The Food Marketing Institute (FMI) released its Food Retailing Industry Speaks: Annual State of the Industry Review 2007 and the news was the best it has been in years as total sales grew 5.3 percent last year while same-store numbers were up four percent.
Business was particularly good for large national chains, which reported strong sales and profit numbers. On the flip side, many smaller chains and independents found some tough going in 2006. FMI reported that nearly one in four grocers (23.5 percent) saw a decline in same-store revenues and the number was even more pronounced (47.1 percent) when inflation was factored in.
"These results are impressive in view of all the rising costs the industry must bear, including energy, healthcare, credit card interchange fees and the imperative to keep improving products and services in today's extraordinarily competitive marketplace," said FMI senior vice president Michael Sansolo. "However, it is also clear that many retailers are struggling to solve the puzzle of cutting costs as much as possible while continually improving customer service."
Working in an increasingly competitive climate, grocers of all sizes are looking for ways to differentiate and find sustainable niches from which to operate. Perhaps not surprisingly are numbers that show virtually all grocers are following the same path to being different. Just under 99 percent reported using perishables, prepared foods, deli and bakery items to stand out in a crowd. Most claim the strategy has paid dividends, rating the effectiveness of company initiatives an 8.6 on a scale of 10 with 10 being the highest score.
Ethnic foods are common in most markets today with 83.9 percent offering these items. Organics are fairly widespread also with 72.4 percent of operators offering a natural/organic food aisle or section. Forty-six percent reported having developing store organics to meet the demand for these items.
Among the top challenges faced by supermarket operators are:
- Healthcare costs
- Credit/debit card interchange fees
- Energy costs
- Staffing, hiring and employee retention
- Technology investments
- Food safety
Discussion Question: What is your assessment of the state of the grocery industry? Do you think the heavy reliance on perishables and prepared foods for differentiation will continue?