Swirling Fortunes

While retail sales gains remain the focus of the main course, economic agita simmers as grocers seek new ingredients to keep the pot steaming.

Analysis by Meg Major and Jim Dudlicek

Rising fuel prices and overall economic uncertainty are beginning to dim the rosy forecast anticipated a year ago by U.S. supermarket executives, whose overall optimism was more robust than the fortunes they foresee for the coming year, according to findings revealed in Progressive Grocer's 80^th Annual Report of the Grocery Industry.

The great chasm of optimism last year — when nearly twice as many chain operators as independents foresaw sunny skies ahead — appears to have closed even as overall supermarket sales rose 3.1 percent (compared with 3.8 percent last year), pushing total sales over the $6 billion mark. However, some of that growth was derived from new stores opened in the past year, the total for which rose 1.3 percent, with per-store sales climbing 1.8 percent.

Information gathered for PG's annual bench-marking study was derived primarily from a proprietary survey of headquarters executives and store directors at supermarket chains, independent grocers and wholesalers across the country in early 2013. The report is supplemented by store and sales data provided by Nielsen TDLinx (read more about the methodology below).

The nuts and bolts of the 80th Annual Report of the Grocery Industry — which gauges the mood and sentiment of the nation's retail food climate, courtesy of the direct input of the executives leading the charge — unfolds on the following pages with a compendium of data and insights pertaining to the hottest supermarket topics du jour, such as shopper traffic trends, competitive channel comparisons, operational trends, on- and off-trend merchandising and marketing strategies, consumer engagement tools, and food retailers' perceptions and usage of social media.

Shifting attention back to the annual bench-marking study's top-line trends, conventional-for-mat stores continue to generate the majority of food sales — more than 72 percent, versus 68 percent last year, suggesting that traditional grocers are holding their own against other formats, which continue to apply considerable pressure to a prevailingly trying climate. Supermarket chains still command the top spot as the dominant store-count leader compared with independents (about 82 percent versus 18 per-cent), as well retaining their post as the sales-share leader (94.3 percent versus 5.7 percent).

Overall, 41.5 percent of respondents projected more optimism about the retail climate, compared with 44.3 percent last year; those less optimistic stayed at about 22 percent. The top three factors expected to impact business during 2013? Fuel costs, benefit costs and retail prices.

An abrupt shift was detected in the assessment of chain operators — about 38 percent expressed heightened optimism this year, compared with nearly 68 percent last year. Meanwhile, optimism among independents rose to nearly 41 percent, from 31 percent last year.

Private label, produce and deli/pre-pared foods were tabbed as being the top three shopper traffic generators, with the highest expectations being tied to higher produce sales in 2013.

Interestingly, pharmacy dropped to last place in the shopper traffic scorecard among this year's Annual Report survey panelists, despite contradictory findings in recent years, with about 60 percent of operators surveyed expecting that level to continue in the coming year.

Coming on strong among marketing strategies is digital media, particularly among chains, with social media running high for chains, indies and wholesalers alike as a consumer engagement tool. Private labels still lead the pack for in-store strategies, particularly among chains.

72%+ The percentage of food sales conventional-format stores generate