This is the 30th annual The Lempert Report Trend Forecast; its focus is on what the most important issues that the retail and food industries face. Our grocery and CPG leaders are confronting uncertainties. Consumers have witnessed supply chain shock, food inflation, out of stocks and most of all – the industry has come to understand that consumer buying behaviors have changed both in-store and online. Over the past few years, we have seen major shifts; and the streets are riddled with signs of retailers not understanding these changes – or consumers. Blockbuster, Boarders, Sears, Toys ‘R’ Us, Bed Bath & Beyond
In 2023 what matters is an evolving consumer culture, labor issues, sustainability, the FDA & policy, technology and the changing face of our retail environments and over the next few Forbes columns we will explore them all over the next few days.
The good news is that according to the Bureau of Labor Statistics in March we’ve saw the inflation reach its lowest point in two years and while food prices overall remained unchanged from the previous month, food at home fell by 0.3 percent, the first decline in the index since September 2020, to an unadjusted 12 month 8.4%. The Adobe Digital Price Index for March, which analyzes one trillion visits to retail sites and over 100 million SKUs, reports that grocery prices rose 10.3% year over year and was up 0.4% over February but have slowed in the past six months. The peak was in September 2022 where online grocery prices we up 14.3% over the previous year. The bad news is that an analysis by Moody’s Analytics found that the average American household is spending an additional $276 a month on goods and services because of higher prices. FMI: The Food Industry Association hosted an expert panel for the media on inflation — their recent grocery shopper trends poll found that 48% of consumers are extremely concerned about high grocery prices – that’s up from 40% in October. 76% are concerned about climbing prices for their preferred foods. The topline according to Andy Harig VP of tax, trade and sustainability at FMI is that “it’s likely that food prices will remain elevated in the short term…it’s clear we aren’t out of the woods yet”. We seem to be moving in the right direction, but consumers aren’t feeling or believing it.
In a recent Dunnhumby survey, consumers, in particular those in the US, believe grocery retailers are earning 35.2% profit margins – that’s about 14 times more than the actual profit. They also perceive food-at-home inflation to be around 24.3% – more than double what has been reported by the US Bureau of Labor Statistics. In a Harvard Business Review article titled, The Elements of Value, the authors write that “when customers evaluate a product or service, they weigh its perceived value against the asking price. Marketers, they say, have generally focused much of their time and energy on managing the price side of that equation, since raising prices can immediately boost profits.” We are witnessing a battle between retailers and those CPG brands who want to raise prices. Major companies like Coca-Cola
The practice of shrinkflation – reducing the amount of product in a package often without changing the size of the package, and Slack-fill – when food packages are not filled to a realistic capacity of the what the package can hold is not helping to build consumer confidence – or trust.
The retail workforce is the number one concern of many CEOs of grocers. At FMI’s Midwinter Executive Conference in 2022, Dana Peterson EVP and chief economist for The Conference Board told the food industry that “Our belief is that labor shortages are here to stay” and she was right. There are a multitude of reasons – the pandemic, poor wages, retiring boomers, immigrant labor issues and more. Randy Edeker, Chairman of Midwest Grocer Hy-Vee, shared with me that Hy-Vee is short 15,000 workers, and not by Hy-Vee’s choice. They are confronted with a pool of workers who do not want to work in retail. There is a shortage of truck drivers, poultry and meat processing workers, supermarket and restaurant workers, and even how some cities like NYC are pushing to make the minimum wage for food delivery workers at $24/hr. We are seeing workers at Starbucks
The pandemic gave consumers – a never before seen look at those we dubbed as essential workers – at retail and meat processing facilities in particular. A new transparency to see what they had to deal with – and it opened the door to give them permission to speak out. It’s not enough to just call them essential workers. Over 200 Starbucks workers have been fired for trying to unionize and some have become TikTok stars – with one fired worker’s video receiving over 17 million views. Many are Gen Zers and media savvy, and they are using social media to convey their messages, and experiences, to a wider audience – their goal is to raise awareness, according to Tyler Daguerre, a Starbucks worker who organized his Starbucks in Boston to be represented by Starbucks Workers United. He also graduated from Law School last year. He told me that especially during the pandemic, working at Starbucks and being in the food industry in general has become even more of a difficult and stressful environment on your body and mind. There are more delivery orders and more mobile orders translating to a higher volume of work that you must do during a given shift, he says. He points out the stresses, and that at a certain point COVID pay and other protections were cut, people were getting sick, high turnover rates and the great resignation. All these factors led him to organize his fellow workers – and drove a law school grad, working in a Starbucks to put himself through school, to move his peers forward.
The College of Food, Agriculture and Natural Resource Sciences at the University of Minnesota conducted a survey of 1,000 US high schoolers’ perspectives on their future careers. The survey found that 90 percent indicated it was important to pursue careers in which they can make a difference, including addressing hunger, sustainability, environmental conservation, and natural resources; but only 37% are interested in careers in food, ag, natural resources and the environment. 88% said that it’s important to work for an organization that is dedicated to making a positive impact on the planet. Just 14% said that salary was a top priority. A separate Axios/Generation Lab survey of over 2,000 college students conducted February 28-March 13 of this year reported that 16 % hope to work for google, 6% for the Federal Government, 5% for Apple
Tomorrow, the 2023 Trend Forecast continues with a discussion about the Generation that will dictate the success or failure of the food world.