Jefferies' monitoring of Western Europe food retail activity indicates a slowdown in sales growth for the four weeks ending February 22, with tracked sales rising 5.4% compared with the previous four-week average of 6.6% and a six-month average of 6.5%.
Measured on a two-year stacked basis, retail sales were up 9.8% in the period, lower than the last three-month average of 11.7% and the six-month average of 10.8%.
Volume performance was mixed across product groups. Of the nine categories Jefferies follows, four recorded volume increases during the period:
- Yogurt volumes rose 5.4%.
- Frozen fish volumes increased 3.8%.
- Coffee volumes were up 0.5%.
- Frozen meat volumes edged higher by 0.3%.
Cereal volumes remained roughly flat over the four-week span.
On a sales basis, every category posted growth. The strongest sales gains were in coffee at 13.3%, followed by yogurt at 7.9% and frozen meat at 7.5%. Other category sales increases were 6.1% for chocolate, 5.3% for frozen fish, 1.2% for ice cream, 0.8% for sweet biscuits, 0.8% for cereal, and 0.4% for savory snacks.
Price inflation was present across all tracked segments. Coffee prices rose 12.8% and chocolate prices climbed 10.2%. Additional price increases reported by Jefferies included frozen meat up 7.1%, ice cream up 4.3%, sweet biscuits up 2.9%, yogurt up 2.5%, frozen fish up 1.4%, savory snacks up 0.9%, and cereal up 0.8%.
Private label penetration expanded in nearly all categories during the four-week period, with sweet biscuits the single exception. Chocolate private label share showed the largest gain among categories, followed by private label share increases in coffee and savory snacks.
Jefferies highlighted differences in price elasticity between categories. Coffee exhibited relatively low elasticity - sales rose roughly 13.5% while prices increased by about 13%, and volumes grew approximately 0.5% (a slight slowdown versus the prior four-week period). By contrast, chocolate experienced roughly a 10% price increase accompanied by an approximate 4% decline in volumes.
Company-level volume dynamics were varied. Mondelez International (NASDAQ:MDLZ) saw ice cream volumes increase by more than 20%, while its chocolate volumes declined by a high single-digit percentage. Nomad Foods (NYSE:NOMD) recorded mid-single digit volume gains in frozen fish as well as mid-single digit volume declines in frozen meat, though both categories showed improvement from the prior period. Post Holdings (NYSE:POST) reported cereal volumes growing in the mid-single digit range but at a slower rate than previously. General Mills (NYSE:GIS) saw ice cream volumes move into positive territory, growing mid-single digits and gaining dollar share in the total ice cream category.
Summary
Over the four weeks to February 22, Western Europe food retail sales growth eased to 5.4%, price increases were broad-based with coffee and chocolate leading, volume gains were concentrated in a minority of categories, and private label share expanded in most categories.
Key points
- Overall tracked retail sales rose 5.4% in the four weeks ending February 22, down from prior short- and medium-term averages.
- Prices increased across all nine tracked categories, with coffee (+12.8%) and chocolate (+10.2%) showing the largest inflationary moves.
- Private label share rose in every category except sweet biscuits, with chocolate seeing the biggest gain in private label share.
Risks and uncertainties
- Slowing sales growth could pressure revenue momentum for packaged food and grocery retailers and suppliers if the trend continues - this affects consumer staples and retail sectors.
- Rising prices alongside weakening volumes in categories like chocolate indicate potential demand sensitivity to price moves, introducing uncertainty for category pricing strategies and gross margins.
- Growing private label penetration in most categories may pose competitive risks to branded manufacturers and influence promotional and pricing dynamics in supermarkets.