The national volume of sales of grocery-anchored retail centers grew 6.6%

Don’t doubt the power of produce.

Not much is expected in the way of new retail construction in 2010, but there is a cluster of projects underway bucking the trend that have a common thread: a grocery store as an anchor destination.

Brentwood-based PGM Properties LLC, Florida-based The Barclay Group and Franklin-based Southern Land Co. have all recently broken ground on grocery-anchored retail centers. Though some have been on the drawing board for some time — Southern Land Co. originally expected its Whole Foods at the company’s McEwen development in Williamson County to be open last fall, and The Barclay Group originally planned to open its Publix-anchored Market at Salem Cove in Murfreesboro in early 2009 — the projects point to a relative strength in the retail arena.

According to data from California-based Marcus & Millichap Real Estate Investment Services, the national volume of sales of grocery-anchored strip centers grew 6.6 percent in 2009, to $3.2 billion worth of transactions. The sales volume of single-tenant and multi-tenant retail sites, however, fell by 33 percent and 56.3 percent, respectively.

“From a retail perspective, grocery-anchored retail tends to be necessity-oriented,” said Paul Gaither, a senior vice president at the Nashville CB Richard Ellis office. While consumers may be spending less at grocery stores at the moment, for instance, they’re at least still going inside. As a result, such developments are taken as a safer bet by lenders and private investors.

While other retail centers may have 10-year leases and cotenancy stipulations (which allow Tenant A to get out of their lease if Tenant B leaves), grocery stores tend to have longer leases of up to 25 years, a big plus in a time of instability.

Having a grocery store as an anchor tenant doesn’t remove all risk for a retail landlord, however. As Gaither notes, “If they ever leave, you’re in deep trouble.”

It’s not unheard of. As noted by Dudley Parker, a principal with PGM Properties, whose Publix-anchored Bowie Commons is to open early next year, Bi-Lo and Winn Dixie stores have gone out of business. Just the same, he said grocery stores are “about as stable of a tenant as you can get in today’s market.”

Even with a tenant with good credit, financing still can be difficult, said Paul Neuroth, senior vice president of retail leasing for Southern Land Co., who said the firm’s Whole Foods project was delayed while “funding had to catch up with the deal itself.”

Jimmy Granbery, CEO of Nashville-based H.G. Hill Realty Co. LLC, said grocery-anchored developments have been the mainstay of retail development, even in the good times.

However, they are changing with the economy. For instance, developers are decreasing the amount of additional retail space, in the form of a strip center or outparcels, that accompanies a grocery anchor. A project that may have once called for 20,000 square feet of additional retail may now call for 10,000 square feet. H.G. Hill is completing a Publix-anchored center on Charlotte Avenue in West Nashville, that will include 15,000 square feet of retail space.

And as Gaither said, “There’s just fewer retailers looking for space.” According to CB Richard Ellis, Nashville-area retail vacancy continues to hover around 6.7 percent.

Though grocery centers are persevering, their construction doesn’t portend a recovery for the overall retail sector.

Chocolate candy registered $4.3 billion in sales in 2009

Despite the gloom of the recession that enveloped the nation last year, with its impact still being felt, U.S. consumers have not given up on chocolate even as they cut back on other frills and took steps to curtail spending in virtually every way possible.

"Chocolate kept selling through the recession; people kept buying chocolate and eating chocolate," said Marcia Mogelonsky, senior food and drink analyst at the market research company Mintel. "Chocolate is an affordable little indulgence for many people to enjoy, even when they have to give up other things. For many people, it's a nice tradeoff. Skip dessert and have a nice piece of chocolate when you get home."

The "affordable indulgence" factor apparently was an important driver of chocolate sales in 2009, which generally were up in convenience stores, supermarkets and specialty food stores, although in unit sales generally declined.

According to The Nielsen Co., chocolate bar dollar sales of almost $4.6 billion in the convenience channel represented a 5 percent jump over 2008, but unit sales were off by the same amount. (Convenience Store News is a subsidiary of The Nielsen Co.)

"The major factor in convenience stores has been that in-store sales have lost ground because people stopping for gas are simply not going inside the store to buy snacks or lunch," Mogelonsky pointed out. "People are trying to save money. Many people are not stopping on the way to work because they are not going to work, or if they are, they bring food from home."

But for many people, depriving themselves of that convenience store candy bar or extra cup of coffee generates a sudden urge to spend money on something little, but extra good, like a fancy chocolate when they buy groceries or are pass by a gourmet chocolate shop at the mall, she said.

