It’s no secret the grocery industry is feeling pressure from all sides. Food price deflation has plagued the industry in recent years. Low-price competition is intensifying, and not just from Walmart and dollar stores, but an expanding base of Aldi stores and newcomer Lidl, which opens its first U.S. doors on Thursday. Shopper’s eating and food buying habits also are changing.
Also read, New study finds that personalized pricing could be problematic for grocers.
As grocery industry struggles persist, and many supermarket retailers turn in lackluster performances, executive-level performance-based pay has suffered as well, according to the The Wall Street Journal. An ISS Analytics study found bonuses for CEOs at the 10 largest U.S. grocers fell 40% from a total of $11 million in 2015 to $6.6 million in 2016.
Austin-Michael, an executive recruiting firm focusing on food retail, said base pay for food retail executives also has fallen. Its analysis of 32 supermarkets finds CEO salaries at large food retailers dropped from $1.75 million in 2012 to $1.5 million last year.
Then there’s the digital revolution. A growing roster of food retailers are putting a stake in the ground, experimenting with click-and-collect, home delivery and third-party partnerships. A recent FMI/Nielsen study found a fifth of all grocery spending — or a total of about $100 billion of the estimated $525 billion that will be spent on food — is expected to come from online shoppers by 2025. Food retailers must prepare now for a digital future or cede ground to the likes of Amazon, which is already shaking up the grocery space.
Amid this backdrop of changes and challenges, retail grocery performance has struggled. The Wall Street Journal reports same-store sales were flat across major food retailers last year after rising by at least 3% each of the previous three years, according to a FactSet industry average. Grocery stocks are down by an average of 5.4% this year, so cutbacks in executive pay and corporate bonuses at struggling chains make sense. Some retailers, including Whole Foods, have eliminated bonuses entirely.
Grocery stores, however, must also consider the long-term view. The sector is in dire need of knowledgeable and experienced talent to help navigate the many changes and challenges ahead. Supermarkets must be willing to make the necessary investments — which include competitive executive salaries and bonuses — to attract and retain much-needed talent not only in the c-suite, but across functional areas as well. The grocery industry, like other retail sectors, faces a talent shortage in areas such as IT, online/digital and data scientists and analytics specialists — roles that will be required to stay competitive, create a seamless online and offline shopping experience and meet the needs of increasingly savvy shoppers.
The grocery industry could be in danger of not only losing some CEOs because of pay reductions, but it also may find it difficult to recruit the talent needed to function amid the many changes food retailers are facing.
While cutting bonuses is a sound idea, the grocery industry would be wise to invest those dollars elsewhere in the business.
SOURCE Sandy Skrovan, Food Dive
News & Updates
Stay informed with the latest news around foodservice, agriculture and other related food news.