by Kristen Cloud/staff writer
What Jarron Springer refers to as the biggest change for the Tennessee grocery industry in a long time, perhaps in decades, is just around the corner.
Beginning in October, the state’s Supplemental Nutrition Assistance Program (SNAP) will distribute funds to recipients over 20 days per month, rather than the current 10.
What does this mean for the industry?
“This affects essentially the whole ‘food chain,’ and not just the retailers on the front lines seeing people coming through the doors,” says Springer, who serves as president of the Tennessee Grocers & Convenience Store Association (TGCSA). “It’s the supplier who puts the product on the shelf. They’re helping that retailer predict how much he needs to order based on that retailer’s sales. So that supplier is going to have to adjust. That wholesaler is going to have to adjust how they’re stocking that truck to go out, and it’s going to change forever.”
The retailers will, however, likely feel the greatest impact—and in a positive way.
“Retailers very much appreciate this change being made because you’ve seen such a dramatic increase in food stamp usage all across the U.S.,” Springer tells The Shelby Report.
Tennessee, with a total population of approximately 6.5 million, currently has about 1.3 million people (accounting for more than 655,000 households) enrolled in SNAP. The state receives nearly $178 million each month from the USDA to fund its food stamp program. To give some perspective on the increase, in 2005, the state received only $44 million.
“You can see in that seven-year period of time, you’re over fourfold what it was,” Springer says.
Transitioning to the new system also won’t come cheaply for the state. Springer notes the change will cost about $450,000. Half of that will come from the federal government.
The new system, however, will be worth the cost in the long run, according to Springer.
In addition to evening out store crowds and long checkout lines, the change will balance sales and provide for more stable employment for stores’ associates.
“Suddenly, retailers’ business models aren’t going to be so erratic,” Springer says. “You don’t have a huge spike in sales at the beginning of the month because of food stamps, and then that line just dwindles to where you just almost have no business at the end of the month.
“That’s the key to this—this is why retailers wanted this change,” he adds. “It’s spreading it out more evenly.”
He says it’s not uncommon for a retailer to see a 50 or 60 percent jump in sales above their average sales the first 10 or 15 days of the month.[gn_box title=”Tennessee Counties With Most SNAP Recipients” color=”#ec7f04″]
1. Shelby County (Memphis) 268,341 ($38M)
2. Davidson County (Nashville) 131,849 ($18M)
3. Knox County (Knoxville) 68,798 ($9M)
4. Hamilton County (Chattanooga) 60,087 ($8M)
5. Rutherford County (Murfreesboro) 40,161 ($5M)
*Note: Numbers of individual recipients are from June 2012[/gn_box]
“Then, the second half of the month will be a negative 40 or 50 percent off the average,” he says. “You have a rollercoaster ride every month. Whatever the average is, the first half of the month is 50 over and the last half of the month is 50 below. So scheduling employees to work, stocking your shelves and having those prepared for that kind of influx, and having enough workers to handle those kinds of lines at checkout, that’s tough. You’ve got a job for somebody for the first two weeks and then you say, ‘I don’t have a job for you for the next two weeks’…This will be good for employees of those retailers because they have better, more structured job availability that’s closer to full-time than part-time.”
Recipients also will have a better shopping experience, Springer believes.
“They’re not all jammed up into one-third of the month,” he says. “They’re going to come in and have better customer service, and we’re able to manage our business better.”
Tennessee’s transition to an extended food stamp issuance cycle is a long time coming. Springer, whose TGCSA has 350 members, began efforts to extend the SNAP distribution cycle in October 2005. That, however, doesn’t mean October won’t experience difficulties, especially since a great number of SNAP recipients will see a delay in their fund issuance. For instance, a person currently receiving funds into their electronic benefits transfer (EBT) account on the first day of the month may have to wait until the 10th day of the month. Following October, after the change takes effect, recipients will be back on a normal schedule. But, as Springer says, “we’ve got a rough month there.”
In addition to informing customers, Springer recommends retailers and communities donate to their local food banks in the months leading up to the transition.
“You’re going to have those families that are not receiving that benefit for a period of time, and there’s going to be a number of them who have to go one to 10 days more than they’re accustomed to that one month, without their benefit. Giving a little bit more in the months leading up to that—working with the food pantries ahead so they know it’s coming … preparing for an influx—will help.”
For updates about Tennessee’s SNAP transition, visit www.tngrocer.org.
Neighboring states also extending SNAP issuance
A number of states in the Southeast are joining Tennessee in spreading out their SNAP distribution schedules.
New schedules in Georgia, South Carolina and Virginia are slated to take effect in the coming months. Georgia, for example, will expand its distribution in September from the 5th-14th each month to the 5th-23rd, with distribution every other day. South Carolina will spread its distribution this fall over 20 days rather than the current nine, and Virginia will begin its expansion from one to four days in September.
