According to a survey of 52 FMI member companies representing almost 40% of the food retailing industry, grocery sales during the pandemic skyrocketed 11% in 2020 from $1 trillion in 2019, and the consumer price index for food at home increased 2.7% in April 2020 — its largest monthly jump since 1974.
But, FMI CEO Leslie Sarasin noted, “profits didn’t rise to commensurate levels.”
Citing data from FMI’s new report, Receipts from the Pandemic: Grocery Store Investments Amid COVID-19 and the Resulting Economics of an Essential Industry, Sarasin explained that based on the cost of goods alone, which are about 70%, gross margins increased 30% or about $30 billion in revenue in 2020.
But, she said, this doesn’t take into account the estimated $24 billion of additional pandemic operating costs grocers incurred, which include $1 billion for personal protective equipment, $3 billion for increased cleaning and sanitation supplies, labor and other related expenses, $5 billion in benefit increases and $12 billion in additional payroll and incentives. In addition, the survey found, grocers invested $1.5 billion into technology and online delivery expenses, which further ate into profit margins.
At the same time, the price of many foods soared due to higher demand. For example, Sarasin said, beef and veal prices soared 25.1% and 12% while potato prices increased 13.3% and tomato prices by 8.4%.
“The shock to the food supply chain, exacerbated by panic buying and stockpiling reverberated down the supply chain and led to a 5.6% inflation in food prices from June of 2019 to June of 2020,” Sarasin said.