Change and perseverance were the overarching themes as grocery retail and other food industry stakeholders gathered this weekend at the FMI Midwinter Executive Conference in Orlando.
Speakers at the event, held Jan. 20 to 23, expressed optimism that the grocery industry will be able to weather what’s looking to be a difficult economic climate for 2023. Meanwhile, the topic of technology was ever-present across the conference keynotes and sessions, with companies looking to harness data and tap solutions to create new opportunities, drive growth and sharpen operations. And through it all, executives and thought leaders emphasized the need to look ahead and identify and incorporate change.
Here are five key takeaways from this year’s FMI Midwinter conference:
1. There’s a rough economy ahead and a potential recession in the early part of 2023, but the second half looks brighter.
The Federal Reserve has already begun acting to slow down inflation but likely isn’t finished yet this year, Scott Moses, managing director and head of food retail and restaurant investment banking at Solomon Partners, said in a session on the grocery industry amid high inflation.
“The Fed is going to slow the economy, and it isn’t afraid to generate a meaningful recession in order to slow things down to get there,” Moses said. “And as a consequence of all that, the capital markets have been quite volatile, and access to capital has been increasingly limited, especially for smaller companies.”
Elevated grocery prices look to continue through midyear but will noticeably ease up afterward, according to Wall Street analyst Karen Short of Credit Suisse.
“If you only have six months more of headwinds from CPGs raising prices and retailers also raising prices, I believe that comes to a screeching halt in the second half of 2023,” Short said. “And I actually think you could end up seeing deflation in the second half of 2023, depending on what the perishables complex looks like. The nonperishable CPI, I think that party is over by the second half.”
Overall, the U.S. economy has some negatives but also a number of bright spots going forward, Coresight Research CEO and founder Deborah Weinswig said in a session on grocery weathering the challenging economy.
“I’m a ‘glass half full’ kind of person,” Weinswig said. “My prediction, if I had to make it today, is that we will avoid a recession in the United States. I think that Europe is also start to see some some positive dynamics. But it will be a choppy environment, and there are certainly a lot of things ahead.”
2. The grocery industry keeps showing its resiliency.
In a passionate keynote speech, Southeastern Grocers President and CEO Anthony Hucker, chair of this year’s FMI Midwinter conference, described how his company turned the corner on a tough period in its history.
“Now, five years into our transformation, we’ve learned to focus on our people first and we've accomplished a powerful cultural transformation that is boldly visible in black on the balance sheet,” Hucker said.
Similarly, the grocery industry is emerging strong from its own rough stretch during the pandemic, he noted. “Before we’re competitors, before we’re retailers, we’re human beings. We’re people, and we’re stronger together. Together, we’ve weathered the storms, we’ve prospered through a pandemic, we’ve nourished a nation in need through the toughest of times. So I’ll leave you with these three requests. No. 1, let’s continue to be resilient together. No. 2, let’s care for our communities together. And No. 3, let’s shape the future of this industry together.”
Hy-Vee Executive Chairman Randy Edeker, now FMI-The Food Industry Association’s immediate past chair, echoed Hucker’s sentiments in a year-in-review keynote on the grocery industry.
“This past year, the continued impact of COVID-19 pandemic, the Russia-Ukraine war, a dismal economy, record inflation, ongoing supply-chain disruptions and extremely tight labor market. And then the ‘Great Resignation’ combined with a new term called ‘quiet quitting’ are just a few d considerable challenges we've faced as an industry and a nation,” Edeker said. “We have never lived in times like these, and I don’t anticipate those changes slowing down any time soon. So moving ahead, we must think different as grocers, suppliers and industry leaders. We have to be ever-changing. We have to be willing to embrace the chaos while relentlessly focusing on our pursuit to serve our customers, whoever and wherever they may be.”
3. Grocers are making strides in leveraging data and personalization.
In their digital transformations, grocery retailers are stepping up efforts to leverage their customer and transactional data to better reach and tailor offers and deals to shoppers. A panel discussion looked at how three grocers—Wakefern Food Corp., Coborn’s and Northgate Markets—transitioned from print and static PDF weekly circulars to interactive digital circulars and improved shopper engagement to drive traffic and purchases.
