SN Year in Review 2007: Fighting New Battles

As if supermarket operators didn't have enough to worry about just competing with other retailers, in 2007 they also had to contend with myriad other concerns, including new fears about food safety, the economy and inflation.

Foodborne illness is a perennial worry for the industry, but this year the topic took on new urgency as one product-contamination scare after another shook consumers' confidence in food safety. Coming on the heels of the leafy greens contamination of a year ago, this year's spate of scares — from pet food to peanut butter — did little to restore shoppers' faith. A survey released by Food Marketing Institute in May showed that only 66% of consumers were at least “somewhat confident” in the safety of supermarket food, down from 82% in 2006 and the lowest it has been in almost 20 years.

The series of this year's contamination episodes began in February, when ConAgra recalled its Peter Pan and Great Value peanut butter brands after hundreds of people were sickened by salmonella. Then in March, Menu Foods, a maker of store-brand pet foods, recalled some of its moist pet foods that contained wheat gluten imported from China after several people reported that their pets had become ill or died after eating the products. Melamine, a chemical used in the manufacture of plastics and fertilizers, was discovered as a contaminant in the wheat gluten about two weeks after the recall began, and soon other chemicals were found in other ingredients used in pet foods. The Food and Drug Administration said it suspected that melamine and the other chemicals might have been intentionally added to make it appear as though the products had a higher protein content when tested.

China remained on the contamination hot seat throughout the year as additional products made there were recalled, including various toys.

As the year ended, the FDA released a report stating that the nation's food supply was being put at risk because the agency did not have the budget to effectively perform its role. Several business and consumer groups spoke out in favor of increased funding for the FDA, and Congress is expected to take up the issue with renewed vigor in 2008.

Food-cost inflation was another troubling factor for supermarkets in 2007, as operators had to adjust to rising commodity costs. The increasing demand for ethanol lifted the price of corn and led to price increases in other crops as well, all of which rippled through the food system. After several years of experiencing nominal cost increases, it took some companies awhile to adjust.

In September, Rodney McMullen, vice chairman of Cincinnati-based Kroger Co., told analysts that although Kroger had hesitated in passing on rising costs to consumers in the first quarter, by the second quarter “market conditions allowed for a general pass-through of cost increases.”