(Bloomberg Opinion) -- Christmas is coming, the geese are getting fat. Well, maybe not so much this year.Covid-19 is poised to reshape Thanksgiving and Christmas dinners, with downsized celebrations the norm. This isn’t necessarily bad news for food retailers. In fact, with more people eating at home, the holidays could bring grocers some cheer.According to GlobalData, Americans are expected to spend 5.2% more on holiday food and drink this year compared with 2019. The increase in food and grocery sales in the final three months of 2020 could be even bigger in the U.K., at 14%, the data provider estimates.But people probably won’t be spending on the usual items. For example, grocers are betting shoppers won’t need as many big centerpiece turkeys for holiday dinners. Consequently, they’ve upped their orders of turkey breasts (typically still attached to bone and known as crowns in Britain). Walmart Inc. will carry 20% to 30% more of them this year. Its British arm, Asda, said sales of frozen turkey crowns, which typically feed three to four people, are up 230% since they went on sale in mid-October, compared with 2019, outperforming frozen whole turkeys.Kroger Co., the U.S.’s largest traditional supermarket chain, said that in addition to offering more small turkeys, it was preparing for heightened demand for ham, beef, pork roast and seafood. Alongside crowns, Britain’s Tesco Plc expects chickens and vegan alternatives to be popular. Its smaller U.K. rival Waitrose has tripled stocks of its upmarket Venison Wellington, which serves four people, after a flood of orders.Large turkeys aren’t very profitable anyway, as supermarkets compete to offer the cheapest deals. Stores can actually charge more for packaged turkey crowns.Smaller gatherings potentially mean more groups purchasing their own Thanksgiving and Christmas dinners. Take turkeys: Rather than a family buying one large bird to feed collected relatives, four or five family groups might each buy a crown or a joint of meat. If each group still wants all the trimmings — sweet potatoes, green bean casserole, cranberry sauce — that could mean an overall higher volume of food sold.Fewer people dining in restaurants or spending the holidays abroad will also translate into more eating at home. This may be why people seem to be buying early. Sales of Christmas puddings were up 81% in the U.K. in October compared with the year earlier, according to data provider Kantar. The pandemic has also encouraged more preparation of food and drinks from scratch, whether it’s bread baking or DIY cocktail mixing. Data provider Nielsen expects this to continue over the holiday season. Perhaps the biggest potential benefit to food retailers is shoppers buying more expensive items. Many affluent consumers have amassed savings under lockdown. At a time when many outside indulgences are unavailable, some shoppers are channeling their lust for luxury into their grocery carts, opting for filet mignon instead of cheaper cuts of meat or springing for an extra-fancy bottle of wine. Consumers have a propensity to trade up for the holidays, and they may be even more willing to do so this year. A report from market research company IRI found shoppers are less price sensitive about food and some other household essentials right now. They’re not balking as packaged-goods companies raise prices and yank promotions. This doesn’t mean supermarkets can rest easy. As infections spike across the U.S. and Europe and shoppers have to deal with more restrictions, their preferences could suddenly shift again. This would test already stretched food supply chains, particularly in the U.S., where stock levels haven’t returned to normal.Retailers need to build in as much flexibility as possible. That means, for example, having the option to buy extra turkey crowns if there’s a surge in demand. If retailers fail to get the balance right, they could end up with too much of a particular product. Grocers have already navigated many challenges amid the pandemic — a rise in people working from home, an explosion in e-commerce ordering and a flight to comfort foods, just to name a few. Smaller holiday dinners are another to add to the list. With sharp inventory management and marketing, at least this shift won’t leave the industry hungry for sales. This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Andrea Felsted is a Bloomberg Opinion columnist covering the consumer and retail industries. She previously worked at the Financial Times.Sarah Halzack is a Bloomberg Opinion columnist covering the consumer and retail industries. She was previously a national retail reporter for the Washington Post.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
