Grocers Invested $24B to Keep Operating Amid COVID-19

A year after the World Health Organization declared COVID-19 a global pandemic, FMI-The Food Industry Association has issued a report, “Receipts from the Pandemic: Grocery Store Investments Amid COVID-19 and the Resulting Economics of an Essential Industry,” showing that food retailers invested $24 billion amid the public-health crisis that wrought drastic changes in Americans’ shopping and food consumption habits. Among grocers’ actions were considerable safety, workforce and technology investments to enable the businesses to remain open and serve their surrounding communities.

“We all remember the uncertainty and anxiety that defined the initial weeks of the pandemic, as virtually every aspect of our daily lives changed seemingly overnight,” noted Leslie G. Sarasin, president and CEO of Arlington, Virginia-based FMI. “Since that time, food retailers and our industry’s nearly 5 million dedicated employees have kept Americans fed and shelves stocked while providing a much-needed sense of normalcy for the communities they serve. This report offers new insights into how food retailers have responded to the needs of their customers and communities throughout this unprecedented time.” 

Overall, the report found that food retailers have spent about $24 billion on additional pandemic-related expenses since March 2020. Among these investments: 

• Increases in payroll and incentive pay: $12 billion.
• Increases in benefits: $5 billion.
• Non-monetary benefits and vaccine incentives: $1 billion.
• Personal protective equipment (PPE) and other safety expenses: $1 billion (Further, retailers spent an additional $2 billion on increased cleaning and sanitation hires, or use of external partners for this purpose, and more than $400 million on cleaning and sanitization products.)
• Cleaning and sanitation supplies, labor and other related expenses: $3 billion.
• Technology and online delivery expenses: $1.5 billion.

Other expense information uncovered by the study included the following: Smaller operators (those with 10 or fewer stores) reported spending $50,000 per store on PPE and other safety measures, more than twice the amount of larger operators (those with 10 or more stores), which spent only $24,000; food retailers have spent nearly $10 billion in premium pay and bonuses during the pandemic; and grocers have so far invested $40 million to administer COVID-19 vaccines.

Food retailers also hired new employees to keep up with consumer demand, adding nearly 500,000 jobs between 2019 and 2020. Meanwhile, 94% of respondents said that they had current job openings; extrapolated for the entire industry, food retailers would employ another 100,000 workers if all of these positions were filled this year.

Shifts in consumer demand, combined with a rise in food costs over the past year, led to higher sales totals for food retailers — an 11% rise to $1 trillion — but higher pandemic-response operational expenses offset much of these gains. In 2019, the average profit margin of the respondents surveyed was 1.06%, but saw a modest increase in 2020 to 2.50%, spurred mainly by the initial surge in consumer purchases early in the pandemic.

As the availability of food-away-from-home options increase and consumer spending and food consumption habits begin to resemble pre-pandemic levels, a majority of respondents to FMI’s survey said that they anticipate a sales decline in 2021. Overall, 63% of respondents believe that sales will fall from 2020 levels in some way throughout 2021, while another 13% predicted that sales will remain flat. Only 23% of respondents said that they expect a sales increase this year. Further, 75% said that they anticipate a decline in profits in 2021, while just 10%  said that they think profits will increase from 2020.

“This has undoubtedly been a challenging year for all Americans, and I am especially grateful for the commitment and perseverance of our industry’s workforce throughout this time,” added Sarasin. “Without our grocery workers, we would have been unable to keep our doors open, and therefore unable to serve our communities at a time they needed us most. Now, as we continue to remain vigilant against this virus, our industry is also focused on moving forward and assisting with critical vaccination efforts while supporting the nation’s ongoing economic recovery.”

The study surveyed FMI members and solicited responses from Feb. 24 through March 15. FMI’s survey was completed by 52 member companies representing about 40% of the food retailing industry, with operations in 50 states and the District of Columbia.