New report examines how shifts in shopper behaviors are complicating the industry's financial and operational outlook

ARLINGTON, Va. – The Food Industry Association (FMI) is out with a report that examines how traditional grocery business cycles are being upended by pandemic-fueled changes in consumer behaviors.

“The Food Industry Speaks 2021” tells the story of the food retail industry’s resilience and transformation in 2020, and identifies how the landscape continues to shift, FMI said today in releasing the report, which is free to its members.

“We all recognize that 2020 was a challenging year for retailers, and I think that was especially true for food retailers,” said Leslie Sarasin, FMI’s president and chief executive officer. “While many businesses and restaurants were forced to close their doors, the essential nature of supermarkets and grocery stores meant that our industry took on the responsibility, and the privilege, of serving and feeding our communities during the pandemic while simultaneously providing a small sense of certainty and maybe even some normalcy during a very uncertain time.”

This year’s “Speaks” report focuses on three key areas – workforce challenges; technology investments; and supply chain issues.

FMI’s survey found that 85% of retailers leveraged higher wages and salaries in 2020 as one method of resolving recruitment and retention challenges.  Additionally, food retailers allocated $8 billion for technology investments last year. And roughly half of the food retailers surveyed for the report expect supply-chain disruptions to negatively impact their businesses in the months ahead.

Among the report’s key takeaways:

• Retailers address consumer shifts: Retailers adapted to the changes in the ways customers have been consuming meals and snacks during the pandemic — and these shifting trends are seen as positive by almost all food retailers. In addition, consumers’ focus on health and well-being has been widely seen as having a positive impact on the food retailing industry.

• Digital shopping transforms: The great majority of food retailers now have online sales (86%) and almost all of them (95%) saw online sales increase in 2020. Moreover, food retailers say they are increasingly experimenting with their ecommerce strategies (81%).

• Workforce challenges intensify: Frontline workers have been lauded as heroes in the face of the pandemic, but recruitment and retention became growing challenges, as turnover rose sharply. Retailers have pursued many strategies to resolve these challenges, including increased wages and benefits, flextime and training/skills development.

• Supply chain dynamics: Perhaps more than ever before, supply chain is front and center in food retail. Pandemic shortages have led retailers to reassess their supply chains and their engagement strategies with trading partners. Trucking and transportation capacity represents one of the biggest hot-button issues, with some two-thirds of responding retailers saying it is having a negative impact on their businesses.

• Tech spending climbs: Emerging technology is in the spotlight as food retailers step up investments, implementation and experimentation. Some 11% of retailers are already using microfulfillment, with 15% expecting to do so in 2021. Likewise, for ghost kitchens, those percentages are 8% using and 12% planning. Just as notable, more than a third of food retailers are now using artificial intelligence in some form.

• Community support excels: In the wake of a pandemic wreaking havoc on communities around the country, retailers have placed a high priority on community support and ties. In fact, retailers ranked community-focused programs as one of the most successful of all their service differentiation strategies.

• In-store experiences gain focus: Retailers are pulling out all the stops to enhance customer experiences, which have suffered from the pandemic. Among store development initiatives, 83% of responding retailers are focusing on new technologies to improve the customer experience and 61% on reintroducing and enhancing self-service experiences in stores. Strategies from scan-and-go to mobile payments are making the checkout experience more convenient.

• Meal solutions advance: More than 80% of food retailers expect to increase space allocation for fresh-prepared, grab-and-go selections, and 70% will do so for plant-based foods and meat alternatives. About two-thirds said that targeting solutions for family meals has been a key competitive differentiator.

• Social responsibility emphasized: Retailers are focusing on goals and implementation time frames for a range of social responsibility efforts. These include 90% for charitable donations; 73% diversity in hiring; 70% for diversity, equity and inclusion efforts overall; 61% energy use reduction, and 57% for food waste reduction.

• Financial picture becomes more complex: Food retailers experienced significantly higher sales and transaction sizes during 2020, but expenses surged and impacted financial performance. Retailers made major investments in employee and customer safety, including PPE, cleaning and sanitizing, signage, plexiglass and more. Likewise, the costs of attracting and retaining employees rose, as retailers increased wages, benefits, training and skills development.