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51st annual report of the grocery industry.

The content of this yearly study is based on statistics, observations, opinions, and predictions drawn from every level of every sector of the food distribution industry. A giant sample is used to permit breakouts and cross tabulations by type of company, size of store, region of the country, and other variables.

For their massive cooperation, we thank the close to 2,000 participants who submitted detailed questionnaires and agreed to lengthy personal interviews. Their contributions are, quite literally, priceless.

Material in the Annual Report is gathered and analyzed by the Progressive Grocer Research Department under the direction of Walter H. Heller, assisted by Leonard E. Kirsch and Theresa O. Scharr. Individual portions were written by Mr. Heller, Mary Johnson, Robert E. O'Neill, Larry Schaeffer, Ronald Tanner, and Ed Walzer.

The bulk of this year's Annual Report--including Commentary, and the Overview, Outlook, Competition, Cost & prices, Store operations and Manufacturer relations section--were printed as part of the April issue. Those sections will be bound with the parts appearing this month into a complete reprint of the 51st Annual Report.

* Even though the CPI for food-at-home remained relatively flat in 1983, some consumers feel prices, particularly in produce, increased a great deal.

* Men are a growing presence in the supermarket. Forty-seven percent are now involved in grocery buying.

* With easing inflation and decreasing unemployment, shoppers are relaxing their budget-minded shopping activities.

* The one-stop-shopping capability of a supermarket scores high with lower income shoppers.

Although the CPI for food-at-home remained relatively flat in 1983, and consumers spent a smaller portion of their disposable income on food-at-home than ever before, some consumers came away from it all feeling good prices had increased a great deal. Approximately half of the shoppers surveyed agree that meat, dairy and frozen food prices stayed about the same, but just as many say produce and grocery prices increased, with 15% saying produce prices increased a great deal.

Generally speaking, households with children, lower income groups and shoppers in the North were more likely to notice price increases.

Shoppers are also under the impression that supermarkets are making greater profits with more than half saying supermarkets are making more money than ever before. This attitude prevails even though consumers' reduced percentage of expenditures for food-at-home were a result of bargains at the supermarket.

It's possible, consumers have yet to get over the mindset developed during double-digit inflation years that prices only go up. But it's also conceivable that retailers' cost-cutting tactics have boomeranged. Promoting "rock bottom" prices, double coupons and "super specials" may have left consumers with the impression that if supermarkets are able to slash prices, then overall prices must be high.

Consumers finally see a silver lining in the grey cloud that's been overshadowing their spending. Easing inflation and decreasing unemployment have contributed to this optimism about economic conditions. As might be expected, shoppers with higher incomes tend to be more optimistic about the economy and price stability than other customers. Those households with children are least optimistic.

The overall outlook on price stability is still pessimistic, however, changing little from last year. Consumers are even more negative about the price stability of eating out than they are about the stability of food store prices. This gloomy attitude might discourage consumers from heading to the neighborhood restaurant instead of the neighborhood supermarket.

Men are a much greater presence in the supermarket today and are involved in a substantial number of the shopping decisions once made by women only. Forty -seven percent of the panelists surveyed report that men are involved in supermarket shopping as either the primary shopper or a participant on the shopping trip.

This sharing of the shopping responsibility is most pronounced in two wage-earner households, where 17% say both the male and female heads of the household act as the primary grocery shopper.

Thursday is still the most popular day for shopping. Sunday hours continue to attract only 6% of the shoppers, but the presence of a young child in the family makes a difference. Fifteen percent of shoppers with a child under age 6 say they shop on Sunday. Those not working outside the home tend to avoid the supermarket on the weekend, but for working shoppers the weekend is an important shopping time. Nearly half of the panelists employed full time outside the home do their shopping on Friday, Saturday or Sunday. Four out of 10 working shoppers visit the supermarket in the evening while primary shoppers not employed tend to do their shopping during the day.

Westerners make more trips per week to a supermarket and drugstore than shoppers in any other region of the country. Northeasterners are the most frequent shoppers at specialty food stores and convenience stores. Southerners lead the list of frequent visitors to fast-food restaurants.

