The State of the Union

The Grocery Headquarters annual State of the Industry almanac is designed to help retailers gain a better understanding of their ever-changing world. Now it is up to them to make those changes that need to be done.

What’s the temperature? Is the patient healthy or sick? Is the patient getting better or worse?

In this case, the patient is the supermarket industry and the collective answer to the above questions is that the industry is not doing too badly, thank you, and appears to be on his way to a steady recovery.

The recession of the past two years has definitely impacted the grocery store industry. Consumers are spending less and they are watching their pennies more and that has played a role in determining sales growth at the 33,000 or so supermarket units spread out across the country.

But the bottom line is that people have to eat and, if nothing else, the lingering recession has caused many consumers to skip a meal or two at their favorite restaurant in favor of eating more meals at home. Those meals, whether made from scratch or prepared, have to come from somewhere. More often than not, that place has been the supermarket.

Interestingly, most supermarket executives don’t see it that way. The consensus among retailers is that supermarkets have been as hard hit as just about every other retail outlet and they need to hold the line on costs to generate any sort of profit. Many grocery store officials say the spike in energy prices two years ago caused them to lose money from higher transportation costs and heating/air conditioning costs.

“Yes, we have seen an uptick in sales, but our costs have gone up dramatically over the last five years,” says one senior executive for a New Jersey-based chain. “Sales rose over the last three years more than they did the previous six or seven years. The result has been a cut into our profit picture. So we are selling more products, but we are not really seeing much growth in our bottom line.”

Other industry observers say that supermarket executives should be quite grateful for their situation. Other retail outlets, such as home furnishings stores, department stores and even some specialty stores, have struggled to make money over the past two years. And, they add that while grocery stores have maintained customer loyalty during this recession, many other retail stores have lost a large percentage of their customer base as shoppers change their shopping patterns and seek more convenient stores or stores that have much better prices, or both.

As the information in our annual State of the Industry Almanac shows, some categories performed better than others in the mass retail world over the tracked period, ended Jan. 24. Some of that had to do with consumer needs; some of it had to do with product introductions; and some of it had to do with changing demands that helped one category while possibly hurting another one.

The key for retailers, of course, is to stay ahead of these trends. That’s why we publish the almanac. With the help of Information Resources, Inc. and The Nielsen Co., we are able to look at dozens and dozens of categories across the entire retail spectrum and see what is growing and what is not. These two database companies have given us access to brands and categories to help you, the retailer, understand the trends.
As always, we ask for your feedback on these charts. Examine them and determine how they can help you build your store so that you give consumers the right products, in the right locations and at the price that will encourage sales but still offer you a healthy profit.

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