As we move toward the conclusion of the first half of the year, it's a good time to take a look at how the food-retailing industry is doing, and what the balance of the year may hold.
In very broad terms, we're in a period when it's assumed that core supermarket product categories, such as Center Store staples, are in a slow-growth mode, at best. That's one reason why retail and manufacturer growth has been sought in recent times through consolidations. But consolidations don't add to the aggregate economic activity of a business sector, although industry profits may be enhanced. It also explains why some industry sectors capable of doing so are moving into other lines of commerce. Some of the possibilities open to supermarket retailers include acquiring drug stores, convenience stores, jewelry stores and, for the ambitious, mass merchandisers.
It also explains why wholesalers are willing to supply product to any channel of trade, and why some are expanding the line of products they supply well beyond the boundaries of those typically associated with supermarket retailing.
But at the end of the day, it's top-line growth that needs to be sought. In this outsized show issue of SN there's a group of news articles presented that are intended to show what might be done to move the industry into growth mode. You'll see the articles indexed on Page 1.
Let's take a look at the article that speaks most directly to the assumption that the grocery staples -- the core of the store -- aren't likely to exhibit much growth. The news article on Page 119 postulates that a renaissance in such goods might be sparked with a little more attention to merchandising. One retailer has boosted sales by increasing the selection of pet-food products, uniting beverages of all types into a common aisle and putting candy and snacks together.
What else can be done? Here's a quick look at related news articles -- all identified by the logo at the top of this column -- and a summary of what they suggest:
Broad Initiatives: A focus on profitability is likely to take a retailer down many roads at once. The news article on Page 35 mentions that among the possibilities are adding categories, such as natural and organic foods, lowering certain category prices and seeking differentiation. In many parts of the country, lowering energy costs can provide a big bottom-line boost.
Fueling Growth: It's obvious that if a retailer can't grow sales and profit with the usual product mix, it might be possible to add new ones. And one product line that's fairly easy to add is fuel. Hundreds of supermarkets are now doing so, and many are adding outpost convenience stores at the same time, as you'll see on Page 79.
The Basics: A lot of attention is heaped on perishables departments, but there are always steps that can be taken to make them more successful. One clue to improving perishables is to keep in mind what a labor-intensive activity it is. One retailer boosted profits by instituting a goal-oriented compensation plan that rewards the extra effort perishables demand. Another makes sure the department is on the cutting edge of product augmentation. See more on Page 89.
New Prescriptions: Using the same logic that has inspired many supermarket chains to add fuel centers, many more are adding pharmacies. Demographic trends suggest that the 14% surge in pharmaceutical sales seen last year in all channels of trade will continue. Supermarkets may as well be positioned to share in the sales growth. The story begins on Page 137.