Mr Livingston did a great job of pointing out all the difficulty that we saw in the last 8 – 10 years within the grocery channel but let us also remember that grocers have a TERRIBLY difficult situation as a matter of daily life. The profit margin in grocery, as we all are well aware, is awful and our grocers have done a terrific job of creating ways to deal with and live with this reality. And let’s also remember that two years after entering the grocery channel, our largest US grocer became Walmart–knocking off long top dog, Kroger.

The grocers we have remaining with us, have refined their business model to survive and to reach this point. In this downturn we unfortunately, are bound to see more problems with grocers as MORE pressure is placed upon these brave stalwart retailers, who no doubt continue to struggle in a very difficult arena.

The reason that supermarkets have not had store closings is because in this channel, more so than others, there is already a proper balance of stores with the number of consumers that shop them. This is not the case with consumer electronics, home style stores, “linens” stores, department stores, etc, where the weakest links are dropping out and/or closing stores to as part of a “correction” to meet lower demand.

The impact of the global recession on food retailing is seemingly more apparent in Ireland where Superquinn–long known for its outstanding customer service–announced it would be laying off a significant number of employees.

We have to remember that U.S. supermarkets have already gone through a substantial reduction in store/company count throughout the 1980s and 1990s. The survivors are leaner and much more better marketers than their peers in other retail sectors. Also, supermarkets do have an ability to “trade down” without disrupting their traditional “face to the customer” or overtly changing their approach to pricing.

Prior to the recession, we had a lot of grocers throw in the towel. Winn-Dixie and Albertsons were the two biggest. Winn-Dixie filed for bankruptcy and disposed of hundreds of stores. Albertsons was forced to sell out their best stores to Supervalu and now Supervalu is scratching the heads and closing some stores. The worst of the Albertsons stores were sold to an investment firm and now those appear to be up for sale. Penn Traffic seems to be pretty much done with retail. Ahold threw in the towel and sold off BI-LO and Tops. Supervalu seems done with Cub Foods except in Minnesota. A&P has closed one division after another over the past 10 years. Delhaize is in the beginning stages of closing Sweetbay stores in Florida. Why are there not more closings? They already did. We will probably see more stores put up for sale or the announcement of large chains closing some divisions. There are just too many chains on life support that for all practical purposes are closed. They just haven’t… Read more »

First off, I would say that Tom Ryan has done a wonderful job of answering his own question. Of course the fact that grocers sell non-discretionary items combined with fewer people eating out will more than offset recessionary trends.

But what would be interesting to know is how sales of other items such as candy, snack food, baked goods, and beverages are holding up relative to the staple items.

While supermarkets are not recession-proof, one would expect to see reduced sales as shoppers buy cheaper cuts of meat, more meal extenders, pasta, etc. People still need to eat and grocery stores sell food, so that’s probably why we haven’t seen bankruptcies yet. You would expect store closings only where an area is saturated, and that’s been happening long before we were in a recession.

Grocery store chains will definitely feel the pinch in earnings and profits as the recession settles in. Most grocery chains (with the exception of the Walmart Supercenters) do not carry a large selection of non food (hardlines, apparel, home, etc.) and therefore have less of an impact from the major decrease in consumer spending on non-essential items.

Supermarkets are in as good a position during a recession as anyone. People have to eat. When facing financial turmoil, customers tend to forgo convenience to focus on bargains, and supermarkets can offer the best prices. Plus, according to one c-store operator I know in the Northeast, you have to factor in public assistance programs for things like milk and cheese, which are primarily redeemable at supermarkets. I don’t have statistics, but I imagine dependence on public assistance increases during these tough financial times and that benefits grocers. Bottom line is that as long as supermarkets are offering the best value and lower-cost “generic” brands they are going to be a destination for consumers that are pinching pennies. I think this can best be illustrated by looking at the popularity of organic foods and “green” products. For about two years, organics and environmentally-friendly products were gaining quite a bit of steam at retail, even though they were more expensive. As the economy has suffered, so have sales of these products as customers have become more… Read more »

We are in the final stages of analyzing the RETAIL:NEXT – Formats in Transition Study survey and will be releasing results shortly (stay tuned to RetailWire). But one interesting finding relevant to this discussion is that the industry participants and observers in the survey slid grocery stores into the “Decrease Somewhat” category by a slim margin. This seems to support the prevalent view in this discussion that grocery stores have seen much–but not all–of the shakeout already.

