Food Retailers Still Behind Inflationary Curve

Looking at the gains food and beverage stores have made in dollar sales in recent months, it appears they are doing quite well. For example, during September this retail sector saw sales increase 5.7% from the same month a year. But when you consider that overall retail food prices during the same month were up an estimated 6%, it's apparent that food retailers are only holding their own for the most part.

Looking at the gains food and beverage stores have made in dollar sales in recent months, it appears they are doing quite well. For example, during September this retail sector saw sales increase 5.7% from the same month a year. But when you consider that overall retail food prices during the same month were up an estimated 6%, it's apparent that food retailers are only holding their own for the most part. Since wholesale food costs were running about 8% more than a year earlier in late summer. 

The 1,681 unit Safeway chain believes that moderating fuel prices will help sales, according to a Citibank report which also noted that, "Management stated that some people within the Safeway organization expect food inflation to begin to moderate as the company begins to cycle higher inflation.” 

And the nation’s largest food retailer reports that its Traffic in grocery has improved 100 basis points and has turned positive. The nation’s largest retailer also says that food inflation is helping its store comps look favorable year over year. However, this benefit has been offset by customers trading down or trading out of products according to the Citi analyst. Customers are trading down from national brands to opening price point items and are trading down to smaller pack sizes within brands.

On the independent grocery side, FMS reported that this sector saw September sales rise by only 2.2% from a year earlier, well under that rate of inflation. Apparently the local independent grocer is not having an easy go of it, reports The Food Institute. But The Food Institute reminds its members and the industry as a whole that typical food and beverage stores, from bakers and delis to supermarkets, account for about 13% of all retail sales in the U.S. from about 147,000 locations and employ some three million people in the United States – one-fifth of the entire retail workforce. That is a pretty significant chunk of the economy.

For more data on the food industry, the Food Institute has just released its flagship publication Food Industry Review 2011. For details to go to www.foodindustryreview.com.