YOUR GROCER is worried. Costs are up, productivity is down. The immediate future promises increased wholesale prices for food but no increase in customers. He is coping pretty well with the energy crunch, but now realizes that expensive modern technology may have been oversold as an economic cure. He's keeping a wary eye on consumers, who may make him the target of their wrath if food prices jump upward, and on labor, whose wage and benefit demands he says he can't meet.
The grocer in question isn't a person. He is the personalized image of the large and sometimes impersonal supermarket industry. While there's no sign the industry, 50 years old this year, is ready to throw in its collective paper towels, the impression left by a day-long press seminar in Philadelphia earlier this month is that the grocer is not having much fun these days and expects things to grow worse.
Next to inflation, the chief concern touched on by various speakers was the lack of new customers and changing shopping patterns.
Citing the slower population increase of the 1970s and the increase in restaurant dining, Peter F. McGoldrick, who resigned last week as president of Acme Markets, predicted "At best, food retailing will be a slow-growth industry in the '80s and at worst, a no-growth industry." Added consultant Willard R. Bishop Jr.: "Studies . . . suggest that the typical U.S. citizen is eating smaller quantities of food than a generation or so . . . In this environment, food stores must take most of their new sales from other stores rather than from growth in the overall market."
Volume is the lifeblood of the modern supermarket. Therefore, the experts feel, consumers can look for supermarkets to intensify their often costly battles, offering more gimmicks to attract them and trying more experiments in store design and content. McGoldrick predicted that more large "superstores" and combination stores would be built, in part it seems because a large portion of their inventories consist of higher profit, non-food items. He also foresees potential profit in limited assortments stores (such as Plus and Basic). Bishop pointed out that with the high cost of urban sites, it may be more economical to convert older, smaller supermarkets in inner-city locations into limited assortment stores that could play to specific ethnic demands.
Another issue that has the industry worried is productivity. Hemmed in by a lack of volume growth and the squeeze exerted by inflation, supermarkets need to operate more efficiently. Industry-wide net profit on sales in 1978, according to the Food Marketing Institute, was 1.02 percent and in a five-year study of major industry profits conducted by Forbes Magazine, food retailers ranked 17 on a list of 31. "One effect of borderline profits," the industry's outlook briefing warned, "is to reduce the amount of capital available for updating and expanding facilities and encouraging innovation."
Ironically, despite the introduction of automated checkout counters that use computer scanners and other steps toward modernization, productivity hasn't improved. In fact, it has declined. One reason, according to FMI economist Tim Hammonds, is that features such as green plant and deli departments, added to attract customers, are labor intensive. Salaries already are the industry's largest single expense. The grocers point a finger at the unions, citing costly inefficients written into work contracts. But the outspoken McGoldrick suggested that the industry had a responsibility to find new ways to motivate employes. He also said automated checkout systems are not providing the returns projected for them.
Scanners, hailed as the economic savior of the industry, are installed in about 2,000 of the nation's 33,000 supermarkets and the conversion rate is projected at 100 stores a month. But Acme "will not expand" in this direction. According to McGoldrick, "The capital is not available and (sufficient) hard labor savings are not available." He said the scanners pay off in large stores with high volume and considerable variety, but are less of an asset for chains with a mix of big, medium and small stores. "I don't see Acme, A&P and others of this type getting there for a long time," he said. The savings projected if prices were not marked on merchandise -- a point of heated debate between the industry and consumer activists -- would not be sufficient to reverse this equation, he said.
McGoldrick said economic projections show that industry and organized labor must cooperate if the industry is to survive in its present form: "We have to hold down a clear cut wage increases (beyond the industry's rate of growth) and we have to get relief from work restructions that limit productivity. I see some evidence of a recognition of this by the retail clerks and meatcutters at the national level, but local autonomy is very strong."
Asked why labor might cooperate, McGoldrick cited as "the most dramatic trend (in the industry) the incredible decrease in the number of food stores operated by companies with full and complete labor contracts."
How does the consumer affect all this? In a negative way by eating less and by changing traditional consumption patterns, but in a positive fashion by eating out less due to higher restaurant prices. (Data from the Consumer Price Index for May showed the cost of meals in restaurants going up at a rate of 6.2 percent while meals at home groceries went up only 2.4 percent.)
Nonetheless projections of sharply high prices in the immediate future for meat and baked goods (the latter triggered by a 25 percent raw sugar price increase in May) and demands by farmers for more incomes, the realization has raised the specter of an inflationary "price blitz" that may trigger dormant consumer hostility.
"Currently the price of food is moving up more slowly than the entire consumer price index," explained FMI economist Tim Hammonds," so we aren't on the spot. But our surveys show that the level of actual and potential activism is higher than ever before."
The industry appears to be hoping that sharing its problems and painting the supermarket as a victim, not a cause, of inflation is the best way to keep this potential consumer wrath under wraps.