A new report from FMI elucidates the journey that the nation’s supermarkets have been on for the past 12 months and sheds light on their prospects. Based on survey responses from 52 member companies, representing some 40% of the industry, “Receipts From the Pandemic” charts the effects of the disruption in the marketplace triggered by COVID-19.
With options for dining away from home limited, annual supermarket sales rose 11% in 2020 to $1 trillion. The sudden surge in demand, together with the need to protect the health of employees and customers, required retailers to make substantial investments. The FMI study found that, since March 2020, grocers have spent $24 billion on pandemic-related measures. All told, industrywide profits increased about $6 billion, 1.44 percentage points above the 2019 level, to 2.5% of sales.
The growth in earnings, moderate as it was, isn’t expected to last. As coronavirus recedes and more consumers resume their pre-pandemic behavior, supermarket sales are expected to slow, even as COVID mitigation costs remain high. Seventy-five percent of grocers in the FMI survey expect profits to decline this year.
The emergence of the new normal in coming months will mean that supermarket operators have to be as flexible, resourceful and agile as they were when COVID struck. According to FMI president and CEO Leslie Sarasin, the industry is likely to be confronted with changing conditions for some time to come. “We don’t really know what the changes in consumer behaviors are going to be going forward,” she says. “As we get more accustomed to being out and about, we’ll see [new] combinations. Most of us will still go to grocery stores, but won’t stop buying online either. We’re going to see differing patterns of behavior.”
How those patterns take shape could have profound implications. Ensuring that significant and growing investments in omnichannel offerings translate into sustained profitability will be a crucial challenge, adds Sarasin.
“We’ve gotten very accustomed to the convenience factor of being able to go online, place our order, and either drive by and pick it up or have it delivered to our front door. I don’t think we’re going back on that. The investments that retailers have had to make in their digital platforms, the technology and the personnel that are necessary to be successful in that space, I don’t think we’re going back on that. Hopefully, over time we’ll get better at it and be able to learn ways to do it more efficiently.”
Based on grocers’ ability to keep America fed during the pandemic, the betting here is that the industry will succeed in doing just that.