In the food, drug, mass merchandising channels, including Walmart, Nielsen reported 2009 chocolate candy sales of $4.3 billion, a 3.6-percent increase, on top of a 4.7-percent jump the previous year. However, unit sales were off by 7 percent. Chocolate miniature sales of about $1.1 billion were up 8.7 percent, following a 1.2-percent boost in 2008, while unit sales dropped 3 percent. Dietetic chocolate sales of $172 million climbed 3.6 percent compared to a slight 0.4-percent increase in the prior year. Unit sales were up, but only by 0.2 percent.

Those higher sales numbers compared to lower unit numbers represent price increases taken by some major manufacturers over the year, but they may also indicate increased interest by consumers in higher-priced premium brands -- the "affordable indulgence" factor.

Last December, Mintel reported chocolate sales worldwide rose dramatically -- by 18 percent and 12 percent, respectively, in China and the Ukraine, for example. Each country has seen steady sales growth since 2005, and Mintel predicts continued growth through 2013. In Britain, the chocolate market produced 5.9 percent growth, with 3.2 percent in Belgium, a country that claims to produce some of the world's best chocolates, showing a sales increase of 3.2 percent. Overall U.S. chocolate sales increased 2.6 percent over 2008, Mintel reported.

"It's clear that despite economic trouble this year, the world's chocolate lovers didn't deviate from their favorite treat," said Mogelonsky. "Even in countries not known for chocolate consumption, sales are on the rise."

Manufacturers say many consumers are also growing more interested in organic and fair trade products, especially on the West Coast, where consumers frequently ask questions about those items as well as about the health benefits of chocolate. That trend is expected to grow in other areas of the country as well. Chocolate, particularly the dark varieties, is loaded with flavanols, which help to lower blood pressure, promote healthy blood flow and balance certain hormones in the body.

What's Next?

The National Confectioners Association's (NCA) 2009 Confectionery Industry Trend report predicts chocolate will emerge as one of the largest growth drivers for the confections industry "in new, delicious and exciting ways."

According to the report:
-- Chocolate and cocoa will pop up more frequently as a key ingredient in main courses alongside salmon, chicken and steak, according to 73 percent of experts surveyed.

-- Flavor infusions that combine chocolate and spices, salts, herbs and floral flavors will become increasingly popular as consumers embrace pairings, according to 43 percent of insiders.

-- Sweet and savory chocolate duos, like chocolate and bacon, and even chocolate and cheese combos, will be popular in stores and on menus. In fact, 78 percent of experts said chocolate and these sweet and savory duos will provide the most surprising flavor combinations.

-- Chocolate will drive the organic market, according to 70 percent of experts surveyed.

-- More than one-third of experts said consumers will become more knowledgeable about the global origin of the chocolate they enjoy.

Experts also forecast that the potential health benefits of chocolate will continue to be evidenced. Nearly half of those surveyed said consumers can expect to see more research into the potential health benefits of milk and dark chocolate, including exploration of naturally occurring cocoa compounds and positive effects on mood and blood pressure levels.

In addition, one in three industry experts said U.S. trends will have the greatest impact on the dark chocolate market globally.

The report predicted limited-edition candies will prevail. Thirty-five percent of experts said experimentation with new flavors of classic favorites will be a leading trend within limited edition candies, such as introducing dark chocolate versions of classic milk chocolate candies and experimenting with flavor fillings.

Some of these trends are evident in new products and line extensions recently introduced in the retail marketplace.

For example, Cape Code Provisions LLC converted six products to an all-natural recipe. In its Harvest Sweets brand, milk and dark chocolate covered cherries and blueberries are now all natural. In the Cape Cod Cranberry Candy brand, dried cranberries are now coated with all natural milk and dark chocolates.

Decadent tastes LLC, Ferndale, Wash., announced that its L'ESTASI DOLCE Sweet Ecstasy brand of Asian-Fusion confections and gourmet wine truffles recently received top ratings from Tastesgrader.com, an online guide for consumers. Cited by the rating service were the company's Lemongrass Ginger Truffles, Mint Ginger Truffles and the Cabernet Truffle.

Last June, Nestle launched its new Kit Kat, Aero, and Coffee Crisp bars, all of which use dark chocolate "to attract a mature, health-conscious new audience." The products contain 70 percent cocoa content, "successfully elevating Nestle's presence as a provider of quality dark chocolate," according to the company's promotional materials. Since the launch, shipment sales have increased 45 percent, with consumption sales up 14 percent compared to the previous year.

C-stores registered 2% annual growth in foodservice customers between 2005 and 2008

Convenience stores are poised to garner a growing segment of the foodservice business, recording steady increases in customer traffic as opposed to traditional quick-service restaurants (QSRs), according to one industry researcher.