Slightly more than half of the consumers who prefer one-stop shopping make only one trip a week to a supermarket. But these same shoppers frequent specialty food stores more often than other shopping groups. More than 50% of households with one wage earner also shop only once a week at the supermarket, whereas nearly 60% of households with two or more wage earners make two or more trips per week.

Consumer feedback suggests shoppers aren't as apprehensive as they have been in past years about spending money in the supermarket. But as usual, retailers say consumers are doing more cost-cutting than they admit to.

There has been a significant drop from 1982 to 1983 in the net percentage of consumers saying they are doing more "cherry picking" and increasing their purchases of cheaper cuts of meat. Shoppers over 55 and those in households where the primary shopper is not employed are most likely to "cherry pick." Consumers in the South are increasing their purchases of cheaper cuts of meat more than shoppers in the rest of the country.

Fewer consumers also say they are cashing in more cents-off coupons and doing more to stay aware of exact prices. But overall, coupon usage remains high. Shoppers in the North are increasing their usage of cents-off coupons more than those in the West. Surprisingly, this is also true of households with more than one wage earner.

Consumer planning for the shopping trip is also not quite as intense. But 70% of those 55 years of age and older and of households where the primary shopper is not employed remain avid readers of newspaper ads, saying they "almost always" read them. More than 60% of these same groups say they "almost always" read advertising circulars, as well.

Consumers still believe that cleanliness is next to godliness when it comes to supermarkets. Cleanliness still leads the list as the most important factor in selecting a supermarket.

A good selection of low-priced store brand items and generic no-name products both dropped in the ranking this year. This might reflect the super "specials" being offered by retailers on brand name items and the better economic conditions prevailing in the country.

The one-stop shopping capability of a supermarket, a new item added to the list this year, seems relatively important to shoppers. Panelists in the lower income bracket seem most attracted by the one-stop shopping aspect. Not surprisingly, they also rank a good drug and toiletries section and a good assortment of non-foods as important. As would be expected, low prices, frequent "sales" and "specials" and a good selection of store and generic brands are also more appealing to this income bracket.

On the other hand, higher income panelists say they consider a good selection of national brands and a good produce department important. They are also more apt to choose a supermarket if it features a deli or in-store bakery. About the Home Testing Institute

Home Testing Institute has a national reputation in the research field with its National Consumer Mail and Telephone Research Center. The National Consumer Mail Panel consists of some 170,000 households located throughout the U.S. The Telephone Research Center is a centrally supervised WATS operation offering high quality telephone interviewing among both HTI households and the population at large. Participants for the PG-HTI study were drawn from a special panel of 700 households throughout the U.S. This household panel is quota controlled to U.S. Census data updated by the latest extimates. The survey was conducted by mail questionnaires and is considered to be representative of the household population of the U.S.

* Wholesalers show an increase in net sales, tonnage and gross margin.

* Inventory turns and sales per employee improve for wholesalers.

* Wholesalers continue to increase their share of total volume handled via backhaul.

* Cornell University's report, "operating Results of Food Chains," shows record high gross margins, but a drop in net operating profits.

These detailed tabulations are drawn from information supplied by 126 wholesale grocery firms with total sales of more than $26 billion. The performance data may be somewhat above average because the reporting firms tend to be more efficient operators.

Compared with 1982, net sales, tonnage and gross margins show improvement. Other areas of operations showing gains are inventory turns and sales per employee. Employee wages, both starting and average, have increased and now employee wages and benefits account for a substantially larger percentage of sales than they did in 1982 for voluntaries, co-ops and unaffiliated wholesalers.

Gross margins for the 51 chains contributing to the latest Cornell Report increased to 22.92%, exceeding the previous high of 22.48% which occured in 1964-65. But record level expenses just about offset the increase. The major components of chains' expenses--payroll, services purchased and rent paid for property and equipment--were up. Therefore, even though overall sales increased from last year, net earnings after taxes as a percent of sales were on average lower.

The average size of a chain store is slightly larger than it was in 1981-1982, and sales per square foot of selling area has increased by 5% compared with the previous year's high. Stock turns, however, declined and are now at a level equal to 1980-81.
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Title Annotation:includes tables
Publication:Progressive Grocer
Date:May 1, 1984
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