Strong 2019 Prepped Food Retailers for COVID
The food retail industry’s strong operational performance in 2019 helped it confront challenges in 2020, according to “The Food Retailing Industry Speaks” report, released annually by FMI – The Food Industry Association. At the same time, though, the report found that such outside forces as trade, credit/debit card interchange fees and health care costs negatively affected food retailers and prevented profit margins from growing.
“In 2019, the food retail industry saw same-store sales rise to 3.3%,” observed Leslie G. Sarasin, president and CEO of Arlington, Virginia-based FMI. “Food retailers experimented with new technologies, online sales, and health and well-being initiatives. It turns out, these investments helped pave the way for 2020 so that food retailers were better prepared for challenges the COVID-19 pandemic presented.”
Even with the gains of last year, however, difficulties remained. More than half of retailers surveyed for the report said that international trade and tariffs had adverse effects on their business. Credit/debit card interchange fees and health care costs continued to eat into profits, along with higher wages and employee benefits costs. The result of these factors an average net income of just 1.0% of sales, down slightly from 1.2% in 2018, and at its lowest point in 10 years.
“The groundwork laid in 2019 allowed the food retail industry to be nimble this year when grocery stores faced unprecedented demand and the supply chain was dramatically disrupted,” added Sarasin. “In this period, retailers, their associates and their trading partners pursued proactive strategies to feed the nation. The food industry will continue to innovate even when faced with uncertainty.”
The "Speaks" report features more than 37,000 food retail stores and provides 2019 operational and financial benchmarks, as well as insights into strategic and tactical decisions. This year’s survey also asked retailers to offer perspective on the first few months of the coronavirus pandemic.