AlabamaGroceryJan2017Final

WASHINGTON REPORT

G o od N ews F o r I nd e p e nd e n t s

PETER LARKIN PRESIDENT AND CEO NATIONAL GROCERS ASSOCIATION

The grocery business is not for the faint of heart, due in large part to low profit margins and shifting consumer preferences.

Additional Challenges and Opportunities: Total expenses increased in 2015, driven mainly by labor and benefit costs, which stood above 14 percent of sales, making it the sixth consecutive year the average percentage was above 14 percent. Fiscal year 2015 marked another year of rising healthcare costs as operators saw healthcare costs grow 10.2 percent. With the rising usage of debit and credit cards among shoppers, interchange fees were listed within the top five concerns for independent supermarket operators. Independents adapted their advertising allocation to marketplace demands by shifting funds from printed materials to digital marketing.

These days, the traditional supermarket is undergoing profound change, while also maintaining its place at the heart of the food shopping experience for the vast majority of American consumers. And while the entire food industry is looking to stay ahead of the consumer trend curve, independent supermarket operators are continuing to innovate to meet shifting demands. Despite a tough marketplace, independents grew same-store sales by 2.1 percent – ahead of annualized inflation (1.2%) and well ahead of the prior year’s 1.5 percent gains, according to the results of NGA’s annual “Independent Grocers Financial Survey.” This study, compiled in conjunction with our partner FMS Solutions Holdings LLC, analyzed the financial and operational performance of independent supermarket operators in fiscal year 2015. In addition to benchmarks for financial performance and business strategies, the report provided an in-depth look at the economic, political and competitive landscape in which these retailers operate. Survey respondents represent a wide array of companies throughout the United States and Canada.

Survey “profit leaders” (the top 25% of independents that exceeded three percent in net profits before taxes) outperformed publicly-traded companies by 4.09 percent to 3.52 percent in average net profit before taxes. Interestingly, for the first time in the history of this report, supercenters were not listed as independent's top competitive threat, but instead were replaced by other conventional supermarkets. In a fiercely competitive industry, independents are continuing to differentiate themselves in the marketplace and are doing so with much success. Whether it’s diving into e-commerce platforms, enhancing customer service or increasing focus on the fresh/perishable department, independents are employing tactics to not only meet consumer demand, but become the store of choice. At the 2017 NGA Show, there will be ample opportunities, including a financial benchmarking workshop, to learn how best in class retailers are able to increase their net profits during challenging times. Visit www.theNGAshow.com. ■

Profit leaders focused on operational fundamentals,

including keeping inventory turns high and implementing programs to track and reduce perishable and theft-related shrink.

| ALABAMA GROCER 18