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Supermarket industry sales increased 5.2 percent in 2008, and identical-store sales rose 4.5 percent, but these gains were offset by the 5.7 percent food-at-home inflation rate last year, according to “2009 Food Retailing Industry Speaks: Annual State of the Industry Review,” released late last week by the Food Marketing Institute (FMI). Adjusted for inflation, sales declined 0.5 percent and identical-store sales fell 1.2 percent.
Industry net profits decreased to 1.43 percent, from 1.82 percent, as companies competed more intensely for fewer consumer dollars in a recessionary economy. Contributing to this decline were increases in the cost of goods, health insurance and credit card interchange fees, among other expenses.
Independent retailers (companies with one to 10 stores) posted the highest net profits and identical-store sales increases of 1.90 percent and 5.11 percent, respectively.
“The industry showed its resilience in the most challenging economy in modern history,” said FMI president and CEO Leslie G. Sarasin. “Retailers aggressively discounted products and increased their lines of private brands to help American families lower their grocery bills. At the same time, they continued to control costs by improving efficiency and productivity, a hallmark of this industry.”
Looking to the future, retailers reported increasing concern over the impact of numerous issues -- especially the economy, which is having a pervasive impact on the industry. The impact of issues, measured on a one-to-10 scale with 10 being the highest, increased for nearly every issue, comparing the rating in 2008 with the expected impact in 2009-2010. For the first time in the six years FMI has tracked concern levels, retailers rated the impact of two -- competition and the economy -- at eight or more. In fact, the economy received the highest rating by a large margin, at 8.7 -- registering a major jump from the 5.9 rating as recently as 2007 -- and six issues had a future impact rating of 7.0 or higher.
Supermarkets are responding strongly to consumer demand for lower-cost foods in three ways, according to FMI’s latest research that found a significant increase in companies emphasizing low prices as a competitive strategy -- from 69.9 percent in 2008 to 78.4 percent this year. Food retailers now rate the success of this strategy at 7.3, up from 6.9, on one-to-10 scale.
Second, retailers are featuring private brands more prominently, demonstrated by a series of figures:
--Private brand products now comprise 9.7 percent of the items carried in a typical store -- up from 8.1 percent in 2008 and 7.5 percent in 2007.
More than nine in 10 retailers (93.3 percent) plan to increase the number of these products in the coming year. They account for 15.0 percent of supermarket sales -- up from 14.0 percent in 2008 and 11.5 percent in 2007.
Private brand sales increased 10.8 percent in the most recent fiscal year -- more than twice the industry’s overall growth rate and well above the 2.5 percent growth rate for manufacturer brands. Nine in 10 retailers are promoting private brands as a core competitive strategy and report a success rate of 7.1.
--Half of supermarkets (50.7 percent) offer savings through frequent shopper or loyalty card programs, and rate their success at 7.3, up from 6.4.
Part II of “FMI’s 2009 Food Retailing Speaks” will appear on progressivegrocer.com on Tuesday.
To purchase the report ($95 for FMI Retailer/Wholesaler Members, $175 for FMI Associate Members and $250 for nonmembers), call 202-220-0723 or visit www.fmi.org/store/.