Skip navigation


The economy is picking up steam and headed toward a sustained recovery, according to industry leaders from around the country interviewed in recent weeks by SN.Most of the chairmen and chief executive officers of food-retailing companies interviewed by SN said they have seen an upturn in consumer spending in their stores, which many attribute at least in part to increasing consumer confidence in the

The economy is picking up steam and headed toward a sustained recovery, according to industry leaders from around the country interviewed in recent weeks by SN.

Most of the chairmen and chief executive officers of food-retailing companies interviewed by SN said they have seen an upturn in consumer spending in their stores, which many attribute at least in part to increasing consumer confidence in the job market. Some retialers reported that anapparent recovery in consomer confidence began late last year during the holiday season and has carried through the early months of 2004.

Some recent positive indicators about the economy and the employment picture led several of the exeuctives to predict that the United States is entering a period of sustained economic recovery, although many also expressed concerns that the war in Iraq and the rising federal deficit could hinder growth. Terrorism also has the potential to derail consumer confidence, the executive said.

Other unknown factors that could distrup the economic recovery include the presidential elections. Some industry executives said they thought that if John Kerry, the presumptive Democrat presidential nominee, were elected, he would seek to raise taxes, which could slow growth, they said.

Richard Badillo, senior economist, Retail Forward, Columbus, Ohio, said in an inteview with SN that the economy generally gets a boost during election years because the incumbent party tends to pull the right strings to keep voters happy.

He agreed with the majority of supermarket executives that the economy had begun to stabilize and was likely to remain on a growth curve for some time.

"We've been forecasting for a while that we're finally going to see a sustainable rebound emerge in 2004," he said. "In the first part of the year, retailing is getting some help from things like tax refunds and easy comparisons, but I think we're also starting to see the kind of rebound in the job market that we need to see to keep that rebound in the second half of the year and beyond."

He described the environment during the past few years as being a "start-and-stop" economy.

"The worst is over, and companies are starting to add new jobs," he said. "Once we get those jobs growing on a sustained basis, then the rebound we've been seeing on and off for the past months should be sustainable."

Asked about regional differences in the economic recovery for the months ahead, Badillo said he predicts more variation in growth rates among the different economic strata than he does among the different regions of the country.

"One thing that's going to characterize economic growth going forward is that there's going to be more divergence in growth," he said. "For example, we've definitely seen growth emerge more quickly among upper-income people as the stock markets have rebounded and upper-income jobs have seemed more secure than the blue-collar jobs, which have been more susceptible to cuts. So, I'm not sure if the differences are so much regional as they are based on demographics or income. You may see differences based on rich and poor, young and old, Generation Y vs. baby boomers."

Recent signs of inflation also should benefit supermarket companies this year, Badillo said.

"Retailers get a boost from rising prices," he said. "They always seem to perform better in an inflationary environment than in a deflationary environment."

He agreed with retailers that the war in Iraq, the ongoing threat of terrorism and the potential of a hard-fought presidential election all create the possibility of unexpected shock to the economy that could deal a blow to consumer confidence.

"But barring that, it should be a great year," he said.

The following are the responses of food-distribution executives who were asked about consumer spending, the direction of the economy, tax cuts, the impact of the election, and their concerns and hopes going forward.

Jack Brown

chairman, president, CEO

Stater Bros. Markets, Colton, Calif.

The national economy is OK, and it's probably a little better than that in Southern California.

Looking at the economy on a long-term basis, I think it will continue to improve, particularly if the Iraqi issue is resolved and tensions are reduced. If that happens, then the public will reward the economy. But if the issues aren't resolved and tensions reduced, then the economy could drag for a while. I don't see the economy declining, but I see a definite upside if we resolve some of the issues facing us by turning more control over to the United Nations.

Abolishment of the [estate tax] would also help the economy, so privately held companies could continue to grow without worrying about expense issues. A continuation of lower taxes and an improvement in the capital gains tax would help, particularly incentives to encourage people to invest capital in expanding their businesses and creating new jobs.

I'd have to say consumer spending at our stores has been healthy. Before the strike, our comps were growing at the rate of 5%, which was among the strongest comp numbers in the U.S., and during the strike comps rose 49%. Since the settlement, we've continued to hold some of the new customers we picked up, and we're running in excess of our pre-strike numbers.

I believe tax refunds will affect grocery spending because consumers traditionally don't save a lot of their refund money, so they're more likely to put it into the economy, and food will be one area that benefits.

