Grocery Sales
Food is an essential item. It is not discretionary like cars, appliances, and other big ticket items. As such, grocery is somewhat buffered from the economy. This does not mean that the economy does not impact grocery sales, but it does so less than other industries. For example, when incomes are flying high, grocery gets less lift than restaurants and when things are going south, grocery declines less than restaurants.
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There are also short and long term drivers of grocery sales. In the short term food inflation and income are the primary drivers, but when we look more long term, population plays a bigger role. This is simply because population changes are generally slow so it takes time to impact grocery sales. We take all of these factors into account when building both short and long term forecasts
The Grocery Model
Grocery sales, like food inflation, is driven by many factors. Some are more important than others and these drivers can move in opposite directions simulatenously.
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Over time Grocery Sales are driven primarily by three things - food inflation (CPI FAH), economic growth, and population growth.
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Economic and population growth have a positive linear relationship with grocery sales. More money in your pocket and more mouths to feed will lead to more groceries purchased.
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Food inflation is a bit more complex. Food inflation in the 1% to 4% range is generally good for grocery sales but when it gets too low, it pulls down grocery revenue and when it gets to high it can weight on grocery units. In the 1%-4% range both price and units are typically moving the same direction.