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(Bloomberg) -- Walmart Inc. is selling most of Japanese retailer Seiyu to KKR & Co. and Rakuten Inc. in a deal that values the supermarket chain at 172.5 billion yen ($1.6 billion), as the U.S. giant retreats from its two-decade attempt to crack Japan’s retail market.Under the agreement, private equity fund KKR will become the majority owner with a 65% stake, while Japanese e-commerce giant Rakuten takes 20%, the companies said in a statement Monday. Walmart will retain a 15% minority interest. Rakuten and KKR will seek to shore up Seiyu’s digital operations as demand for online retail grows in Japan amid the pandemic. The new owners are retaining a previously announced plan to re-list Seiyu in the future.“An IPO is certainly common goal for us,” Eiji Yatagawa, a partner at KKR, told Bloomberg News. “What’s important is to build a business that can go public. For a company to go public, you need to demonstrate a very attractive story to the market.”In June last year, Walmart said it would seek to relist Seiyu, following years of speculation that it was seeking to sell the chain after years of poor performance. While a 2018 report in the Nikkei newspaper said the Bentonville, Arkansas-based retailer planned to sell the business for as much as 500 billion yen, the company had repeatedly denied it was looking to exit. The price paid by KKR and Rakuten for the stakes was not disclosed.Walmart expects to recognize a non-cash loss of about $2 billion after taxes in the fiscal fourth quarter related to the deal, according to a regulatory filing. The company “does not expect a significant impact to earnings per share following completion of the transaction.”Foreign FailuresWalmart first invested in Seiyu in 2002 and took it private in 2008. But like other foreign retail giants, including Tesco Plc and France’s Carrefour SA, it failed to find success in Japan’s notoriously difficult and low-margin supermarket space, and struggled to compete with local rivals such as Aeon Co. and Seven & i Holdings Co.In 2018, it began working with Rakuten on fresh produce delivery in Japan as well an e-book operation in the U.S. The U.S. giant has been reshaping its international operations to focus on high-potential markets like India and China, and investing to build its digital operations globally as it faces cost pressures and sluggish growth in its home market.Fresh produce is a 60 trillion yen market in Japan, but only around 3-4% of that is online sales, according to Noriaki Komori, a Rakuten executive officer, creating a growth opportunity. Books and home appliance see about a third of sales online, he said. The pandemic has boosted e-commerce in Japan, where adoption has sometimes lagged other markets, with online clothes shopping and food delivery seeing notable gains.The pandemic has also been boosting domestic Japanese dealmaking in the second half of the year following a downturn at the start of the outbreak, a surge that private equity firms including KKR as well as Carlyle Group Inc. have been seeking to get involved in. Carlyle in March raised 258 billion yen ($2.5 billion) for its fourth Japan buyout fund, while KKR has been increasing its involvement in the country, declaring Japan in 2019 to be among the most interesting buyout opportunities in the world. The heads of its Japan operations told Jiji in September that it aimed to do one or two deals totalling 300 billion to 700 billion yen a year.KKR and Carlyle Are Betting on a Resurgence in Japan DealmakingThe combination of online retailer -- Rakuten runs Japan’s largest online shopping mall -- with traditional brick-and-mortar store has echoes of Amazon.com Inc.’s $13.4 billion purchase of Whole Foods Market in 2017. Whole Foods has struggled during the pandemic, however, with foot traffic down an estimated 25%. Amazon’s Japan arm already runs a grocery delivery service with Life Corp., a supermarket chain.“The world is very different today than it was 18 months ago for all of us,” said Judith McKenna, president of Walmart’s international business. “The world has accelerated in omni channel and digital transformation in the course of this year, not just in Japan but around the globe.”The deal is expected to close in the first quarter of 2021. Seiyu Chief Executive Officer Lionel Desclee will stay in his role through the transaction and then take a new position within Walmart. A new CEO will then be appointed by a new board comprised of managers from the three owners.(Updates with Walmart’s expected loss in fifth paragraph)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.