Trying to overcome a pandemic, inflation, supply chain bottlenecks and labor shortages all contributed to a year of challenging obstacles for food retailers and suppliers, according to the 74th annual The Food Retailing Industry Speaks report released Tuesday by FMI-The Food Industry Association.
Food suppliers—surveyed for the first time in the report's history—agreed with retailers that inflation will cause operating costs to increase 78% for retailers and 90% for suppliers, Speaks reported.
“While inflation is a cause for concern for the food industry, it is much more concerning for American families who work hard to put food on their tables,” said Leslie Sarasin, president and CEO of FMI.
Trying to remain nimble despite these inflationary times has been a hurdle as 85% of retailers and 86% of suppliers expect inflation to pressure margins, the report found.
As for supply chain woes, 70% of retailers said supply chain disruptions are negatively impacting their business—up from 42% from last year, according to the report.
In response to high turnover, labor presented a huge hurdle towards growth, with 87% of retailers and 86% of suppliers saying finding workers and retaining talent are both impacting their businesses in a negative way, Speaks reported.
Despite these woes, the food industry is seeing online sales, curbside pickup and delivery options expanding for future growth.
In a post-pandemic climate, 91% of food retailers now offer online sales and saw a 47% sales increase in 2021, the report found. As grocery retailers are still trying to find their footing with online shopping, the omnichannel shopper is here to stay.
Credit card and debit use in 2021 included 85% of all online purchases, but a key issue impacting high profitability is high credit card interchange fees. Credit card fees average 1% of food retail sales and 1.4% for retailers with less than 10 stores, the report found.
The food retail industry’s resilience paved the way for new in-store shopping experiences as well investments in new technologies. In fact, 73% of food retailers are investing in foodservice ordering and delivery, dynamic pricing and mobile checkout systems.
Retailers report they are also expanding numerous fresh or perimeter departments. Looking to prioritize local and fresh offerings to meet consumer demand, 90% of food retailers are offering locally sourced products throughout the store.
“A major trend that has emerged from the pandemic is shoppers are looking for fresher, healthier, more convenient options at their grocery store,” said Sarasin. “Food retailers have absorbed this feedback and are making great strides to create both online and in-person shopping destinations that cater to shoppers’ evolving tastes.”
With technology setting the pace for food retail transformation, 73% of food retailers are continuing to invest in and experiment with technologies to improve the customer experience. And suppliers spent twice as much as retailers—3.3 % of total sales on technology in 2021, Speaks reported.