Hy-Vee enacts cost-saving plan as consumers cut back on spending
Anticipating an economic downturn in the United States as early as next year, Hy-Vee is planning cutbacks, including the elimination of around 600 corporate positions.
The West Des Moines, Iowa, U.S.A.-based operator of more than 285 grocery stores detailed its cost-saving plan in advertorials published in several newspapers across its operating region.
“Today, Hy-Vee and other retailers across the nation are currently facing a number of obstacles, from rising inflation and increasing fuel costs, to supply chain disruptions and more,” Hy-Vee wrote in the advertorials. “But that may just be the beginning. Several of the world’s leading financial service providers recently predicted a steep economic downturn as soon as next year.”
Hy-Vee cited a financial update from investment bank and financial services company Goldman Sachs predicting a 35 percent chance for a U.S. recession within the next 24 months, and a recent survey by Bloomberg showing that half of investors expect a recession by mid- to late-2023.
“As a trusted retailer that millions of people depend on every day, we need to make adjustments to better serve our customers and our more than 93,000 employees,” Hy-Vee Chairman and CEO Randy Edema said in the advertorial.
Rampant inflation – running at an estimated 11 percent in the nation’s food sector – is also taking its toll on the grocery industry, according to Hy-Vee. But rising inflation is just one of many operating challenges, including a severe shortage of retail workers, increased pressure from labor costs, supply disruptions, and changes in consumer behavior, Hy-Vee said.
“Many consumer trend reports are noting that more than 70 percent of consumers are spending less due to recent inflation,” Hy-Vee Executive Vice President, Chief Merchandising Officer, and Chief of Staff Donna Tweeten said. “They are cutting back on indulgence items and impulse buys – both of which were on the rise during the pandemic but are now coming to an abrupt halt.”
As a result, Hy-Vee has begun taking strategic steps to analyze spending and reduce operational costs to deliver better value and more savings to its customers “without sacrificing the superior customer service and quality products that have been the pillars of the company since its inception more than 90 years ago,” Hy-Vee said.
The biggest immediate move being made by the grocery store chain will be moving around 600 positions from the corporate level to the retail side of the business.
“While more than 100 corporate office employees were asked in March to make a move to retail, this week the company will be asking up to 500 additional employees to make similar moves,” it said. “[It is a] restructure of corporate positions, and if anything, the stores and our customers should see benefits at the store level with regard to these moves.”
Last week, the retailer invited all corporate office employees to attend an internal job fair “to continue our efforts to see if any of our retail leadership openings may be a good fit for them, as many people in our corporate office have retail experience,” Senior Vice President of Communications Tina Potthoff told SeafoodSource. She declined to comment on the impact of the changes on seafood positions within the company.
“We currently have approximately 400 store leadership positions open across our eight-state region in addition to other full-time opportunities,” Potthoff said.
The grocery chain has been a leader in pushing for seafood sustainability, setting a goal in 2011 to ensure 100 percent of its seafood was responsibly sourced by the end of 2015.
In early 2016, Hy-Vee confirmed all of its private-label fresh and frozen seafood was sustainable sourced. Working with nonprofit FishWise, Hy-Vee made several sourcing shifts including a move to provide fresh and private label farmed salmon that held either a yellow or green status in Monterey Bay Aquarium’s Seafood Watch program.
Potthoff said Hy-vee “won’t be changing our policies or high standards due to these [staffing] moves.”
Hy-vee also said it is pausing several construction projects, including a new warehouse in Cumming, Iowa, as costs continue to rise. Hy-Vee is also evaluating its existing land parcels to determine whether the spaces still align with its growth plan.
Hy-Vee is working to deliver more value through deeper discounts via digital “daily deals" that are featured on TV, text message, social media, weekly ads available online, and in stores.
“The majority of consumers are now being forced to focus on necessities and make their dollars stretch, just so they can afford the most basic of staple items, whether that be milk, butter, and grains, as well as proteins like eggs, poultry, pork and beef,” Tweeten said. “We need to do everything in our power to keep prices down and provide the very best value, especially when it comes to the rising costs on those most basic essentials.”
Hy-Vee is the first retailer to make such significant cuts this year. However, Amazon recently announced the closure of six Whole Foods Market stores after reporting its first quarterly loss in years, The Hill reported.
Photo courtesy of Hy-Vee