The transition will be particularly helpful to retailers in Virginia, which currently is among nine states that issue benefits only one day a month.
“This (one day issuance) creates a bottleneck for customers and SNAP recipients, as grocery lines can become frustratingly long during that time,” Elizabeth Tansing, director of state government relations for the Food Marketing Institute (FMI), tells The Shelby Report. “Stocking can be difficult for a retailer when shelves and fresh produce are depleted after only one shopping day, and it is also difficult to keep labor for only a day or two surrounding that one busy shopping day of the month.”
The USDA, which distributes SNAP funds to states, also supports the staggering of benefits. In February, Jessica Shahin, USDA associate administrator for SNAP, sent a letter to all states clarifying this.
“…we are concerned when the effectiveness of the EBT distribution system is adversely impacted by factors that we have the combined ability to influence,” she writes. “Specifically, issuing SNAP benefits on a single day or over a limited number of days instead of staggering issuance over the course of the month puts an unnecessary strain on SNAP clients and on participating retailers by causing surges in customer traffic at SNAP authorized stores.”
There are more than 233,000 retailers in the U.S. that participate in SNAP, which serves 46 million Americans.
“In the interest of best serving SNAP clients, we ask states to evaluate their issuance cycles and consider the steps, cost and time table that might be involved if the conversion of issuance dates to a staggered schedule or a further extension of a current schedule could improve services to SNAP clients and their access to healthy and nutritious food choices,” Shahin adds in her letter. “States have the authority to stagger SNAP benefit issuance over the entire month as long as no participant goes longer than 40 days between benefit issuance days.”
North Carolina was the most recent state to spread out its distribution schedule. In 2011, it moved from a 10-day cycle to a 19-day schedule.
“Instead of hiring temporary employees to work for a limited time frame, grocers are now able to hire more full-time employees, and SNAP recipients now have an increased availability of fresh fruits and vegetables, among other inventory, to enhance their shopping experience,” says Tansing.
BI-LO spending millions to update Chattanooga stores
BI-LO expects to spend more than $6 million this year in the Chattanooga area and add more than 100 new workers as it updates five area stores, according to the Chattanooga Times Free Press.
Fred Shropshier, BI-LO’s regional VP, tells the Free Press that the company is “reinvesting in the total market,” as he and others marked the refurbishing of BI-LO’s Rivermont store off Hixson Pike in early July. BI-LO calls these projects “clean and brights.”
Shropshier tells the paper that BI-LO’s merger with Winn-Dixie earlier this year has already helped the combined company streamline operations.
“We’ve already taken advantage of synergies … with contractual agreements with suppliers,” he says.
Those savings, the Free Press reports, along with others from integrating support staff for the companies have enabled the grocer, which is now based in Jacksonville, Fla., to pass those on to consumers and make the capital investments in stores.
BI-LO District Director Daryl Massey tells the Free Press that the company locally is focusing on upgrading existing stores to woo more business.
At the Rivermont BI-LO, he says, the company renovated using “softer, warmer colors,” having a modern décor and updating the departments inside the store. The store also boasts new refrigerated cases and more product varieties.
BI-LO is the Chattanooga area’s top grocer, with 31 stores ranging from Dayton to Blairsville, Ga.
Publix to make debut in Knoxville on Aug. 2, Kroger opens Marketplace store
Two leading grocery chains are making their marks in the Knoxville market.
Employee-owned Publix, based in Lakeland, Fla., and with more than 1,000 stores across the southeastern U.S., will enter Knoxville for the first time Aug. 2. The 56,000-s.f. store at 2010 Town Center Blvd. in the Northshore Town Center will employ approximately 200 people. It will offer conventional items combined with a selection of earth-friendly, all-natural and organic products. In addition to a bakery, deli, full-service meat and seafood departments and an event planning center, the store will have a drive-thru pharmacy.
On June 27, Kroger opened its second Atlanta division Marketplace store in west Knoxville.
The new 117,000-s.f. store at 9225 Kingston Pike at the Shops at Cedar Bluff features a Starbucks, fuel center, sushi bar, full-service meat and seafood department, SunTrust bank and bistro. It also boasts new specialty retail sections, such as Fred Meyers Jewelers and Ashley Furniture.
“The amenities offered by the Kroger Marketplace will provide residents with a variety of new options and a convenient shopping experience,” says Glynn Jenkins, director of communications and public relations for Kroger’s Atlanta division. “In addition to its convenience, the store will employ 300 Kroger associates, creating 200 new jobs in Knoxville…”
Kroger’s first Atlanta division Marketplace opened in Farragut in 2008.
