Report: Food Retailers Performed Well in 2007

Las Vegas Supermarket industry sales increased 4.6% in 2007, and same-store sales rose 4.2%, the highest mark for this performance measure in more than a decade, according to the Food Retailing Industry Speaks: Annual State of the Industry Review 2007 released on Monday by the Food Marketing Institute (FMI).

The gains, however, were largely offset by the 4.2% food-at-home inflation rate last year, the report said. Unlike previous years, mid-sized food retailers posted the highest growth figures with overall sales increasing 7.4% and same-store sales 6.5%. The increases among independent retailers and the largest chains were closer to the industry medians.

Among independents, overall sales grew 4.6% and same-store sales 4.4%. For the largest chains, these growth figures were 5.2% and 4.2%, respectively.

“The industry performed quite well in an extraordinarily challenging year,” said FMI president and CEO Tim Hammonds. “Companies managed spikes in energy, commodity, healthcare and credit-card interchange costs, along with relentless competition in the industry.”

Supermarkets are tightly managing their own budgets, tempering the impact of cost increases in numerous areas, the report indicated. These efforts contributed to improvements in key performance figures. Labor productivity (sales per hour) increased to $138.90, from $122.14 in 2006, while space productivity (sales per square foot) rose to 8.1% from 7.3%. Inventory turns increased 15.6% for the total store from 13.5%.

This year’s report focused on advertising and found that annual spending remained at 1.0% of sales. The study showed that retailers are moving away from mass-marketing vehicles to more targeted ones, compared with spending results for 2004, when the report last studied this area.

The report found the following: Newspaper ads, including circulars, declined to 52.2% from 56.7%; direct mail increased to 16.7% from 14.6%; radio advertising rose to 9.2% from 7.3%; and more than one-third of retailers (37.1%) focus advertising on the fast-growing Hispanic market, allocating 5.5% of their ad budget.

Meanwhile, companies are starting to use new media, the report said. This includes using Web sites other than their own (19.4%), YouTube (6.3%), blogs (6.3%) and text messaging (6.3%).