Independent grocers prove their resiliency in 2022; seek innovation in 2023

This is the sixth article in WGB’s Year in Review series. Check the site each day through Dec. 16 for a fresh look back at 2022 in the grocery industry.

The 2022 grocery landscape for independent grocers shifted significantly. A pandemic, supply chain woes and historic inflation have all tested the grocery ecosystem with never-before-seen challenges, forcing needed adaptations for 2023.

“The pandemic that refuses to entirely go away is still having an impact on grocery operators, as its ripples continue to be felt in the supply chain,” the National Grocers Association (NGA), the national trade association representing the independent supermarket industry, told WGB. “Inflation is as much of a challenge for grocers as it is for their customers, as they strive to maintain reasonable prices and deliver good value amid their historically tight margins. Grocers operate in a complex marketplace in which the only constant has been change. Navigating these volatile times is a tremendous accomplishment that will help independents through tough marketplace conditions that have lingered throughout 2022.”

Reflecting on 2022, the Herculean proposed merger between Kroger and Albertsons also weighs heavily on the grocery industry.

Whether the merger creates significant harm to independent grocers by dominant players in the grocery marketplace will be closely watched as details unfold.

“There is the question of what impact this will have on independent grocers and local and regional supermarket chains,” Ryan Mathews, a former journalist, editor, publisher and declared “philosopher of e-commerce” by Wired magazine, told WGB. “My sense is that this will—in the mid- and long- terms—boost the competitive position of these, at least relatively, smaller operators who have demonstrated an uncanny ability to adjust to change and grow despite challenges from competitors with far deeper products.”

The NGA finds the merger puts local grocery store owners at an uneven playing field.

"A merger of the nation’s top two grocery chains should raise serious questions about a single supermarket giant gaining unprecedented dominance over the nation’s food supply chain," said Greg Ferrara, NGA president and CEO, in a statement. "A merger would not only put smaller competitors at an unfair disadvantage, but also increase anticompetitive buyer power over grocery suppliers, which ultimately would harm consumers. It is our expectation that this deal will receive rigorous scrutiny from federal antitrust enforcers."

Looking to 2023, independent grocers will continue to embed resiliency into their strategies.

“In 2023, we expect challenges like inflation and supply chain pressures to continue but gradually moderate during the coming year, allowing grocery operators to deliver a greater value to their customers,” NGA told WGB.

John Ross, president and CEO of IGA, the largest group of independent grocery retailers in the world, sized up several predictions on keys areas that impact the independent grocery industry: inflation and the economy, labor market, housing, and shopper behavior.

When it comes to inflation and the economy for independent grocers, Ross said he foresees the good/bad phenomenon will be short lived.

“Mounting consumer credit card debt (up 15% versus a year ago) and rising goods prices will eventually collide,” Ross told WGB. “Only when consumers slow purchases will inflation begin to reverse, no matter what the Fed does with interest rates.”

As for the labor market, Ross pointed out that “today’s workers have choices they never had before–36% of employed Americans identify as freelancers. The gig economy, with employers like Uber, Lyft, DoorDash and thousands of others, has permanently changed the landscape for traditional employers.  In 2023, the gig economy in the U.S. will hit $455 billion, with 78 million people who used to apply for warehouse, restaurant and retail jobs opting for flexible work options.”

When it comes to housing,  Ross noted that over the short run, “the squeeze between high housing costs and high inflation will tip more Americans into economic crisis, especially two-income working families already struggling to stay ‘above water.’”

Turning to shopping behavior and what to expect for 2023, good news is on the horizon, especially when it comes to food and nutrition.

“People continue to care more about what they eat, how it is made, where it comes from, who is making it, and how it impacts local and global communities and the environment,” said Denise Purcell, the Specialty Food Association’s (SFA) VP of resource development, in a statement.

In fact, amongst all the things Americans spend their money on, quality food and nutrition are the least-likely categories to get cut, Ross said.

“That is good news for the food industry, but only if we modernize how we sell," he said. "Shoppers might switch out of name brands and go to private label in one area, but still buy fresh produce and hand-ground meat in another. As grocers, we need to understand this need. If we can help them to save money without nutritional compromise, we could navigate the tough waters ahead and come out with higher market share and more-loyal shoppers.”

For the upcoming year, Washington, D.C.-based NGA, which represents 21,000 independent grocers nationwide, believes independent community grocers will readily adapt and “continue to demonstrate the skill and commitment that has made them some of the most-innovative operators in the grocery industry and significant contributors to the local and national economy.”