Trends in Food Distribution: The Retailer

This year I have been on leave from the Uni-versity stationed at the National Association of Food Chains in Washington. I have been able to view the industry close-up for the last twelve months and am very anxious to share my observa-tions with you. Since my comparative advantage lies in retailing, my remarks will be directed specifi-cally to that sector. Five basic economic trends underlie our discus-sion. First, the decline in rate of domestic popula-tion growth. This phenomenon caught everyone, including food retailers, off guard. As a result, new store construction has outstripped demand over at least the last five years. Average sales per square foot of selling space deflated by the food-at-home portion of the consumer price index were 3.57 in 1972, 3.33 in 1973, 3.13 in 1974 and 3.03 in 1975 (S.M.I.). Overcapacity is a fact in this industry. Second, the energy crisis. No other industry in the United States is more concerned about the impending energy shortage and no food retailer believes the crisis has gone away. Programs developed in response to the problem have already started to have an impact on industry structure. More about this later. Third, the capital crisis. Almost every serious industry analyst predicts a serious capital shortage for food retailers over the next ten to fifteen years (McKinsey). Our economy in general will experience a capital shortage over this period due primarily to new expenditures needed to finance higher energy costs, new environmental protection programs, and new safety standards. In times of capital shortage, food retailers rank decidedly below average in their ability to attract funds. Investment bankers and institutional fund managers tell us there are many reasons for this, but th