“The more we know about what we face, the stronger we can be.”

Heading into 2024, grocery retailers need to understand the trends they face in today’s marketplace.

Being a leader in an independent grocery store has always been difficult. Our business model itself is brutal, and the competitive landscape is fierce. Adding to the difficult business climate, the pandemic brought with it additional crises—many of which we are still navigating as business leaders—that intensified the pressure on independent grocers’ performance.

For food co-ops and independents alike, many leaders wonder what to make of the emerging trends and the forecast for some of the key crises we face. As a consultant and someone who studies and teaches about trends in our industry, I am often asked what I think are the most critical changes in the marketplace for independent leaders to monitor. Naturally, there is variation on what is most important, depending on the store’s location, the product mix, and the scale of operations. But there are some overarching developments in our business that I urge food co-op boards, store owners, and store leadership teams to pay close attention to:

Key developments in an extraordinary period

• The loss of market share by independents, regardless of product mix: Many mom-and-pop grocery owners have retired without finding suitable buyers, and stores have closed—especially in rural areas. This trend, together with the expansion of corporate-owned grocery store locations, has resulted in a loss of overall market share by locally controlled grocery stores, leaving many communities without much control over their access to the foods they want.

• The drastic change in the natural and organic industry: Over the last fifteen to twenty years, natural foods retailers have gone from controlling half of the natural products market to less than one-third of the market. Conventional retailers, who used to sell very little in the way of natural and organic products, now control nearly half the natural products industry’s sales.

In addition to the competitive market changes, there were key changes that the pandemic brought with it:

• The hiring crisis: Many stores have been unable to find and keep a full staff since the beginning of the pandemic, leaving challenging operations to fall on fewer shoulders in the store. Grocery stores of all kinds had to adjust business hours or department offerings simply because there were not enough workers.

• Food shortages and disruption: 2020 and 2021 saw the most severe food disruption in decades. Stores have had to juggle multiple supply relationships just to keep the shelves full. Out-of-stocks have fallen but persist today. This has left stores that are already short-staffed to manage more complex ordering and receiving systems.

• Food inflation: Because of the disruptions to food supply and changes in shopping patterns that the pandemic brought, we experienced a once-in-a-generation crisis of food inflation. We began to see cost changes roll in by late 2021 and peak in late summer 2022 with a whopping 13 to 14 percent food inflation rate, according to the U.S. Department of Labor. While these rates have been moderating over the past few quarters, the intense pressure this put onto small grocery operators to manage the rapid price changes cannot be understated. Many stores lost tens of thousands of dollars of gross margin simply because they did not have the internal bandwidth to track the waves of price increases the way that the large corporate chain stores did.

• Social changes also bring new demands on managers: Coinciding with the pandemic came a new heightened awareness of equity and justice for all people. There is a new urgency for managers to develop their own leadership skills to provide the kind of workplaces that workers now demand. Some CEOs who have previously been thought to be good at operations have felt that they do not have the skills or experience to lead their teams into this new era.

• This brings me to one final trend to highlight: the shortage of general managers/CEOs to lead our stores. We in the industry knew there would be some leadership transitions, because of the wave of planned retirements that began seven or eight years ago. But when the added pressures of the market conditions, simultaneous pandemic-era crises and the new societal demands began weighing on our leaders, many younger general managers and CEOs began to exit the market too. Today, locally owned grocery stores, both mom-and-pop and food co-ops alike, have experienced a dramatic exit of leaders. Over the last three to four years, data suggests that more than half of our stores have experienced a leadership transition at the top, often more than once. In some cases this has resulted in weak and vulnerable stores during this time of extreme challenges in our marketplace. There simply has not been much of a runway for these new green managers to learn how to run a grocery store with all the critical trends unfolding.

As a consultant and store trainer and former general manager myself, I track the news and trends that impact us. But these past few years have been extraordinary by any measure. We face so much, and yet here we are, day in and day out, in our stores and in our communities, trying to serve our neighborhoods and drive local impact. I believe that the more we know about what we face, the stronger we can be, so I have been talking about trends everywhere I present or teach.

To learn more about all these trends, click this link to purchase my new “Trends 2023” video. (Note that subscribers to Cooperative Board Leadership Development receive a discount. Contact a CBLD Consultant to get your coupon code.) I aggregate and summarize the trends that I think are the most important right now. I created this for boards of directors in particular, but many management teams have also found this kind of summary pretty helpful.

What one leader said:

“I’ve been on the board about 15 years now, served as President and presently Treasurer. I just watched your Grocery Trends Report 2023 and have to write and thank you for putting this together. I’m the chair of our Education Committee and have found no lack of educational resources on internal governance practices. On the other hand, I find resources specifically for boards about our external micro and macro environment are much harder to come by. I really appreciate your excellent work on this project and hope to share this with our board.” —Gayle Havens, Roanoke Co-op

Together we can do this! Our communities need us to stay strong in the face of these strong market headwinds. And part of staying strong is following along with some of the trends we face.