Discount, dollar formats thrive
It’s little surprise how well discount grocers and dollar formats are doing. The economy, as United Grocery Outlet Director of Purchasing Gary Buchanan points out, has made for a smart, hard bargain-hunting consumer.
“I think the consumer in general has become more savvy in finding the places to shop for value,” Buchanan tells The Shelby Report, mentioning manufacturers also have changed the way they run their businesses.
“We’re all getting used to this stressed economy, figuring out how to live in it, including the regular retailers. I think as we get through this tight time and understand what kind of changes we all need to make to operate, it becomes regular business to us. Of course, for us, with the consumer looking for value, it’s increased business for us as a retailer.”
Athens-based United Grocery Outlet, with 35 extreme value liquidation stores in five states, finished its third quarter June 30 with same-store sales up 14.78 percent from a year ago—despite ever-growing competition,
according to Buchanan.
“The state of our business today is very strong,” he says. “We continue to fill the value gap in the marketplace and the consumer continues to look for value. So our outlook for the near future is strong sales…we’re looking for an excellent year, both in sales and in profit.”
Grocery Outlet also is making capital improvements to its current stores and on the lookout for opportunities to open new stores.
The company recently remodeled a store in Chattanooga, expanding its size by 35 to 40 percent.
A store in Clinton is expected to open in early August.
“That’s the only one we have nailed down right now,” Buchanan says. “We’re actually looking at some opportunities with several of the other empty Food Lions.”
Different from other retailers on a number of fronts, United Grocery Outlet doesn’t focus its growth on accumulating market share.
“We’re looking for opportunity in towns that we currently don’t operate in…and we want to stay within a three-hour radius of Athens, Tenn., from a distribution point so our distribution costs are not escalated,” Buchanan says. “That said, we’re looking to open stores and we’re continuing to look for those opportunities. We’d like to open two or three stores a year if we can find the right kind of fits.”
Its uniqueness doesn’t mean United Grocery Outlet isn’t aware of its competition. In fact, Buchanan says the company considers any and all grocery retailers competition, since they all are vying for customers and their dollars. This competition, of course, includes fellow Tennessee-based retailer Dollar General.
Dollar General, headquartered in Goodlettsville, saw 2011 sales growth of 13.6 percent and worldwide retails sales of $14.8 billion—making it one of the top 10 fastest growing retailers in the U.S., according to the National Retail Federation. Much of Dollar General’s growth, of course, comes from its expanding selection of food items, along with beer and wine.
United Grocery Outlet, while paying attention to its competitors, still puts great focus on its “niche” market.
“It is a niche market (we have) because we buy from the manufacturer—the products they need to sell rather than want to sell—so we create a secondary channel, if you will, and that provides some extreme value to the consumer.
“From a price standpoint, we feel like we kind of stand alone from the competitive edge,” he adds. “But from a marketing standpoint, and there’s some great retailers that do a wonderful job getting the consumers’ dollars, in merchandising and the way they run their stores, that becomes a competition in itself.”
In other grocery-related news:
• A quarter-penny reduction in Tennessee’s state sales tax on groceries took effect July 1. The cut trimmed the sales tax from 5.5 percent to 5.25 percent. That comes to an average savings per person of about $3.40 a year. The state is giving up $22 million in revenue through the move. Tennessee Gov. Bill Haslam, who proposed the reduction, is expected to recommend another quarter-cent reduction next year, taking the rate to 5 percent on food. The reduction does not apply to prepared foods, dietary supplements, candy, alcoholic beverages and tobacco, which continue to be subject to the general state sales and use tax rate of 7 percent plus the applicable local sales tax rate;
• An employee of Breedlove Grocery Store in Memphis was allegedly shot in the head and seriously injured July 6 by, police believe, an unruly customer. Wmctv.com reports that police were called to the store overnight after a disorderly customer who had been kicked off the property returned with a gun. Police recovered the weapon but the customer got away. It is believed the same man, with a different weapon, returned July 6; and
• The severe drought and excessive heat that continues to plague more than half the nation has forced the USDA to designate natural disaster areas. The majority of Tennessee counties are among those areas. Middle Tennessee is especially suffering from the dry conditions, with dairy farmer Roy Major telling The Tennessean that this year’s drought is the worst he’s seen since he started farming about 60 years ago. The historic drought also will result in higher food prices, officials report.
“Prices are going to go up,” Justin Gardner, assistant professor of agribusiness at Middle Tennessee State University, tells the Christian Science Monitor. “The only question is when.” The USDA has lowered its crop projections for corn by 12 percent, promoting a 34 percent hike in prices in recent weeks. Since corn goes into so many food products for both humans and livestock, its effect on overall food prices is massive.