How Can Inflation Impact Independent Grocers?

A historic period of inflation has pushed grocery prices ever higher as the nation continues to grapple with the coronavirus pandemic. A labor shortage, supply chain issues and other factors are driving up costs, but many consumers just see high food prices amid record profits in the grocery sector.

With Nielsen forecasting inflation to rise 6.9 percent in 2022, how are retailers dealing with the rising cost of goods and what are they doing to help shoppers do the same?

The National Grocers Association (NGA) recently hosted a webinar, How Grocers Are Grappling With Inflation, to explore just that. Moderated by IGA CEO John Ross, the panel saw leaders at three independent chains discuss their approach to pricing and customer care:

Mike Davidson, President and CEO, Buehler's Fresh Foods (14 stores in Ohio)
Russ Greenlaw, VP of Sales and Operations, Adams Hometown Markets (15 stores in Connecticut, Massachusetts, and New York)
Tim Lowe, President, Lowes Foods (80+ stores in North and South Carolina)

IGA retailers & NGA members can watch the webinar recording by logging in here.

Let's address the biggest questions independent grocers have about the impact of inflation on their business.

What is causing the inflation?

A perfect storm of factors has contributed to the current inflationary period that saw food prices up seven percent in December, the highest since 1982. Compounded by the pandemic, inflation is being driven by both supply and demand issues, including a sweeping labor shortage impacting most industries including trucking, as well as shifting consumption patterns.

How long will it last?

“We saw it coming … [but] it accelerated quicker than we all thought,” Davidson said. “It’s something we’ll be dealing with at least for the short term and probably the mid-term,” possibly for much of 2022.

What is most impacted by the inflation?

The middle is getting squeezed again. "We're seeing this stretch in two directions: the entry price level and we're seeing people pricing up. And everything in the middle is shrinking," Greenlaw said, noting behavior is mimicking what occurred in 2008.

How can retailers keep prices attainable for their shoppers?

Grocers need to help shoppers stretch their food dollar. “If you go looking, you can find some value buys on the open market,” Lowe said, such as volume purchases on some commodities like certain cuts of meat, which has been most significantly impacted by inflation. Lowe observed that, despite inflated prices, many consumers are still engaged in “pantry loading” due to uncertainly over the pandemic. “We want to help consumers’ dollars go further by helping them think differently about how they spend their dollars.”

How can independent retailers demonstrate their value to shoppers, beyond pricing?

"Now is the time to double down on differentiation," Ross said. "Differentiation is the weapon that grows share, even when times are tough and shoppers are looking for a deal. In fact, the biggest growth retailers from the recession until today—the ones that grew and survived—were the ones who figured out a way to sell value without defaulting to price alone."

Greenlaw agrees. "At the end of the day, you can always give price tomorrow—quality is always first," Greenlaw said. "And when you look at the value equation, if you put price too high on that list, you can make a mistake. Value is more than price."

Independent retailers, renowned for their local ties and their ability to provide exemplary service and shopper experiences, are in a prime position to offer value that extends far beyond price. "I'm going to give you something that isn't just the Walmart of food," Greenlaw said about independents' value. "I'm going to give you something experiential; I'm going to teach you how to cook it; I'm going to teach you how to enjoy it."

Independents can help their shoppers rediscover the "thrill of adventure" in cooking at home that they initially found at the beginning of the pandemic by providing recipes that help them discover new flavor profiles, allowing them to make their favorite restaurant meals at home for less, as well as recipes that stretch one protein into multiple meals—like using a rotisserie chicken for dinner and making chicken salad for lunch out of leftovers. “We want to help consumers’ dollars go further by helping them think differently about how they spend their dollars,” Lowe said. (Note: IGA's Family Meals Made Easy! recipes make it easy to share new recipes with shoppers—and many use IGA Exclusive Brand products for even more savings!)

Retailers can also tout their eCommerce offerings as a reminder that shopping online will help shoppers "stick to your grocery list so that you truly can extend your dollar and know exactly how much you're spending," Lowe said.

That includes promoting digital coupons, which help shoppers save both online and in-store while keeping the store competitive. Ross said, "I'm a huge proponent for using these digital tools—they're cheap, they're data driven, and they work!"

Lowe stressed the importance of using digital coupons to remain attractive to both shoppers and CPG companies. "As independents, if we don't get out there and fill this gap with digital, the players like Instacart and Shipt are making it really easy for the CPG partners to spend their trade funds with them," he said.

In the end, it’s all about trust. “We want to continue to engage our customers,” Lowe said. “We focus not so much on the numbers but on getting quality products to the consumers so they can find value.” Davidson said there’s a great opportunity for independent community grocers to help their shoppers. “We are advocates for our customers," he said. "It’s how we can continue to earn their trust.”

Dive Deeper At The NGA Show

With only an hour to discuss such a big issue, these are just some of the concerns and solutions the panelists were able to share. Ross will be hosting a general session on Monday, February 28, 2022 at The NGA Show in Las Vegas, Nevada that will dive deeper into the topic:

Don’t be a victim to Inflation: Simple strategies to maintain price authority, increase sales, and drive shopper loyalty. Inflation is coming fast, but as an independent, how do you maintain your value proposition during an inflationary period? Discover tactics that will help you keep your margin and stay competitive against the chains on core CPG and private label items, how you can use the margin you have to further increase profit, and how to increase shopper loyalty with marketing initiatives that show shoppers you’re on their side as prices rise.