Supermarket sales rise, but profits fall
While the supermarket industry's sales increased 5.2 percent in 2008, its profits were offset by a 5.7 percent food-at-home inflation rate, according to a new Food Marketing Institute report.
As a result, grocery industry net profits fell to 1.43 percent last year, compared to 1.82 percent in 2007, as retailers competed for fewer consumer dollars during the recession.
"Contributing to this decline were increases in the costs of goods, health insurance and credit card interchange fees, among other expenses," said the FMI report 2009 Food Retailing Industry Speaks: Annual State of the Industry Review.
Despite a decline in net profits, grocers were resilient, said FMI President and CEO Leslie Sarasin.
"Retailers aggressively discounted products and increased their lines of private brands to help American families lower their grocery bills," she noted.
Independent food retailers - companies with between one and 10 stores - posted the highest net profits of 1.9 percent and the highest same-store sales increases of 5.11 percent.
Still, the economy is the No. 1 concern of food retailers, followed by competition from other retailers, healthcare costs, credit/debit interchange costs and food-safety issues.
Because the economy is top of mind for grocers, 93.3 percent of them plan to increase the number of private label products they carry in 2009. Store brand products accounted for 15 percent of supermarket sales in 2009, compared to 14 percent in 2008 and 11.5 percent in 2007.
In addition to private label, supermarkets' primary focus is on their perishable and healthy offerings, which should bode well for the seafood industry this year.
"Nearly all (97.3 percent) emphasize perishables to gain a competitive advantage," said the FMI report. In addition, 68.4 percent of food retailers are focusing on wellness and family health as a competitive strategy.