Indie Companies Demonstrate Flexibility in Overcoming Consumer Wariness and Operational Challenges
In a time of economic uncertainty, independent grocers have demonstrated resilience and adaptability, according to the recently released "2025 Independent Grocers Financial Study" by the National Grocers Association (NGA) and FMS Solutions.
The study reveals key findings about how independent grocers performed in fiscal year 2024. Despite flat sales and gross margins, and rising expenses due to inflation, these grocers showed an edge of persistence. Total expenses reached 25.8% of sales, the highest in the history of the study, with labor and benefits costs notably high at 16.3% of net sales.
The financial performance varied among operator sizes. Single-store operators had an EBITDA (earnings before interest, taxes, depreciation, and amortization) of 1.52%, which, while below multi-store operators’ 3.28%, remains above pre-COVID levels, indicating resilience. Multi-store operators experienced a 2.2% sales gain, while single-store grocers had a 0.8% dip, highlighting the continuing advantage of scale and operational efficiency.
Independent grocers also faced operational challenges, with part-time associate turnover reaching 40.7% overall and 55.8% among multi-store operators. However, these grocers showed resilience in meeting evolving consumer needs. Grocers who acted quickly with well-timed promotions, especially using digital circulars, were more successful in meeting shifting consumer demand during this period.
E-commerce accounted for 1% of total sales, with an average basket size of $105 online compared to $34 in-store. Operational efficiency was also a key factor, as inventory turns rose to 17.8, although shrink grew to 3.5% of sales.
Perimeter bakery was identified as an emerging differentiator for independent grocers. Weekly transactions grew to an average of 8,609 per store as customers hunted for promotions. Spending per trip declined as non-essential items weren’t purchased, reflecting plummeting consumer sentiment early this year.
Despite these challenges, net profit edged up to 1.9%, led by larger operators. The study includes segmented insights based on store count, region, and sales volume, with data from 93 survey participants and 626 store locations, as well as FMS' database of 507 independent grocers with 1,911 store locations.
In summary, independent grocers in FY 2024 showed resilience despite flat revenue growth and pressure from rising costs and shrink. The study underscores the importance of scale, operational efficiency, and adaptability in the face of economic uncertainty.
In the challenging business landscape of 2024, independent grocers proved their tech-savvy resilience, leveraging digital tools like circulars for effective promotions and boosting e-commerce sales by 1%.
Amidst rising labor and expenses, the study found that larger operators showed a significant edge in net profit, highlighting the potential advantage technology can bring to business finance.
