Food prices, the food movement and the loss of the center store shopper will have a negative impact on the industry unless all parties pull together.
Collaboration is always a popular topic at executive conferences and this year will be no exception. As we have all watched and listened to the dysfunctional political process on how to manage the U.S. debt and deficit crisis, I guess we should be grateful that industry businesses and their trade associates do not behave in a similar fashion. As Washington wrestles with the fiscal cliff, we are only now hearing about the actual liabilities of federal debt, which exceeds $86 trillion, of which only $16 trillion shows up on the balance sheet.
Could the grocery industry be missing its own fiscal cliff because we do not see potential future liabilities? This column looks at three areas—food prices, the food movement and the loss of the center store shopper—that benefit from a retooling of collaborative efforts.
Record high food prices
Americans will have to deal with some of the highest food prices on record over the next few years due to recent droughts. No doubt, higher food costs are hardest on the poor and underemployed, but, in truth, most Americans have seen their incomes decline during this recession with more state and federal tax increases to come.
Hidden from most eyes are increasing federal ethanol mandates that require 15 billion gallons to be used annually by 2015. This will require more than 40% of a normal year’s corn crop. Corn for fuel is really a hidden tax on the food we eat. Not many of us were around to experience the food protests of the ‘70s, but we are seeing the continuing decline in shopping trips to traditional food stores and restaurants.
Higher food costs, higher taxes and lower wages force more shoppers to find other food sources. Could one-stop shopping at a modern grocery store become an infrequent splurge or special occasion shopping trip? Do we need multi-industry collaboration to tell the whole truth about the ethanol food tax?
Food movement demanding change
Despite the failure of Prop 37 in California to require labeling genetically modified food, more states and counties will surely follow. While our industry debates the cost—$45 million in California—of further campaigns, food movement activists have a long-range plans to tear down our packaged processed food industry. California voters, (47%), were sympathetic to the food movement positions.
Activist messages for the future will be less about personal food choices and more about community decisions surrounding health, environment, biodiversity, food deserts and the social effects of our animal inhumane food system. Disruptive actions including lawsuits, street actions, boycotts and educational campaigns will be tools to change our modern food distribution system.
If chefs and nutrition experts continue to support emotion-based, “right-to-know” propositions and “organics are better” stories, our industry will not only lose trust with the consumer, but also lose the protection of science-based rules. Do you really know what grade school teachers are telling your future customers about the sources, quality and healthy choices in today’s food supply?
Loss of center store shopper
We can all see the continuing loss of the center store shopper to other formats, different channels and now e-commerce. But what we are really losing is the trust in our business model. Once upon a time, grocery shoppers were advocates and fans of the neighborhood grocery store. The magic of seasons, signage, and sampling has given way to part-time employees with little knowledge or caring about the products or shoppers they serve.
Shelf appearance, out-of-stocks, cleanliness and rotation are part of the lost art of merchandising. Yet, the industry cannot define the cost of a failed retail coverage system that has long ago disappeared.
Numerous studies of the total cost of activities, space and utilities demonstrate that today’s modern grocery store cannot survive on the profits from perimeter departments.
As warehouse, club, dollar and online competitors continue to take product categories and even whole aisles out of the center store shopping trip, how do we prevent the modern grocery store from becoming just a large convenience store with ever-increasing higher prices?