FMI Research: North American grocers spent $24 billion during the pandemic

According to a report from FMI, grocers have spent approximately $24 billion on significant safety, labor and technology investments since March 2020. These investments include:

• Increase in wages and incentive compensation: $12 billion;

•Benefit increases: $5 billion;

• Non-monetary benefits and vaccine incentives: $1 billion;

• Personal protective equipment (PPE) and other safety spending: $1 billion;

• Cleaning and sanitation supplies, labor and other related costs: $3 billion;

• Technology and online delivery costs: $2 billion

The report, Receipts from a Pandemic: Grocery Store Investments in COVID-19 and the Resulting Economics of Essential Industries, provides a comprehensive overview of these changes and a cost analysis of the actions food retailers are taking to keep stores open safely across the board.

According to the data, food retailers spent more than $1 billion on personal protective equipment and other safety expenses , another $2 billion on increased hiring for cleaning and sanitation or using outside partners for this purpose, and more than $400 million on cleaning and disinfecting products.

Food retailers are also investing in new technology and infrastructure, such as online ordering and curbside pickup services , to meet new consumer demands and the needs of people who can’t shop safely in stores.

Food retailers have hired a lot of new employees throughout the pandemic to keep up with consumer demand. This includes the addition of nearly 500,000 jobs between 2019 and 2020, and 94% of respondents said they currently have vacancies. Based on extrapolation across the industry, if all of these positions are filled in 2021, food retailers will hire an additional 100,000 workers.

Changing consumer demand combined with rising food costs led to higher total sales for food retailers over the past year, although those revenue gains were offset by increased business expenses in response to the pandemic.

Respondents reported an average profit margin of 1.06% in 2019. Their profits rose slightly in 2020, by 1.44 percentage points to 2.50%, the report showed, largely due to an initial surge in consumer purchases during the early months of the pandemic.

Most respondents expect sales to decline in 2021 as the availability of away-from-home food options increases and consumer spending and food consumption habits begin to more closely reflect the pre-pandemic environment.

Overall, 63% of respondents expect sales to decline in some way from 2020 levels throughout 2021, while another 13% expect sales to remain flat. Only 23% expect sales to increase this year.

Additionally, 75% of respondents expect profits to decline in 2021, while only 10% expect profits to increase compared to 2020.

“We all remember the uncertainty and anxiety that the initial weeks of the pandemic created, and since then, food retailers and our industry’s nearly 5 million dedicated employees have kept Americans fed and stocked store shelves while providing a much-needed sense of normalcy to the communities they serve,” said Leslie G. Sarasin, FMI president and CEO.

FMI

North American Grocers