I don’t think that Supermarkets are immune from the recession. I do think that they will be one of the last industries to see a large number of bankruptcies, but make no mistake, they will see them. Everyone has to eat, and therefore the Supermarket industry is not seeing the huge drop-off in sales that are other retailers are seeing. Food will be the last thing that people stop purchasing.

All the more reason that Supermarkets will have to market smarter, and harder to survive the economic downturn. Smart retailers such as Trader Joe’s, Costco, and Aldi will continue to thrive as people look for ways to save money. Traditional supermarket retailers who do not adjust their product mix will be the victims of the downturn.

No one in the food industry should sit back and relax. We have a long 18 months ahead of us before we start to see a real sign of recovery.

From my conversations recently, it is apparent that the industry is still highly recession-resistant and despite price increases in commodities retailers are doing pretty well.

But they used to say that about the restaurant industry and we saw bankruptcies at five major chains in 2008. Don’t be surprised to see some closings and bankruptcies in the supermarket industry in 2009. Don’t think we’re going to see anything earth shattering. But smaller chains and some independents–especially those with aging management or no line of succession–will be throwing in the towel. On the upside, good locations–and banners–may be picked up by larger chains.

I agree with the basic gist here, but under it all, what I’m really watching is evolution of private label in this maelstrom. Increasingly, retailers are “owning the shopper,” and this recession is continuing to tip the scales in their favor.

Thumbs up for grocery, for these three reasons:

* Consumers are attempting to stay out of retail stores as a way of avoiding temptation, but most people can’t avoid grocery shopping.
* Small splurges are going to be the order of the day, and splurging at the grocery store is a lot more appealing to freaked-out consumers than eating out.
* Grocery chains seem to have increased the number of door-buster discounts, to help them retain market share.

Small glimpses of blue sky….

Supermarkets, if they play their cards right, do have the potential to survive or even thrive but they had also better beware as the Financial Times warned today with food prices due to go up again sooner rather than later. It isn’t going to be easy for anyone – complacency definitely needs to be avoided.

Over the years we have seen plenty of supermarkets in bankruptcy court and more on the way. During this economic period, physical volume has increased, yet sales increases have been below inflation adjustment. Retail food does well during inflation times due to their perishable pricing approach.

Over the next year we will see food deflation, not just switching from National Brand to Private Label. Some of the weak players will go bankrupt within the next year. The limited assortment and dollar store attack will take market share from traditional supermarkets. Only those retailers that have a well-defined target market and execute well are likely to win in the short term.

People can’t eat laptops…I see this discussion constantly at the grocery site I operate. People do however have to eat. And while they’re making tough decisions about what to eat, they haven’t stopped eating. And what they can’t personally afford, the government has kicked in with food stamps, so the level of overall grocery spending by the consumer hasn’t fallen as dramatically as consumer electronics, clothes, and other retail sectors.

Over the last thirty years the consolidation of grocery stores in the US has been remarkable in its breadth and depth. One, only one precipitating factor was consumers’ decrease in cooking at home. With today’s economy, cooking at home (at at least heating prepared food at home) is increasing because it costs less. As a result, share of wallet may be increasing at grocery stores. The kind of items purchased may be different, the kind of “grocery” stores frequented may be different, but the percent of wallet spent on food at grocery stores may be increasing.

To be successful over time, these stores need to make sure they understand these consumers and their needs and how they change over time.

This is a “need” economy. It is no longer a “want” economy. The retailers that have what people need rather than want will avoid the more extreme events of this downturn. Supermarkets have done a nice job of extending their brands into the consumer mindset, and they have refrained from destructive price competition. Must be nice to operate from a position of confidence and service rather than fear and survival instinct.

