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* Total retail food store sales rose a smallish 4.7%, but a large part of the growth was "real."

* The portion of consumer disposable income spent for food-at-home dipped to a new low of 11.4%, continuing a long-term trend.

* Convenience stores outpaced supermarkets in rate of growth. * The wholesale sector enjoyed a strong year.

* A majority of executives think disinflation has had a negative effect on the industry's health.

* Recession exceeds inflation as a present danger to operations. Sales growth slows as prices flatten...And consumer spending lags

Grocery store sales totalled $263.8 billion in 1983, a relatively modest gain of 4.7% over the previous year. significantly, however, higher prices accounted for only a small part of the increase. The food-at-home component of the Consumer Price Index went up a scant 1.1%, indicating that a better-than-usual portion of the growth was "real".

Stable prices, together with heavy use of specials, coupons, and other pricing inducements, enabled consumers to spend less of their disposable income for food-at-'ome. The fraction has been going down year after year and now stands at 11.4%. With supermarket product prices expected to remain reasonably level, and intense competition sure to continue, there is little likelihood that the trend will change.

While the year left something to be desired in terms of incremental sales volume, most grocers were apparently satisfied with the results. In general, the industry's spirits and expectations were higher at the end of 1983 than at the beginning. Growth potential brightest in Sunbelt

The number of supermarkets in operation grew by 600 during 1983, even though reduced price inflation held down "graduations" of smaller stores into the $2 million ranks. In sales, independents gained at a slightly greater rate than chains. The "other" stores--including delis, bodegas, and self service units of less-than-supermarket size--declined both in numbers and market share. Convenience stores had another forward-going year, adding 1,700 1nits and $1.4 billion of volume. 1983 chain openings and closings

The usual amount of shuffling took place on the chain store scene, but the total number of corporate supermarkets changed little. Among the largest companies, the percent showing openings-but-no-closings increased, while the percent closing one or more stores dropped. However, medium-sized chains reported just the opposite. There was also a sizable spurt in the percent of 21-50 store operators who had closings-but-no-openings. The smallest organizations became somewhat more active--41% opened one or more stores, compared with 27% in the prior year. Chain store openings

After a year in which 40% of the companies opened fewer stores than during the preceding 12 month period, the green light may be shining for chain store debuts. A solid 49% plan to add more new units in 1984 than they did in 1983. Executives of the largest chains are even more bullish. The long-term record indicates, however, that actual construction rarely matches intentions. Wholesalers post forward going year

Sales in the wholesale grocery sector increased 5.96% last year, comfortably ahead of the total industry gain. The overage is explained by the strong performance of independents and convenience stores, as well as service to chains.

The $65.8 billion figure reflects only the wholesale value of general line grocery products sold to retail grocery outlets. Excluded are food service and institutional sales and the retail volume of company-owned businesses.

The count of 139 unaffiliated wholesalers represents only those firms that qualify as primary grocery suppliers to supermarkets.

Mixed feelings about the effect of disinflation

Disinflation may have seemed desirable when costs and prices were going through the roof, but it obviously wasn't a cure-all. For the second year in a row, a small majority of executives think disinflation has affected the industry's health unfavorably. The same is true with respect to the impact of lower food price inflation on their own companies. Wholesale officers are especially convinced that relative price stability is bad medicine. Do grocers need inflation?

In light of negative attitudes about reduced food price inflation, it is logical to ask: Does the supermarket industry need a certain amount of inflation in order to operate successfully? A surprising 41% of chain officers (46% in the case of the largest chains) say yes. The level they think is worth having ranges from 2% to 8% and averages out at 4.6%. Cheers for Reagan's policies

Even Though Reagan administration actions hastened the disinflation which most executives regret, the president's overall policies are nevertheless judged to have been food for the industry. Additionally, 85% believe those policies will prove successful during his time in office--which, in their opinion, includes another term. Recession deemed a greater threat

By a two-to-one margin, industry leaders consider recession to be a bigger present danger to their operations than inflation. The pendulum is beginning to swing back, though.
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Title Annotation:grocery annual report
Publication:Progressive Grocer
Date:Apr 1, 1984
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