Regarding the impact of the presidential election, I think a change in control will slow down economic growth until people are satisfied that the new person is qualified. But nothing will change before the election, though there may be some caution until all uncertainties about who wins are resolved.

My greatest fear for the economy concerns Iraq and the possibility the U.S. may get into a full-blown war alone. Some of our stores are in high military population areas of Southern California, so our customers are very close to what's happening over there.

My greatest hope is for a peaceful settlement. Nothing would help the economy more here and nationally than to have Americans coming home after accomplishing their goals.

J.H. Jay Campbell

president, CEO

Associated Grocers of Louisiana, Baton Rouge

I would say on the whole our economy is improving. I think there are jobs being created.

I think the president's tax cut is very significant on the federal side. Unfortunately, some local governments and state governments changed their tax structure so that they picked up some more revenue, at least in the state of Louisiana.

Our best indicator [of consumer spending] is observing what products are selling. We notice that when the economy is very tight, our lower-end products do very well, our dollar items do very well. People go to the low end whenever money is tight. When things seem to free up and the stock market rebounds, people get a little more comfortable about their spending habits.

The mixed bag in our economy locally has to do with the chemical industry. The state of Louisiana is heavily dependent, or has been in the past, on high-paying jobs in the chemical and the petroleum industries, and both of those industries are going through their own transitional periods right now because of the high cost of natural gas. When natural gas prices are as high as they are, you see a lot of transference of manufacturing to overseas operations. As jobs are being created in many sectors, we're losing some jobs in sectors just due to the price of natural gas. So it's kind of a mixed-bag economy because of that.

We see lots of growth in sectors such as the medical profession. As the population ages you're going to see a lot more of that around the country.

We project, now going forward, the economy is going to do well. We think we'll have a very active summer season.

I think we're seeing a little bit of a shift away from our lower-end products, and see people going back to the branded labels again.

I think the tax cuts have helped, but I think unfortunately in many states, not only in Louisiana, local governments and state governments created new taxes of their own which basically eroded some of that federal tax cut. Now many states have been in some pretty tight situations themselves, from a budget standpoint, so they started thinking it was a "diving for dollars" situation.

I think home building is still pretty strong, not only in our market but also around the country, and that has continued to fuel a lot of growth in the economy. If the economy continues to chug forward, and obviously if there's any further stabilization in Iraq, I think the election will be a very favorable one.

I think obviously if we were to have another terrorist incident, it would retard any future growth and scare people temporarily, and hopefully that would never happen. You have some extremists that would love to see the American way of life derailed in any way they can, and they know that affecting our economic prosperity is one way to do that.

John Catsimatidis

chairman, president, CEO

Gristedes Foods, New York

I don't think the economy is going to get worse, but I don't see it getting dynamically better. And with Wal-Mart marching along the highways and byways of this country, it's not going to get a lot better for those of us in the retail food industry.

We haven't had inflation in 10 years. Most people consider inflation a bad word, but retailers have always done a little bit better under inflationary conditions, so maybe a little bit of inflation couldn't hurt us.

Our stores have been quieter, and a little less dynamic, than we expected this year. Our same-store sales are slightly down. There's been new competition in our marketplace -- e-commerce businesses like FreshDirect and also Whole Foods.

As far as benefiting from tax rebates, people don't reward themselves by buying more turkeys with their tax rebates. They'll buy computers or clothing or television sets.

I think regardless of who wins the election, interest rates will go up. We're all Americans and we all hope for good things for our country, regardless of who gets elected.

Hopefully there are no further terrorist events to erode our economy.

Neil Golub

president, CEO

Price Chopper, Schenectady, N.Y.

A year ago, we were facing the war, and that certainly had an impact on the economy for a number of months. We began to see it break free a little around the end of the year, in November and December, and since then we're seeing an uptick. At this moment, we're encouraged.

I don't have a fix on the long-term outlook. I just know that in our marketing areas, business is difficult and very competitive, and it's always been that way.

Also, business today is being affected by all sorts of new government regulations, and medical costs that are scary for everybody because there's no way to make adjustments for the kind of increases that every one of us is getting bowled over with. Somehow we're going to have to figure out a way to deal with it.

One way we have to measure [consumer spending] is through average order size, and we see that as very stable.

The election year is always an interesting time to watch. I think the problems this country faces are enormous, maybe the biggest they have been in a long time. The U.S. is finding itself in the same kind of arena that Israel has found itself in for years and years, and there's no easy solution. We're digging ourselves in deeper and deeper. Unfortunately, to protect ourselves, that's what we have to do.

