$100 Billion at Stake for Online Food Sales

Undoubtedly, the online food sales business not only secured a solid position among US consumers during 2020 but, according to the consulting firm Nielsen, it will have room to continue growing.

The pandemic changed the trajectory of online grocery shopping, dramatically accelerating a trend that had been growing for several years.

Three years ago, Nielsen caused much astonishment when it projected that U.S. consumers would reach $100 billion in online grocery sales by 2024. This week the projection is that this $100 billion figure will be reached this year.

Online Food and Beverage Sales Crushed Forecasts
$106 billion (Food Universe online sales (Stores + Restaurants)
+125% vs. prior year
12% Share of total food and beverage generated online
Source: NielsenIQ Total US Ecommerce measurement powered by Rakuten Intelligence

The 2018 projection was one of the drivers of an industry-wide movement to invest heavily in infrastructure to facilitate physical store retailers’ opportunity to participate in this growing online sales market.

Online grocery sales in 2020 were approximately $66 billion, representing an annual increase of 125%. The increase was pandemic-driven and led by large players such as Walmart, Kroger, and Amazon, click-and-collect offers from other grocery chains, and cumulative sales from retailers partnering with Instacart. Collectively they trail Amazon as the nation’s largest online grocery retailer.

For the 52 weeks ending Nov. 10, Amazon was the largest U.S. online grocery seller with $17.4 billion, followed by retailers that partnered with Instacart ($15.7 billion), Walmart ($6.5 billion), Kroger ($6.1 billion), and Target ($2.2 billion).

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Elizabeth Buchanan, director of consumer intelligence for North America at NielsenIQ, reiterated how the pandemic became the big online grocery boom.

Click-and-collect stores saw a 130% increase in orders and a 113% increase in customers during 2020, a phenomenon Buchanan said offered familiarity and simplicity to shoppers as they adapted to a new environment, work, and shop from home.

Instacart’s growth, Buchanan added, reflected its ability to move physical stores quickly into online commerce, including small independents and big players such as Wegmans, Publix, Aldi, and Costco. “Instacart had a great year,” she said.

3 Scenarios for Online Growth in 2021
(From $31 billion in 2019 to $66 billion in 2020. What will the number be by 2021?)
Food & Beverage CPG online sales projections
Conservative: $94 billion
Moderate: $103 billion
Aggressive: $109 billion
Source: NielsenIQ consumer analytics: Total US Ecommerce measurement powered by Rakuten Intelligence

Several factors influence NielsenIQ’s prediction that online grocery could account for sales of between $94 billion and $109 billion in 2021, respectively conservative and aggressive estimates that could revolve around economic recovery, consumer confidence, and launching the COVID-19 vaccine, Buchanan said.

In his presentation, Buchanan said consumers who are more comfortable with spending online will increase the percentage of their purchases made through that channel. And as COVID restrictions ease, consumers will also make more in-store purchases, he added, emphasizing running an omnichannel offering and not one or the other. “It’s both,” he said.

Meanwhile, one phenomenon supporting the increase in food spending is sampling consumers who find they have more disposable income but fewer places to go amid restrictions. “They don’t spend away from home,” on expensive indulgences like vacations, for example, so they are likely to spend more on dining experiences.

At the same time, a significant sector of consumers is likely to struggle financially because of the damaged economy in the short term and face a long road to recovery.

This points to an opportunity for retailers to apply segmentation and merchandising tactics they use in-store to an omnichannel approach, Buchanan said.