In this recession, no retailer will be immune. Supermarkets, however, will be in a better position than most. As many of my colleagues already noted, people do have to eat. And further, the supermarket has a cushion in a country where a huge part of the food dollar has been spent on restaurant meals. Consumers will trade from eating out to eating in. Not only will this trend be experienced in the sit down restaurants, but also many who purchase fast food will be switching to the old brown bag. Unfortunately, it is not a dollar for dollar trade off. In fact, it is more like $3 down in fast food for $1 up in the supermarket. Similarly, the supermarket will win as the consumer moves from brands to private label. But, it will lose considerable margin as consumer abandon prepared and premium products. But, at least the supermarket has areas to win with. Walmart will continue to have the edge in these tough times because no operator minimizes operational costs as well as they… Read more »

While some perceive supermarkets as recession proof–which to a certain degree may be true–they are still subjected to the same downward forces of the economy as the rest of U.S. corporations–reduced spending due to lost wages and jobs, reduced frequency as consumers purchase staples and bypass the higher margin outside aisles, increase in cherry-picker consumers and downward brand shifting, etc. With these challenges lie opportunities. Now is the perfect time for grocers to fortify customer loyalty. There are several grocers that understand this opportunity and are implementing many different measures to increase their brand value in their customer households with more targeted and relevant offers, investing in marketing technology improvements with interactive recipe widgets, free curbside pick-up of groceries ordered online or via cell phone, customized prepared meal plans and initiating mobile marketing and m-coupon programs. We are also seeing many grocers reducing their dependency on expensive print & broadcast buys, and their declining returns, by implementing more direct marketing programs that offer a higher ROI, better measurement capabilities and ultimately deliver better brand loyalty.

While the industry may be recession resistant, its not recession proof. Like any area in retail it takes focus, blocking and tackling, and pruning and trimming where ever possible.

It’s a good time to be looking at any innovative way to increase your share of the customer’s wallet. It’s now that you have that opportunity better than any other time. Offering meal solutions, recipe planning, and a full and complete offer.

Carefully done, it’s a time for slow and careful growth for the industry. Done well, that growth can be retained upon resumption of a more favorable economy.

While I agree with the sentiment of this discussion, when reading David Livingston’s response, I had to shake my head and disagree with many of his points. Yes, while Winn-Dixie sold off many of its stores, it now operates a much leaner company, generating a profit and a decent stock, considering the environment. Albertsons LLC, the private equity-owned company, recently sold 49 locations to Publix in Florida. It was more of a defensive move on Publix’s part, and they paid a premium for the real estate and building properties. Penn Traffic recently sold its WHOLESALE division to C & S, as they are remaining in retail. Sweetbay closed 7 underperforming stores in FL, and is in now form of restructuring. Not to mention that Florida is one of the most difficult retail environments to operate it, one that was among the hardest hit by the real estate bubble, and one where Publix gets the high-end customers and Walmart dominates the bottom share. Thousands of underperforming chain-supermarkets on the verge of closing? Highly doubt it. Maybe… Read more »

Grocery chains may not be hit as hard as other retailers, but we have observed the recession’s impact in several areas.
1) Fewer impulse purchases
2) More coupon-clipping, price-consideration
3) A growing emphasis on private labels (and developing meal solutions with these)
4) The premium market (e.g. Whole Foods, Wegman’s) backlash – food to admire and inspire (like art) but not to buy
5) A growing trend to developing smaller footprint, “neighborhood” stores with at least 20% fewer skus and a focus on attracting the local demographic.

All of these trends fit the hypothesis of one lasting recessionary impact–that over time, all retail is shrinking.

Supermarkets are government subsidized via food stamps, Medicare, and Medicaid. All 3 government programs expand spending when times are tough. Ask any supermarket executive, manager or cashier how much sales volume goes through the food stamp program, Medicare Part D, and Medicaid. Take away those government subsidies and you’d see thousands of drug and supermarket locations closed asap.

I agree with Blist. Supermarkets are open and primarily thriving, because they serve their customers at the local level.

Great A&P is celebrating its 150th anniversary year and sells food products that customers really want to purchase and eat.

Private label offerings are multiplying because consumers like the quality and the savings. Supermarkets with strong private label lines will expand their sales as customers shop for the best quality products at the best prices.

A simple mindset is that people have to eat. So they will make choices that are easy on their pocketbook and taste good all at the same time.