Study: Grocers have spent $24 billion on pandemic-related expenses

Marianne Wilson
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PPE supplies

From increased cleaning and sanitation supplies to incentive pay, food retailers have paid a steep price to meet increased consumer demands and operate safely amid the pandemic. 

According to a report from FMI, grocers have spent approximately $24 billion on significant safety, workforce and technology investments since March 2020. The investments include:
•    Increases in payroll and incentive pay: $12 billion;
•    Increases in benefits: $5 billion;
•    Non-monetary benefits and vaccine incentives: $1 billion;
•    Personal protective equipment (PPE) and other safety expenses: $1 billion;
•    Cleaning and sanitation supplies, labor, and other related expenses: $3 billion; and
•    Technology and online delivery expenses: $1.5 billion.

The report, Receipts from the Pandemic: Grocery Store Investments Amid COVID-19 and the Resulting Economics of an Essential Industry, offers the first comprehensive overview of those changes and a cost analysis of the actions taken by food retailers to safely keep stores open throughout the pandemic. 

According to the data, food retailers spent more than $1 billion on PPE and other safety expenses, such as store signage, COVID-19 tests, and thermometers, and an additional $2 billion on increased cleaning and sanitation hires or use of external partners for this purpose, and more than $400 million on cleaning and sanitization products. 

Food retailers also invested in new technologies and infrastructure, such as online ordering and curbside pickup services, to meet new consumer demands and the needs of those unable to safely shop in stores.

Labor Costs
Food retailers hired new employees throughout the pandemic to keep pace with consumer demand, which included adding almost 500,000 jobs between 2019 and 2020. Ninety-four percent of respondents reported having current job openings. Extrapolated for the entire industry, food retailers would employ an additional 100,000 workers if all these positions were filled in 2021.

Financial Impact
Changes in consumer demand combined with an increase in food costs during the past year resulted in higher sales totals for food retailers, though additional pandemic-response operational expenses served to offset much of these revenue gains. 

In 2019, the average profit margin of the respondents surveyed was 1.06%. Respondents reported that their profits increased modestly in 2020 by 1.44 percentage points to 2.50%, driven mostly by the initial spike in consumer purchases experienced in the early months of the pandemic.

2021 Outlook
As the availability of food-away-from-home options increase and consumer spending and food consumption habits begin to more closely reflect those of the pre-pandemic environment, a majority of respondents expect to see sales decline in 2021. 

Overall, 63% of survey respondents expect sales to decrease from 2020 levels in some fashion throughout 2021, while another 13% forecast sales to remain flat. Just 23% of respondents expect to see an increase in sales this year.

In addition, 75% of respondents are forecasting a decline in profits in 2021, while only 10% expect to see increased profits as compared to 2020.

“We all remember the uncertainty and anxiety that defined the initial weeks of the pandemic, as virtually every aspect of our daily lives changed seemingly overnight,” said Leslie G. Sarasin, president and CEO of FMI. “Since that time, food retailers and our industry’s nearly 5 million dedicated employees have kept Americans fed and shelves stocked while providing a much-needed sense of normalcy for the communities they serve.”