As the Food World Turns

With ecommerce, Amazon, Walmart, Lidl and Millennials dominating the majority of conversations in the extended retail food world, it’s easy to see how the perception exists that there’s little else to debate or discuss.

However, as significant as the aforementioned topics are, the reality is that a plethora of equally pressing, albeit lesser-discussed, issues will have a profound bearing on the next chapter yet to be written about the tumultuous present-day grocery derby.

Among the foremost formidable forces grocers will continue to grapple with in the near term:

• Lingering deflation, which continues to compound competitive pressures, including those on the food-at-home Consumer Price Index (CPI), which decreased 2 percent during the 12-month period ending January 2017. Grocery CPI, which measures channel inflation, remained flat compared with the previous month, largely as a result of the 5 percent decline in the fruit and vegetable index.
• Profound uncertainty with two of the Trump administration’s top policy priorities, uppermost being immigration reform, which threatens to strip farms and meatpacking and processing plants of labor. Next is the controversial Border Adjustment Tax (BAT) proposal, which sparked a coalition of some 100 industry trade groups — including associations like FMI, NGA and NRF, and retailers such as BJ’s Wholesale, Meijer, Target and Walmart — to unite in opposition as Americans for Affordable Products (AAP). The National Retail Federation (NRF) recently debuted a humorous television spot to broadcast its view of BAT as “bad tax policy that would increase costs on everyday necessities like food, gas, clothing and prescription medicines for the average family by as much as $1,700 in the first year alone.”

While these looming issues will undoubtedly command considerable attention and resources from affiliate industry cohorts in the months ahead, additional watch-worthy developments include:

• Kellogg Co.’s disbandment of its DSD network for its $3.2 billion snack business to the warehouse model already in place for 75 percent of its North American portfolio. Set to be complete by Q4 of this year, the transition sets the stage for other manufacturers to potentially follow the lead of the Battle Creek, Mich.-based company.
• Dollar General’s expectation to create 10,000 new jobs this year as a result of 1,000 planned new store openings and two new distribution centers. The 9 percent overall increase to its workforce marks the largest one-year employee increase through organic store and distribution center growth in the company’s 78-year history. Further, after cutting the ribbon on its first small-format DGX store in Nashville in January, Dollar General is also eying additional compactfootprint models to add to its store fleet in 2017 and beyond.
• Aldi’s $1.6 billion cap-ex remodeling and expansion purse earmarked for an overhaul of 1,300 U.S. stores by 2020. Aiming to shore up its turf and broaden its appeal, the Batavia, Ill.-based chain will focus on more robust produce, dairy and bakery sections with design tweaks such as open ceilings, natural and LED lighting, and upgraded refrigeration systems.
• Albertsons’ quest to become a publicly traded company, which has been in the works since July 2015 after acquiring Safeway six months earlier, may finally come to pass. Indeed, with investors giddy about the Dow, S&P 500 and Nasdaq posting new record highs on continued optimism regarding President Trump’s pending pro-business reforms, the timing certainly seems right for the Boise, Idaho-based retailer — which operates 2,200-plus stores across the country under 18 banners — to make its long-awaited IPO leap.

The industry truly is at the tipping point of major change, which will threaten the position of many existing players, but will also prompt others to become shrewder and better equipped to compete in an increasingly disruptive ecosystem where there will be no room for mediocrity.