By Jim Dudlicek / NGA Managing Editor and Content Strategist
The first quarter of 2024 marked a significant turning point for grocery sales, with the first year-over-year unit increase since the second quarter of 2021. The first quarter underscored a resilient grocery sector adapting to economic pressures and changing consumer habits, with deli-prepared foods emerging as a significant trend for 2024.
Several economic factors contribute to the rising (while stabilizing) grocery prices, including inflation, global economic conditions and governmental policies. And while many of the supply chain issues of the past are over, some still exist.
In a recent webinar host by NGA, Robert Graybill, president and CEO of FMS Solutions, offered some insights about current economic conditions and the road ahead.
Here are some key takeaways from the discussion:
Wages are being driven up, even when they should not be due to supply. More money hits the market, creating more demand and driving up prices.
But the consumer continues to be squeezed. Real earnings are down; from February to March 2024, U.S. wages rose 0.3%, but the increase was erased by a CPI of 0.4%. Meanwhile, credit card balances are at all-time highs, along with interest rates and fuel prices.
Inflation for food away from home is 4x food at home. To save money, 93% of consumers are making at least one change when buying groceries, such as switching to private label and otherwise cutting back or trading down. Meanwhile, 39% are eating out or ordering in from restaurants less often.
Business output accounted for about 77% of the value of GDP in 2023.
Re-evaluate your pricing strategy. Analyzing your competition’s pricing strategies can provide valuable insights. Offering discounts on high-margin items can help entice customers to purchase more, while leveraging private label and creating value bundles can increase sales and provide more value to customers. Be sure to keep an eye on pricing trends in the market. Manage the narrative on price gouging – make sure customers understand you’re under pressure, too.
Review sales-based bonus programs. Look at volume and units as a measure free of the impact of inflation. But also consider order fill rates and out of stocks.
Promote where possible and be creative. Feature happy hours, one-day and three-day sales rather than a standard week. Continue to invest in marketing but consider a shift to digital over paper.
Pennies can add up to dollars. It’s all about the turns and where those dollars come from. Inventory purchased for deals can be investments when you look at the deal level vs. cost of capital. Slow-moving inventory represents capital that could be redeployed.
The balance sheet is the true measure of your company’s economic health; your income statement just shows how you feel today. Always measure inventory trend but keep an eye on past inflation when measuring real inventory dollars.
For more exclusive insights, view a recording of the complete webinar at https://attendee.gotowebinar.com/recording/3606926344240056415.