Presenting information before about 250 attendees at CSP's annual Convenience Retailing University conference, David Portalatin, director of industry analysis for The NPD Group, Houston, revealed statistics showing c-stores sustaining a 2% annual growth rate in foodservice customers since 2005 (with a dip to 1% last year), as opposed to 2% increase in 2005 to a decline of 2% in 2009 for QSRs.

Among the factors attributing to the steady increases was customers' age, he said, noting the emerging challenge of retaining Baby Boomers as they move from industrial parks to neighborhood lifestyles while still appealing to the 18 to 34 year-olds who seek healthy options and value.

"You've got to appeal to Baby Boomers as they transition their lives to other places without alienating the [18 to 30 year-olds] who are coming on board."

One of the elements needed to lure health-conscious customers was freshness, with that being defined in NPD studies in the following ways:

• I can see it being prepared, 43%.
• Made with fresh ingredients, 39%.
• Item has a "sell by" or expiration date, 8%.
• Aroma, 4%.

Items that also enhance the perception of value include fresh fruit, breakfast, salads, sandwiches and baked goods.

"There's an opportunity to move a lot of foot traffic if we can make it happen."

Today's economy is also playing role with regards to foodservice at c-stores, he said. Lower prices (58%), better quality (41%), variety (32%), promotions (32%), fresh-made foods (31%), healthier options (29%) and cleaner food-prep areas (29%) were all emerging demands, NPD studies revealed.

Offering value—and more importantly, the perception of value—is an area of great concern, as dollar-menus and broadly advertised specials present a challenge to the c-store channel. In particular, Portalatin (pictured) felt retailers were behind the curve with regards to advertising promotions in the general media. A show of hands confirmed his theory as only a small portion in the room said they did.

C-stores may be losing out on the value equation even when they currently hold an advantage, with Portalatin saying the average ring at a QSR is $5.29 as opposed to $3.18 at c-stores. He said c-stores still own the lower price point and must leverage it to their benefit.

"Convenience as a value will lose steam in a recession," he noted, but added that coming out of a similar recession in the 1990s, consumers did return to convenience-minded norms.

One of the last points Portalatin made emphasized the growing importance of grocery loyalty programs tied to fuel. He said that 76% of fuel bought at Pittsburgh-based Giant Eagle Inc. and 51% bought at Cincinnati-based Kroger Cos. were linked to in-store loyalty programs. More and more, the larger grocery chains are finding the lure of accumulating fuel rewards as a powerful incentive to drive traffic and sell more merchandise.

"I can't make an assessment of gross margins," he said. "But it will move more consumer foot traffic than what we've observed in 30 years. [Fuel rewards are] a powerful incentive."

FDA Wants $4 Billion for Food Safety

The U.S. Food and Drug Administration (FDA) is requesting $4.03 billion to transform food-safety practices, improve medical product safety, protect patients and modernize FDA regulatory science to advance public health. The request is part of President Obama’s fiscal year 2011 budget—a 23-percent increase over the agency’s current $3.28 billion budget.

The proposed budget includes $318.3 million in support for the Transforming Food Safety Initiative that reflects President Obama’s vision of a new food-safety system to protect the American public. FDA will set standards for safety, expand laboratory capacity, pilot track and trace technology, strengthen its import safety program, improve data collection and risk analysis and begin to establish an integrated national food-safety system with strengthened inspection and response capacity.

“The FY 2011 resources will strengthen our ability to act as a strong and smart regulator, protecting Americans through every stage of life, many times each day,” said FDA Commissioner Margaret A. Hamburg, MD. “This budget supports the ability for patients and families to realize the benefits of science that are yielding revolutionary advances in the life and biomedical sciences.”

The U.S. Food and Drug Administration (FDA) is requesting $4.03 billion to transform food-safety practices, improve medical product safety, protect pa

The U.S. Food and Drug Administration (FDA) is requesting $4.03 billion to transform food-safety practices, improve medical product safety, protect patients and modernize FDA regulatory science to advance public health. The request is part of President Obama’s fiscal year 2011 budget—a 23-percent increase over the agency’s current $3.28 billion budget.

The proposed budget includes $318.3 million in support for the Transforming Food Safety Initiative that reflects President Obama’s vision of a new food-safety system to protect the American public. FDA will set standards for safety, expand laboratory capacity, pilot track and trace technology, strengthen its import safety program, improve data collection and risk analysis and begin to establish an integrated national food-safety system with strengthened inspection and response capacity.

“The FY 2011 resources will strengthen our ability to act as a strong and smart regulator, protecting Americans through every stage of life, many times each day,” said FDA Commissioner Margaret A. Hamburg, MD. “This budget supports the ability for patients and families to realize the benefits of science that are yielding revolutionary advances in the life and biomedical sciences.”

