‘The consumer is clearly trading down,’ says Albertsons Cos. CEO

( Photo courtesy Albertsons Cos.)

Inflation has caused shoppers to focus on value more and buy lower-cost versions of what they want, but they’re still willing to spend on certain categories — looking to grocery retailers for ready-made meals, organic produce and more convenience items.

These are some of the findings in the Albertsons Cos. first-quarter earnings call for the 2022 fiscal year.

Based in Boise, Idaho, Albertsons Cos. is a publicly traded company listed on the New York Stock Exchange as ACI. It operates stores across 34 states and the District of Columbia under 20 banners including Albertsons, Safeway, Vons, Jewel-Osco, Shaw’s, Acme, Tom Thumb, Randalls, United Supermarkets, Pavilions, Star Market, Haggen and Carrs.

“We are giving customers great value choices by adapting our fresh offerings literally every week in every market and through our strong Own Brands portfolio,” Albertsons Cos. CEO Vivek Sankaran said in the earnings call. “Our stores are operating more effectively and efficiently as our supply improves … and we are proactively managing our costs.”

Private label is doing well with Albertsons’ banners.

“The consumer is clearly trading down,” Sankaran said. “But the good news is they’re trading down into a lot of our Own Brands on that front.”

The company is expanding its lineup of Own Brand products and leveraging the strength of that assortment, along with managing its fresh departments hyper-locally to give customers great choices in this inflationary environment. Own Brands sales penetration reached an all-time high at 25.8%, and Own Brands sales outpaced national brands in several categories, he said.

And despite restaurants gaining business, shoppers are still going to supermarkets for their food needs, even if in different ways with their tighter budgets.

Demand for food away from home is shifting into food at home, possibly in part because more people are working from home than they were in 2019, and that people are still cooking more, he said.

“If they're, in fact, trading out of food-away-from home, trading into food-at-home, and they're eating more at home, then the fresh portfolio really, really matters,” Sankaran said. “We think we are gaining market share first because people are coming in for a broad fresh portfolio.”

Related: Shoppers can use supplemental benefits to buy fruits, vegetables at Albertsons Cos. stores

Also, the companies’ ready-meal program is doing so well, it just launched a sandwich program. Convenient salads found in the stores are doing well too, he said.

“We're seeing this behavior where people are value-conscious but are willing to spend on the things that they care about,” he said.

In fresh foods, Albertsons Cos.’ in-store processing capabilities allows for tailoring selection, the cuts and package sizes to fit local demographics and economic circumstances.

“We are giving customers choices with opening price points and large value packs. Our innovation too is gaining traction. For example, we now have rolled out our ready meals, our ready-to-eat, ready-to-heat and ready-to-cook meals to approximately 600 stores and expect to be in more than 1,100 stores by our fiscal year-end,” Sankaran said.

Albertsons Cos.’ tonnage sales are better than unit sales, likely because they’re shopping less frequently, with bigger baskets. And a bag of avocados is one unit, “instead of three avocados that they have bought in the past,” Sankaran said.

While some commodity prices are decreasing, Sankaran said he expects that produce commodities will come in a little higher because fertilizer costs are up. “That’s the crop that people have already put in the ground. And so, when we harvest that, we’re going to see some prices.”

He does expect some sequential inflation, even if it’s moderated through the rest of the year.

Albertsons Cos. Is “definitely” still seeing supply chain disruption, although some areas have moderated, Albertsons Cos. President and Chief Financial Officer Sharon McCollam said in the earnings call.

“From a supply chain operations standpoint, we have been hiring better and we've been more able to find labor. I'm not saying it's solved. It seems to have mitigated,” she said.

Transportation continues to be a challenge: Moderated but not fixed.

“I think all of us as an industry would say we’ve seen some relief, but it is not at this point where we would call it being significantly better. It is moderating.”

In this environment, it will be hard to drive down prices and expect massive uptick in supply volumes because supply is challenged and people are looking for different things,” Sankaran said.

“It's not just about going in and buying a packaged good. People are looking for a full portfolio to solve their challenges and meet their needs today,” he said.

Albertsons’ gains in market share are sustainable, in part, because of its focus on tailoring offerings to each store’s local market, extremely targeted digital marketing and the gains in shopper loyalty.

“You cannot win in this market if you're not working it on a store-by-store basis, locality-by-locality basis and optimizing to it. And that's our heritage, and the teams are doing that,” Sankaran said.

Driving “stickiness,” or shopper loyalty has been a focus.

“We did that extremely seriously, which is why we want people to engage more digitally because we can drive more stickiness, whether it’s a loyalty program or an e-commerce program,” he said.

In stores, the company is rolling out artificial intelligence-based and machine-learning technologies to improve the customer experience in self-checkout, enhanced freshness and product availability in produce and shrink.

Related: Albertsons, DoorDash partner to deliver fresh groceries in 30 minutes

Albertsons is further embedding its [Environmental, Social and Corporate Governance] throughout our operations, after launching a new Recipe for Change framework in April. This framework is focused on maximizing the company’s positive impact across four pillars: planet, people, product and community.

“We have a long history of driving sustainability within our operations and are committed to leveraging our resources and expertise to support the communities we serve and the planet we share,” Sankaran said.

The Albertsons Cos. financial report also included:

  • Albertons Cos.’ same-store sales in the first quarter of the 2022 fiscal year were 6.8% higher than the same time the previous year, and the companies continue to gain market share in food.
  • First-quarter digital sales increased 28% year-over-year, and omnichannel households increased 34% year-over-year, with retention rates over 90% and they spend 3 times more than in-store-only shoppers.
  • At the same time, in-store transactions also increased with new merchandising initiatives and Just for U Loyalty offerings. Just for U Loyalty members increased 16% to 31 million, with actively engaged members reaching an all-time high and spending 4 times more than a non-actively engaged member.
 

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