Grocery Industry Looks to a Bright Future

Abstract

TRADITIONALLY, FINANCIAL ANALYSTS have been aware of the steady strength of the food and grocery manufacturing industry in resisting recessions. In recent years they have had reason to become aware that in producing today's wonderful new basket of groceries the industry has also become a growth industry. A short 15 years ago, for example, a good-sized, wellstocked grocery store offered about 3,500 items; today the number is closer to 8,000. Total consumer expenditures for food during the same period have grown from $31 billion to an expected $73 billion this year, and the sales of grocery and combination stores-the classification which is made up largely of today's modern and efficient super markets-have soared from less than $14 billion to an anticipated $46 billion for 1959. Rising population and rising income have, of course, contributed to this growth; but the industry's sales have increased beyond anything which could have been forecast on the basis of just the increase in population and income. It used to be that the percentage of disposable income spent for food declined when national income rose. But that old rule has been broken in the last 15 to 20 years. Contrasted with 21% in 1944, the American people in 1959 are spending an average of 22% of their much larger disposable income for food. For this they received an annual basket of groceries which was greatly improved in terms of quantity, quality, variety, packaging and convenience. Compared with pre-war 1939, 20 years ago when the public also spent about the same percentage of income for food as does now, the improvement is even sharper. One way to bring that improvement into clear focus is this: If people were content to buy only the same types and quantities of food per person which they bought pre-war, they could buy that outdated grocery basket at today's prices for less than 16% of their enlarged incomes. The difference between that and the 22% they actually spend represents the additional economic values they want and which the food industry, collectively, has provided. This ability of the industry to maintain food spending at a constant share of a rapidly rising disposable income is an especially noteworthy accomplishment o the numerous economists who argued that it couldn't be done. Their argument was based on the many food consumption studies which show that at any one point of time the higher income families spend a smaller percentage of income for food than do lower income families. These economists therefore theorized that as the whole population moved up the income ladder the percentage of income spent for food would decline. What they overlooked was that things were happening that led families at each income level to spend a greater percentage than formerly. The effect of this has been that while per family income has more than tripled over the last 20 years, the percentage of disposable income which America spends for food is still about 22%-almost exactly the same as in 1939. Maintaining this constant share of the consumer dollar has been a severe challenge to the resourcefulness and imagination of food manufacturers, particularly in view of the unremitting efforts of other industries to increase their respective shares. The makers of stylish and powerful automobiles, new, better and more efficient household furnishings and appliances, entertainment, sports, tempting and pleasurable equipment to enhance the enjoyment of increased leisure time, all have skillfully appealed to the consumer for a larger share of his disposable income.