The war is going to continue to have an impact on the economy, and I think it's gotten more dangerous for Americans, unfortunately. My biggest fear is us getting deeper and deeper into a war that extends around the world. Terrorism is everywhere, and it jumps at you when you least expect it, and that's a scary thing for people.

I think Americans are still optimistic and will continue to fight for what we believe. We are resilient and will do the kinds of things that keep our economy moving in a direction.

Thomas S. Haggai

chairman, CEO

IGA, Chicago

IGA finished 2003 feeling that we had performed well under the circumstances of losing, through the Fleming bankruptcy, the supply source for 40% of our stores. As the sales came in, as recorded by ACNielsen, they were better than we guessed at the corporate offices.

It is difficult for us to predict 2004. We believe that the business conditions in the United States are improving with each day; and while we anticipate at least 10% to 15% growth in store count, we think it will also be an excellent year preparing us for 2005 that might be for IGA USA one of our better years because we have stabilized our infrastructure and have brought on new formats and very attractive programs.

Overall, we see business improving, along with the value of the products going across our scanners, though uneven by geography since we are one of the few companies that does go coast to coast. Value buying is here. Families are willing to sacrifice for the family members to have good eating habits, and this is true for families with limited incomes as well as those in the middle class and even more affluent.

IGA feels we would be politically better served if we maintained the same administration. We feel that this war cannot be abandoned, and only those historically illiterate would compare anything we are doing in the Middle East to the mistakes that were made in Southeast Asia. We are fighting now in what the historians have told us all of our lives to be the tinderbox of the world. It won't be pretty and it's not easy, but we will prevail.

The other part of our economy is the bad news/good news. The good news is that we have increased productivity dramatically. Even in the stores we see our efficiencies that, in turn, lessen our need for the number of people.

My greatest concern would be that the outsourcing of jobs is not limited to just those in the moderately skilled industry but also those on the high end. So it is with our IT. We may be producing some of the chips and some of the equipment, but many now have their IT needs met at a great savings away from the United States.

Ron Pearson


Hy-Vee, West Des Moines, Iowa

Categorically, I believe the numbers that are coming out on the economy, and the [gross domestic product] numbers, are phenomenal.

We operate in seven states in the Upper Midwest, and it was very clear to see, starting last fall, Thanksgiving through Christmas, that the economy was kicking back in. Compared to the year before, we saw consumer spending, business spending, gift giving and those types of things increasing at a very rapid rate.

So we were convinced that the economy was coming back, and then through the January-February-March period, we've seen very good consumer spending in every one of our markets. Whether in the big metro areas or in other smaller areas, we've seen a general upturn. Consumers are buying up, trading up, buying a bigger variety of products, and they are quicker to spend. Our average sale is up. Our pharmacy sales are up, and we know some people don't renew prescriptions during down economies, so we think that's another barometer. We're just really positive that the economy is making a difference.

I reported last summer that in the fall, when the refund checks came in, we could see a definite jump in our comp sales, and we didn't do anything different, and that has just continued. We're seeing spending that you hadn't seen for some time, whether it is due to the lower tax brackets or because people know they have jobs. The mood of the country is that people are working, and the economy is up, and people are more secure in their jobs now. We see that consumer confidence.

The consumers have gone through lots of elections, and a certain percentage of consumers will tune out the rhetoric that's going on. In our view, nothing will change right through the elections, unless something happens on the international or global picture. We do see people on both sides of the aisle concerned about who's elected and what might happen with taxes and what might not happen with taxes, but I think that's probably common in every presidential election.

I'm most hopeful that [the economy] continues at the brisk rate that it is right now. There is a real upbeat attitude in our shoppers and it shows in our comparable-store sales. Our concerns would be if there would be a change in the direction of the economy following the election.

Robert Piccinini

chairman, CEO

Save Mart Supermarkets, Modesto, Calif.

Our growth has been very healthy. Same-store sales have been good. The biggest challenge we have out there is places like Wal-Mart.

They've only got one open in the whole state at this point, but I am aware of most of the places they are attempting to put them, and frankly, it's going to be devastating. It won't affect the urban areas so much, but out in the rural, suburban areas, it's going to have a tremendous impact.

It's not going to affect us today or tomorrow, but they have said they want to develop 40 or 50 in the state, and they've got a three-year time period to do it. If three years from now they have 50 stores in this state, it will be devastating for this industry.

