NEW YORK (TheStreet) -- The supermarket industry is notorious for having virtually no profit margins. Just think for a second from an executive's standpoint. All of that work selecting the assortment, store layout, and weekly promotions, and ensuring fresh goods are delivered on time and consistently stocked, and operating margins clock in around 3%. Talk about no love!
Investors will be closely monitoring this sector today, with Safeway (SWY) on deck to report its fourth-quarter results after market close. The reality is that U.S. households are no longer stocking pantries for a number of reasons - they either can't financially, lack actual pantries in scaled-down homes, or view doing so as unnecessary absent an impending snowstorm amidst a Polar Vortex. Hence, same-store sales growth at supermarkets is now often fueled by bouts of inflation rather than unit growth. No inflation, no positive sales, and here come the earnings misses and store closures to keep over-indebted balance sheets from swallowing the entire organization.
Consider this Twitter shareable stat from 2013 produced by research firm Hartman Strategy:
- 18% of supermarket revenues are generated from low velocity categories that turn an average 89 units per week per store.
- 40% of supermarket revenues are generated from shrinking "giant" categories experiencing declining volume, for example canned soup, meat, cereal, and frozen pizza.
So to have any shot of growing same-store sales and out-flanking a Wal-Mart (WMT), supermarkets must be willing to put new, unproven products from the likes of Kellogg (K) and Hormel (HRL), as well as from smaller, unheard of companies, on their shelves that address the evolving preferences of consumers. For instance, products that I would deem "good for you" with slick-looking packaging.
While having a guerilla analyst moment at a local Target (TGT) turned partial supermarket, I found 10 new products that are comparable to emerging markets on supermarket shelves. These are products I have also seen at traditional supermarkets. I am emotionally over Greek yogurt in large white containers, and cylinder-shaped tubs of hummus being the new, cool kids on the block, and went in search of even fresher looking products and packaging.
Check out these 10 awesome new foods invading U.S. supermarkets: