NGA recently released the results of its annual Independent Grocers Financial Survey. This study, compiled in conjunction with our partner FMS Solutions Holdings LLC, analyzed the financial and operational performance of independent supermarket operators in fiscal year 2016. In addition to benchmarks for financial performance and business strategies, the report provided an in-depth look at the economic, political, and competitive landscape in which these retailers operate.

Survey respondents represent a wide array of companies throughout the United States and Canada: 46.3 percent of respondents were single-store operators; 40.2 percent operate between two and 10 stores, and three percent operate 31 or more stores. Ranging from one to 153 years, 70.3 percent of responding companies have been in business for up to 50 years.

Not surprising, 2016 marked a challenging year for supermarket operators across the board. Retailers faced food price deflation in addition to an influx of new store formats in a fiercely competitive marketplace.

Independent grocers reported that their sales were down 1.62 percent in 2016 compared to 2015. Food at home deflation across all categories, especially in meat and dairy, had a negative impact, resulting in a decrease in net profits of 0.98 percent compared to 1.44 percent in fiscal year 2015.

While many in the industry have predicted that the deflation issue will subside next year to some degree, competition was top of mind among the independent grocers that were surveyed.

Independents ranked a number of industry challenges, such as health care costs, technology, interchange fees, and the economy, on a scale of 1 to 10 for impact on their business. Competition from other retailers was rated at 8.32, almost a point higher than in the previous year. In addition to competition, the other issues within the top five list of concerns were health care costs/compliance, regulations, the economy, and hiring/retention.

Supercenters regained the lead among the formats putting the most competitive pressure on independents, followed by conventional supermarkets, limited-assortment stores, gourmet/specialty stores, and other formats. Included under the other category, independents reported rising impact from online sales, farmers’ markets, conveniences stores, dollar stores, and meal kits.

Additional insights from the report: 

  • Total store margins held steady at 27.13 percent, while expenses were largely unchanged from 2015, totaling 23.04 percent of sales in 2016.
  • Labor and benefits remained the largest expense for respondents, growing to 14.84 percent of sales in 2016.
  • Independents ranked competition from restaurants/foodservice as an area of increasing concern.
  • The top 25 percentile, or the profit leaders, managed to grow their net profits over the previous year, showing an increase of 4.7 percent.
  • Top profit leaders focused on fresh with higher contributions by produce, floral, meat, deli and seafood.

To learn more about this report, visit www.nationalgrocers.org/research.