“We used to print about a million copies a week and now we’re in the 450,000 range per week. Much of that was surgical, by ourselves, doing deep-dive analytics on what was going on in two of our markets and had a surgical approach to optimize our distribution and move those dollars from print to digital,” said Dennis Host, vice president of marketing at Coborn’s. “We still have to get our ad in front of shoppers somehow. So as the world continues to go digital, we just see this as a shift that we have to make as we move further and further in."
For Hispanic grocer Northgate Markets, an interactive circular presented the opportunity for story-telling, explained Dan Jones, senior director of strategic pricing and data integrity.
“We’re all about fresh foods. We’re about preparing foods on-site, and we sell the authenticity of Mexican food,” Jones said. “The newspaper ad—which is two-dimensional and designed for item and price—really does not work for us. We've got a high cost model. We’ve got great stories and romance behind the great foods we’re making, and it’s really hard to put that in a newsprint box. When we saw the ideal [digital] platform, I said, ‘Oh my gosh, we can put video in here.’”
Ranjana Choudhry, vice president of advertising and social media at Wakefern, also emphasized the effect of rich video content, such as recipes and nutrition, enabled by a more robust digital circular platform.
“When you put that into the circular, suddenly there is entertainment. You are giving them the information in a way that is so much more interesting,” she said. “Video is 1,200% more engaging than static, and 95% of the message gets retained if it’s a video format.”
4. Refocus on customer experience and make it seamless.
In 2022, supermarkets saw customers returning to stores en masse after lengthy COVID restrictions had pushed many to use online grocery services for food shopping. Now retailers need to get back toward optimizing that in-store experience as part of a seamless omnichannel strategy.
“The customer wants what they want, where they want it, when they want it. But I also think the other side of that is that they’re willing to travel to the experience,” Charles McWeeney, vice president of technology, innovation and strategy at Wakefern, said in an FMItech Talks panel. “What we’ve starting to talk about is digital engagement within the organization as opposed to online sales as a piece. And the value in that is looking at that customer holistically, saying, ‘How do we invest in our online initiative, whatever that may be, whether it’s online sales or online communication, etc., but in a way that then can be driven back into the consumer experience in-store?”
Kirk Ball, executive vice president and chief information and technology officer at Giant Eagle, said he sees “a ton of opportunity in just digital interaction” to significantly eliminate friction for shoppers.
“You have to think of it as an omni-shopper. How do you bring together the experience that a customer would have interacting with you outside of the store together with the experience that they have interacting with you inside of the store?” Ball said. “I think we have 93.5% of sales are in-store on average, right? Think about the opportunities that we have to enrich that experience to bring inanimate objects to life to create a more frictionless experience in-store. I think augmented reality has a great potential to really create an experience that people want to come be part of.”
5. Anticipate, embrace and adapt to change.
Working with Oliver Wyman and leveraging focus groups, a member survey and other research, FMI identified six topics at the top of industry executives’ minds: supply chain disruption, labor shortages and workforce challenges, accelerating technology transformation, changing marketplace and societal dynamics, evolving consumer behaviors and rising ESG expectations. FMI board members examined how to navigate these imperative business issues in an executive roundtable.
Looking at today’s consumer, H-E-B President Craig Boyan noted that customers are under tremendous financial strain, especially amid high inflation, and the grocery industry is going to have to take a different approach to help today’s shoppers.
“I don’t know about you, but one thing I learned during the pandemic is that my crystal ball has a big crack. And I don’t know if we can predict anything, but I think it’s very reasonable for us to assume that growth in spending in 2023 and beyond is going to be slower than last year. And I think it is imperative on everybody in this room and this industry to find ways to help the household that’s under massive economic pressure,” Boyan said. “That’s going to be a totally different mindset than what we’ve had.”
Likewise, Sandy Douglas, CEO of United Natural Foods Inc., said the industry’s thinking needs to change on technology transformation.
“We often talk about tech companies, how and important tech companies have been to the U.S. economy," Douglas said. "But the truth is we need to be tech companies. In my view, the battle that we’re all about to face is how can we all become great tech companies before tech companies become greater retailers? That’s the fundamental challenge that we face, is how does this not be separate business? How we become truly integrated e-commerce?”
Author and though leader on radical innovation Peter Hinssen gave FMI Midwinter attendees some additional food for thought in the closing keynote, explaining his notion of “The Never Normal.” He said that, to survive, companies must accept and embrace the idea of constant change and devote more thought to not just “today, tomorrow” but also to the “day after tomorrow.”