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Fare thee well.

"The food retaling industry is expected to fare well in 1984. Continuing economic improvement (will) spur greater consumer expenditures for food at home, (and) retailers' profits are likely to improve slightly as consumers upgrade their grocery purchases."

That's the encouraging word from the Commerce Department in its just-published U.S. Industrial Outlook 1984. Not even the specter of higher food prices in the second half of the year dims business watchers' enthusiasm. "The impact of higher food prices (will) moderate if other nonfood consumer prices increase only slightly, as expected," they predict.

Food retailers should continue to build on their 1983 successes, according to the Outlook. Improved economic conditions last year led to a 2% increase in food store sales, which reached an estimted $262 billion for the 12-month period. Grocery store sales (excluding specialty retailers) increased a respectable 3.9%, reaching $246 billion, while sales by larger supermarkets approached $140 billion, up 4.6% over '82 receipts, the report states.

"Strengthening consumer demand and improved operating efficiencies, achieved during past years of high interest rates and weak sales, enabled many food retailers to improve profit margins," Commerce says. "The ratio of net profits to sales for food retailers reached 1.7% in 1983 compared to 1.6% in 1982."

Though sales volume increased in 1983, stores did not need as many new employees. The Outlook shows total industry employment reached 2.5 million last year, up only .4% from 1982. This contrasts with an average annual gain of 3.2% between 1972 and 1982. Similarly, in 1983, hourly earnings of non-supervisory workers edged up only 3.1%, the smallest rise in 11 years.

Consumer spending in food stores increased about 5% in 1983. Measured in constant dollars, food at home purchases (which represented 12% of all consumer spending) rose at an annual rate of 3.5% during the first half of the year.

One reason may be grocers' extra "people pleasin'" efforts. "Recognizing that consumers want more than low prices and no-frills operations, food retailers responded in several ways in 1983. The super warehouse store flourished. Many retailers, sensing changing preferences, added or expanded in-store services." They spend $4.2 billion on advertising.

Looking ahead, Commerce expects not much will change in the food retailing segment over the next five years. "The total population is not expected to increase by much more than 1% annually during this period, (so) overall quantities of food sold will grow slowly. Retailers are expected to compete vigorously for market share by upgrading product lines, increasing promotional activities and developing store formats and services appealing to (particular) market segments," namely young singles, seniors and "the affluent 35-44 age group."

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Title Annotation:food-retailing outlook
Author:Densford, Lynn E.
Publication:Progressive Grocer
Article Type:column
Date:Feb 1, 1984
Words:445
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