I think the workers' comp reform [that was signed into California state law last month] is going to be a huge benefit. In the last few years we've had an awful lot of business leaving the state -- manufacturing and those kinds of businesses -- so we've been losing jobs. I think this will help stop the export of jobs, and then, hopefully, natural growth will take over.

We are in Northern California, and all of our areas have been experiencing a lot of growth. There's not a town that we're doing business in that isn't doing some pretty good growth.

Al Plamann


Unified Western Grocers, Los Angeles

I believe the economy is strengthening because sales among our retail customers are becoming stronger, exclusive of the impact of the strike-lockout [a 20-week labor dispute that ended in early March]. I say that because a significant number of our retail members don't compete directly with the chains that were involved -- their stores are five to 10 miles from the nearest chain -- and they've been seeing sales get stronger during the first part of the year.

I would rate consumer spending as healthy. On balance, retail sales independent of the strike are up 2% to 5%, so that's very healthy for the retailers.

Customers are more likely to apply any tax refunds to discretionary spending rather than to groceries.

If the presidential election has any impact on spending, it will not be during this calendar year. But the election might have an impact if consumers think taxes will go up next year, which might prompt them to put some money aside and watch their pennies.

My greatest fear for the economy is that there will be some type of cataclysmic event in the U.S. from terrorists -- I don't feel we have that situation totally under control. My greatest hope is for stability, and we're seeing several positive signs, including a strengthening in the economies of our trading partners, which is an excellent sign. But it would help if we could get the political situation under control in places like Israel, Pakistan and Afghanistan by getting more external help.

Ross Roeder


Smart & Final, Los Angeles

The economy is still in the process of recovery, but it's coming in fits and starts. The economy seems to be moving along very well for a quarter, then it pauses. I believe there are still a lot of questions hanging over the economy, though it is improving and we're seeing an increase in jobs. Although I'm not sure about the impact of the Southern California strike-lockout on the big picture, I think the overall economy is continuing to improve slowly.

I think recovery is being slowed by the war in Iraq and the instability in the Middle East. As long as that uncertainty exists, it will continue to affect the overall economy. In addition, the huge deficit must be dealt with.

Consumer spending in our stores in the first half of the year has been healthy, though it's hard to evaluate because of the strike. Obviously we benefited from that situation, and we are continuing to benefit. We've picked up so many new customers, but it's hard to separate the impact of the strike from any change in the economy. In addition, part of the reason our earnings have been so strong, aside from the strike, is the rebound in the economy and the fact people are spending money.

I don't think tax refunds will affect grocery spending. Refunds help hard goods but don't affect the grocery business.

The election will probably impact consumer spending because with uncertainty, people will be more cautious -- and if Kerry is elected, we will see higher taxes that will affect spending.

My biggest fear involves the huge deficit we're seeing, and the war. My greatest hope is for peace and stability.

Craig Schnuck

chairman, CEO

Schnuck Markets, St. Louis

The economy definitely had an impact on consumer spending in 2003 and through the early part of 2004. Particularly in our area, the economy seems to be picking up. Unemployment's going down, and consumer confidence seems to be on the rise.

We're beginning to see some early signs of increased consumer confidence, with some buoyancy in sales as a result. It wasn't apparent in the first couple of months, but in March and April it picked up.

We had a very down economy in the St. Louis area in particular in 2002 and 2003. We experienced some job loss, and that had a depressing impact on consumer spending. Now there's been a definite recovery. We can see a turnaround.

It's hard to say whether the tax refunds are the reason, but I'm sure it's a piece of the equation.

The election could [play into the economy.] Any time that there's a presidential election, there tends to be a greater focus -- because of the politicians -- on the national economy. There tends to be discussions about whether the economy's good or the economy's bad, and that can definitely have an impact on consumer attitudes, which is reflected in spending.

All the revised economic data for March were fairly positive. If those trends continue, it could make consumer spending more buoyant.

The major concern would be if this present uptick is only temporary, and we slide back into the doldrums. I don't think that is going to happen, because from some of the recent reports I've read, companies are now opening up and hiring where they had been somewhat on hold. People are going to have a chance to get off unemployment, and more often just move to higher-paying jobs.

That definitely will have a positive impact. That's my best guess about what's going to happen over the next three to four months. Based on what I've heard and read, I'm optimistic about what the next half-year is going to bring.

We've seen some increases in average order size.

Right now we have four stores under construction [including two in Memphis, where Schnucks acquired the Seessel's chain in 2002]. The economy in Memphis is very strong. One of the reasons that Memphis appealed to us is that in the past three or four years, it has been experiencing major population and job growth.