CHICAGO - There were clear signs in 2005 of "death in the middle" for regional operators of 11-100 stores, Michael Sansolo, senior vice president, Food Marketing Institute, told the FMI annual convention here last week during the Speaks presentation.
While sales and net profits soared for the large chains and for independents operating 10 stores or less, retailers in between saw slower sales gains and negative same-store sales, Sansolo reported.
In general, however, the retail food industry did well last year, he said, with overall net profits moving back to more traditional levels and sales keeping pace with the prior year.
Net income rose to 1.16% of sales last year, compared with 0.88% in 2004 and 0.95% in 2003, with the numbers reflecting the recovery from the impact of the strike-lockout in Southern California in late 2003 and early 2004, Sansolo said.
Among the industry's top performers, net income climbed 3.68% - about three times larger than the industry average, he said.
Overall industry sales in 2005 were up 4.6%, compared with a 4.8% gain in 2004 and 3.6% in 2003, Sansolo said. Had sales of gasoline been included, "sales would have skyrocketed to nearly 7%," he said.
Inflation accounted for 1.9% of the sales boost, "so a lot of the growth was real growth," Sansolo said. Excluding inflation, sales last year were up 2.7% - the highest real sales gain in more than five years, he said - compared with a gain of 2.6% in the prior year and 1.4% two years earlier.
But when the sales gains were broken out by company size, operators with one to 10 stores saw sales rise 4.7%, similar to the 4.6% gains by companies of more than 100 stores, while stores in the middle - regional operators with 11-100 units - saw sales rise only 1.6%, "so it was a tough year for them," Sansolo said.
That pattern was also reflected in same-store sales, which were up an average of 3% last year for the industry overall, compared with 2.1% in 2004 and 2.6% in 2003, Sansolo said. However, for independents with 10 stores or less, the same-store sales gain was 4.56%, compared with 2.56% for chains with more than 100 stores, while regional operators with 11-100 stores saw same-store sales decline 0.22%, he reported.
To get those numbers up, "you've got to give shoppers reasons to come to your stores - you've got to figure out how to incentivize them," Sansolo said.
Average operating cash flow in 2005 was 4.38% for the industry overall and 6.36% among the top performers, Sansolo said, while all operators allocated 2.25% of sales to capital expenditures, compared with an outlay of 2.49% of sales spent by the top performers.
When consumers were asked how they felt about the shopping experience, 35% of those who do their major shopping in supermarkets said they liked the experience, compared with 43% who said they disliked it; while 19% of consumers who use supermarkets for fill-in trips said they liked the experience, compared with 38% who said they disliked it.
However, among consumers who said they cook at home, 61% said they liked the shopping experience, compared with 23% who said they did not.
"So it's up to you to figure out how to change those dislikes to likes," Sansolo said. "No one else can do it but you. You've got to give them reasons to love the experience."