November 13, 2008 / 7:20 PM / 9 years ago

Holiday food, drink seen strong amid retail blues

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<p>A shopper selects bottles of wine in Arlington, Virginia, May 29, 2008.Molly Riley</p>

LOS ANGELES/CHICAGO (Reuters) - Grocery sellers are poised for a hearty holiday season as harder-to-get credit and rising unemployment promise to keep consumers close to home and family.

U.S. shoppers, who have been putting off purchases of clothes, furniture and cars in what could be the worst retail environment in three decades, are stretching their food dollars by visiting fewer restaurants, clipping coupons and trading down to store brands.

"Every retailer who does a penny-a-pound for turkey is going to win this year. People are more concerned about saving money than ever before," said Phil Lempert, editor of

The American Farm Bureau Federation tracks 12 items to estimate the cost of the average Thanksgiving dinner and expects that the cost for a family of 10 will be up 6 percent to $44.61 this year, largely due to higher prices for turkey -- the centerpiece of the traditional Thanksgiving meal.

Plentiful supplies of ham, another popular holiday main dish, could translate into lower prices this season and wine, beer and spirits are still expected to have a part in at-home celebrations.

"There is a great re-emphasis on meals and entertaining," said Thom Blischok, president of innovation and consulting at Information Resources Inc (IRI).

Grocery sellers of all stripes are optimistic.

Supervalu Inc (SVU.N) CEO Jeff Noddle told Reuters in October that he sees strong Thanksgiving sales and Winn-Dixie WINN.O Chief Executive Peter Lynch said that he was expecting a good holiday season for grocers.

Wal-Mart Supercenters (WMT.N), SuperTarget (TGT.N) and other big box retailers that can undercut grocery stores on price are expected to post overall sales growth -- including nongrocery items like clothes, shampoo and toys -- of 9 percent this year.

Low-price grocers like Supervalu's Save-A-lot and Aldi ALDA.O are expected to expand sales by 4.8 percent, while growth at traditional supermarket chains like Kroger (KR.N), Safeway SWY.N, Publix PUSH.OB and Winn-Dixie is targeted at 3.1 percent.

Sales of lower-cost store-brand items -- called private label or corporate brands -- are also on course to grow this year both in terms of dollar and units, Euromonitor retailing analyst Phil Park said.

In addition to helping consumers save on grocery bills, grocery stores make more profit on sales of private label than national brands.

"Private label is what's for dinner this holiday season," IRI's Blischok said.

Turkey or Ham?

Consumers have seen grocery prices rise for much of this year, and analysts are watching consumer prices of traditional holiday meats.

As of the end of September, supplies of whole turkeys were up 20 percent from a year ago to 327.7 million pounds, according to U.S. Department of Agriculture data.

Despite that additional supply, the American Farm Bureau Federation expects turkey costs to be up $1.46 to $19.09 for a 16-lb bird.

Steve Meyer, the economist at Iowa-based Paragon Economics, said ham should be particularly abundant because of increased pork production this year and a big slowdown in exports to Mexico and Russia, both of which are big ham buyers.

"The weakening of the peso has Mexico pretty much out of the market," said Meyer. "It's going to leave hams here. Hams ought to be a great deal this fall."

Len Steiner, owner of Steiner Consulting Group, thinks inexpensive ham could knock turkey off center stage.

"It's probably going to take a little bit of the zip away from the turkey and move a little to ham," Steiner said.

Holiday Buzz

As the housing and credit bubbles burst, wine, beer and spirits remain in vogue.

"People will drink no matter what," said Roman Shuster, a Euromonitor analyst who covers alcoholic beverages.

"We're definitely going to see people drinking less away from the home and more at home. This is especially going to be true for wine and spirits," he said.

Peter Mondavi, proprietor of Napa Valley's Charles Krug Winery, is expecting to see a "material" decline in retail sales of wine in the $30 to $40 range as people shift to less-expensive options.

Still, he and others expect some people to splurge.

"An expensive bottle of wine from France is cheaper than traveling to France for the holidays. You still have to treat yourself somehow," Shuster said.

The Euromonitor analyst said beer sales at bars and restaurants are holding up, in part because people are switching to the more utilitarian drink from pricey spirits.

Superpremium craft beers are also an option for liquidity-challenged foodies who want to impress guests: "You can accomplish the same thing with a nice Belgian import as you can with an expensive bottle of French wine," Shuster said.

Editing by Matthew Lewis

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