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Help Consumers Better Understand Grocery Business, Full Impact Of Inflation

man shopping in grocery store

Independent grocers are more in tune than most businesses with the communities they serve. Grocers see folks every week – sometimes every day – to help them with their families’ needs. Grocers engage, communicate and commiserate, offering ideas and solutions amid challenging economic times.

So, it may come as a surprise that, according to recent surveys, consumers generally don’t understand the grocery business.

The latest confirmation came over this past summer, when findings from a survey of more than 1,200 grocery shoppers conducted by The Feedback Group revealed that, on average, shoppers believe their primary store has a net profit of 33 percent after expenses and taxes, rather than the historic reality of 1 percent to 2 percent.

“This inflated view of profits certainly leads some shoppers to think that food stores simply aren’t doing enough to keep prices down,” said Doug Madenberg, chief listening officer with The Feedback Group, suggesting that this off-base perception likely influences consumers’ weak ratings of supermarket price competitiveness (average of 3.95 on a five-point scale) and value for money spent (4.18 on average).

The gradual easing of inflation in the food sector doesn’t appear to have shaken this perception, and The Feedback Group results reinforce the findings of a similar report by Dunnhumby released in February.

Of course, we know grocers have been under intense pressure to deliver value at the shelf while contending with higher prices for everything from the products themselves to the gasoline in the trucks that move the products to the salaries of the people that make it all work.

Independent grocers have continued to be successful amid these trying economic conditions, though it hasn’t been easy. As revealed by the 2023 edition of the Independent Grocers Financial Study, conducted by NGA and FMS Solutions, same-store dollar sales trended 4.8 percent in fiscal year 2022 above year-ago levels, but sales growth was below the rate of inflation for more than three-quarters of  independent operators.

While inflation dominated the headlines and bottom lines, consumers sought out sales, switched between stores and bought less, hurting volume and unit sales, and slowing inventory turns. Out-of-stocks improved over 2021, but sourcing products continued to be a challenge.

Inflation, competition and continued supply issues are just some of the challenges facing independent grocers, but independents have been nimble enough to meet these dynamic marketplace opportunities and challenges.

Employee turnover remains high, impacting customer service. The cost of goods, utilities, rent and labor all have increased. Independent grocers compressed margins in 2021 to help consumers absorb rapidly rising prices. Strong customer loyalty combined with business savvy have positioned independents to not only survive but thrive in the coming year.

News continues to be hopeful on the inflation front. According to the latest report available from the U.S. Bureau of Labor Statistics before press time for this column, the overall Consumer Price Index rose 0.6 percent in August on a seasonally adjusted basis. The index for food at home increased just 0.2 percent over the month while the index for food away from home rose 0.3 percent.

The six major grocery store food group indexes were split: meat, poultry, fish and eggs rose 0.8 percent while pork increased 2.2 percent. Cereal and bakery products rose 0.5 percent, dairy decreased 0.4 percent and produce declined 0.2 percent.

How can grocers dispel the doom and gloom to demonstrate they’re on their consumers’ side?

Be transparent with consumers about prices, cost to retailers and supply chain pressures. Make them aware that consistently higher prices for goods, services and transportation make it difficult to deliver value. Re-evaluate your pricing strategies.

Make your sales more meaningful – feature items that offer meal-planning solutions and otherwise meet consumers’ highest needs. Use your circulars more strategically.

Consumers are leaning toward store brands, so demonstrate how they offer added value beyond just a lower price. Emphasize conventional produce as fewer consumers select organic options. Highlight value-priced items with healthy profiles. Offer bulk specials and volume discounts.

Inflation for food at home vs. away are neck and neck, so stress the value and variety of grocery over restaurants. Highlight culinary-quality prepared foods as an economical alternative to dining out.

Retailers and consumers alike are displaying resilience in challenging times. New behaviors quickly become new habits, so stay on top of changing trends. And keep communicating with your consumers so they understand the challenges you face to remain invested in the community.

Read more NGA news at The Shelby Report.

About the author

Greg Ferrara

President and CEO of NGA

Greg Ferrara is the President and CEO of NGA. The National Grocers Association is the trade association representing the U.S. independent community supermarket industry. NGA members include retail and wholesale grocers located in every congressional district across the country, as well as state grocers’ associations, manufacturers and service suppliers.

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