Food Retailers, Suppliers Get Creative to Solve Industry Challenges

Food retailers and suppliers, facing formidable challenges with a changing workforce, inflation, supply chain hurdles, intense competition and shifting consumer buying habits, are investing in more creative and proactive approaches to future-proof their businesses, according to FMI—The Food Industry Association’s annual comprehensive research analysis “The Food Retailing Industry Speaks 2023.”

The 74th annual report finds the food industry is prioritizing innovation to increase efficiency and foster redundancies across product supply and assortments; investing in technology for worker recruiting, training and retention, and pay increases to ease labor issues; and prioritizing competitive pricing and strategies to provide value and maintain customer loyalty.

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“Food industry companies are maximizing efficiencies and, in some instances, creating strategic redundancies in the supply chain in their unending effort to ensure consumers have access to the products they love,” FMI President and CEO Leslie G. Sarasin said. “The industry is also heavily invested in bringing more creative approaches to product assortments that will continue to delight and inspire their customers.”

Sarasin continued, “The positive news is the industry is signaling its expectation that supply chain disruptions will continue to lessen as we move through 2023. Across the food supply chain, we are taking the lessons learned over the past few years to change the way we invest in our employees, innovate to future-proof our businesses and, most importantly, adapt our operations to better engage with and serve shoppers.”

The report found that less than half of food retailers (44%) and suppliers (32%) believe supply chain disruptions will negatively impact their businesses in 2023, compared to 70% of food retailers and 82% of suppliers in 2022.

To maintain customer loyalty in this inflationary environment, retailers are fine-tuning competitive pricing for products and categories and increasing consumer communications about value. The majority of retailers say they are showcasing private brands as strong value alternatives, and 85% of retailers are investing in new technologies to improve the customer experience. In 2022, food retailers devoted an average of 1.3% of their total sales — more than $13 billion — to technology investments, and food suppliers spent almost twice as much on technology as food retailers.

Retailers also reported continuing to leverage perimeter departments to attract and retain shoppers. Eighty-eight percent of food retailers differentiate themselves from the competition by selling local assortments throughout the store, with 73% increasing local items in SKU allocation. Additionally, 85% utilize fresh prepared/foodservice programs to stand out among competitors and enhance consumer engagement.

Arlington, Va.-based FMI works with and on behalf of the entire industry to advance a safer, healthier, and more efficient consumer food supply chain. FMI brings together a wide range of members across the value chain — from retailers to producers to companies supplying critical services — to amplify the collective work of the industry.