Shoppers Loyal to Price, Values

Support for ethically produced foods in general has withstood the pressures of an 18-month recession and is growing, despite the tough economic conditions. In fact, nearly 30 percent of shoppers have specifically purchased locally produced food over the last month, double the number in 2006, according to new consumer research released by food and grocery analysts IGD.

“These figures prove what we have been saying throughout the recession—shoppers are looking for both value and values. They are not simply looking for cheaper food in tough times, they also expect the grocery industry to support their moral and ethical values,” said Joanne Denney-Finch, chief executive, IGD.

Survey respondents said their main reasons for supporting local food were it fresher and they wanted to support the local economy. Additionally, 57 percent said they purchased local food because it has not travelled as far and is fresher; 54 percent wanted to support local producers and farmers (up from 28 percent in 2006); 34 percent wanted to support local retailers (up from 18 percent in 2006); and 29 percent wanted to keep jobs in the local area (up from 14 percent).

When asked what improvements they would like to see to their food and grocery shopping experience 31 percent wanted more local products available to them, compared with 12 percent in 2005; 20 percent wanted a farmers’ market or farm shop to be established nearby, up from 15 percent in 2005.

About 47.2% of consumers will purchase candy for Valentine's Day

As husbands and wives across America continue to focus on reining in their spending, it seems couples this year plan to spend less on each other but more on their family, friends, co-workers…even their pets. According to NRF’s 2010 Valentine’s Day Consumer Intentions and Actions Survey, conducted by BIGresearch, couples will spend an average of $63.34 on gifts for their significant other or spouse, compared to $67.22 last year. The average person will shell out $103.00 on traditional Valentine’s Day merchandise this year, similar to last year’s $102.50. Total holiday spending is expected to reach $14.1 billion.*

With Americans cutting back on the amount they spend on their significant other, friends and co-workers can expect a little bit more this year. The average person will spend $5.37 on friends, up from $4.74 last year; $4.29 on classmates and teachers, compared to $3.59 last year; and $2.84 on co-workers, slightly up from the $1.94 they spent in 2009. Family pets will also feel the love this year with the average person spending $3.27 on their furry friends, up from $2.17 last year. Spending on family members will remain the same ($20.94 vs. $20.95 last year).

“While some may view Valentine’s Day as cliché, many people still look forward to giving significant others, friends, family and even pets something special,” said Tracy Mullin, President and CEO, NRF. “Rather than not give anything at all, consumers will instead focus on small, thoughtful gifts for the people who mean the most to them this year.”

As in previous years, men will spend nearly twice the amount women spend on the holiday. The average man plans to shell out $135.35 to impress the people in his life while women only expect to spend $72.28.

Personal and practical gifts will resonate with celebrants again this year as more people will look to sweaters, winter accessories and other clothing options (14.4% vs. 10.2% in 2009) in place of jewelry (15.5% vs. 16.0% last year) or an evening out (35.6% vs. 47.0% in 2009.) Traditional gifts such as greeting cards (54.9%), candy (47.2%) and flowers (35.6%) remain popular choices.

“The economy has forced consumers to rethink their gift giving practices,” said Phil Rist, Executive Vice President, Strategic Initiatives, BIGresearch. “Personal and unique gifts will speak volumes this Valentine's Day as consumers dig deep into their hearts and not their wallets."

When it comes to where people will shop, most will head to discount stores (40.9%), though department stores (31.1%) and specialty stores such as florists, electronics stores and greeting cards and gift stores (21.4%) will also see a share of holiday foot traffic.**

About the Survey

The NRF 2010 Valentine's Day Consumer Intentions and Actions Survey, conducted for NRF by BIGresearch, was designed to gauge consumer behavior and shopping trends related to Valentine's Day. The poll of 9,578 consumers was conducted from January 5-13, 2010. The consumer poll has a margin of error of plus or minus 1.0 percent.

BIGresearch is a consumer market intelligence firm that provides unique consumer insights that are gathered online utilizing very large sample sizes. BIGresearch’s syndicated Consumer Intentions and Actions survey monitors the pulse of more than 8,000 consumers each month to empower its clients with unique insights for identifying opportunities in a fragmented and changing marketplace.

The National Retail Federation is the world's largest retail trade association, with membership that comprises all retail formats and channels of distribution including department, specialty, discount, catalog, Internet, independent stores, chain restaurants, drug stores and grocery stores as well as the industry's key trading partners of retail goods and services. NRF represents an industry with more than 1.6 million U.S. retail establishments, more than 24 million employees - about one in five American workers - and 2009 sales of $4.1 trillion. As the industry umbrella group, NRF also represents more than 100 state, national and international retail associations. www.nrf.com.