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:
PRODUCT: ALOE WATER
Company: L.A. Aloe Inc.
Ironically, founded by three guys who used to work at the struggling Coca-Cola (KO). Hey, why waste Aloe on your skin, might as well ingest it too - Aloe Water boasts 200 biologically active amino acids, according to L.A. Aloe Inc. Pictured below, the cool kid of 2013: coconut water.
Company: Oat Works Inc.
Most workout mags pound the table on the awesomeness of rolled oats. Let's be real, though, who is making oats with hot water before work? Nobody, hence the niftiness of this oats with flavor in a bottled product. Caught my attention because it's one of the only smoothies not in the refrigerated section.
LIPTON WATER ADDITIVE
Flavoring for water is a smooth move by Unilever (UL) for two reasons: (1) it reaches a consumer that grew up drinking Lipton iced tea mix but now watches his/her figure; (2) it's a high margin product inside a package that promotes rapid replenishment by the consumer.
CEREAL IN A BOTTLE
Now you have no excuse not to have quasi-cereal from the cornflakes maker before a busy day - they stuck it in a to-go bottle! Kellogg needs this innovation - its core sales were up a measly 0.3% in 2013.
THE HEALTHY EGG McMUFFIN
Geez, Kellogg is really trying to cater to your every need. Don't want their cereal? Hate the semi-sweet taste of shakes in a bottle? Then Kellogg says step up to the plate with a quick to microwave, healthy egg sandwich.
THE SWISS ARMY KNIFE WAFFLE
Okay Kellogg, I will be reviewing your stock this weekend. Check out what Kellogg has done with its new Waffler product: (1) reduced the size of a waffle to save costs somewhere; (2) added a flavor not being seen from competitors (chocolate chip); and (3) told moms that they could save money, no syrup needed.
THE OMG PRODUCT
Yes, that is reduced sugar peanut butter and jelly in an oddly crispy looking whole wheat pouch. Probably tastes so good you venture down another aisle to pick up a jar of Smucker's (SJM) jelly, which is the secret goal of the company's R&D team.
BRING HOME TO THE OFFICE
Hormel knows you love its deli meats, at home. But it wants to be part of your life, whether it's in the car or office. Enter the REV, an easy to pack meat and cheese wrap.
JAZZED UP OATMEAL
Company: Kellogg and Pepsi
As seen here, there is clearly a war going on within the jazzed up, to-go oatmeal category between Kellogg (yes, another innovative product) and Pepsi's (PEP) Quaker Oats brand. Add hot water, there is breakfast at your desk...no bowl cleaning required.
RESTAURANT ESCAPES ITS WALLS
Company: Panera Bread
You wait seemingly forever on a weekend to order and enjoy a salad bowl from Panera (PNRA). You tweet out the great taste of its salad dressing, and wonder what's in it. Panera now has you covered with a salad dressing product to use at home.
-- By Brian Sozzi CEO of Belus Capital Advisors, analyst to TheStreet