While prices for groceries fell slightly, overall food prices rose 0.2 percent in Minnesota for the two months ending in November. Grocery prices fell 0.2 percent, and food prices away from home (restaurant, cafeteria and vending purchases) rose 0.8 percent for the same period, according to the November 2023 CPI report from the U.S. Bureau of Labor Statistics, Midwest Information Office.
Looking back at 2023, food prices increased 1.6 percent over the year in Minnesota. Prices for food at home increased 0.5 percent. Three of the six major grocery store food group indexes were higher over the year.
The index for other food at home (including sugar, sweets, fats and oils, for example) was up 4.9 percent, the index for nonalcoholic beverages and beverage materials was up 2.9 percent and the index for meats, poultry, fish and eggs was up 0.5 percent.
The index for dairy and related products was down 7.1 percent, and the index for fruits and vegetables fell 3.2 percent, while the index for cereal and bakery products was unchanged over the year. Food prices away from home were up 3.6 percent, according to the report.
Minnesota’s current FY 2024-25 surplus is projected to be $2.4 billion, up $808 million from the end-of-session estimate, according to the Budget and Economic Forecast from the Minnesota Management and Budget office. The state’s budget and economic outlook remains stable in the current biennium, but a significant structural imbalance constrained the budget outlook for FY 2026-27.
Jamie Pfuhl, president of the Minnesota Grocers Association, said the state had a “huge budget surplus” in 2023, but most of it was spent by state government.
She said the Minnesota legislature is on a biennium, with 2024 being the second year, which historically has been more of a policy year.
“We don’t anticipate a tremendous amount of additional spending necessarily through the legislature, but these are strong, strong revenue forecasts right now for the state. But that will be waning in the coming years,” she said. “A lot of that surplus is due to increased revenues from income taxes, our sales tax, our corporate franchise taxes. So this is a direct result in lifted taxes, obviously.”
Looking at the state’s grocery industry, Pfuhl said the landscape is complex – similar to what is seen across the nation.
“We have growth in some communities; we’re seeing reinvestment in our grocers in those communities. We’re seeing expansion of some organizations, we’re seeing consolidations, some of our independents [are showing] good growth, strong growth. So that’s all very positive. Yet in some of our cities we’re seeing the brick and mortar really struggle.”
Pfuhl added that there are challenges such as “reduction in the community, less folks, competition, that pressure for baskets, so it’s complex.” She noted the dichotomy of seeing growth and strength in the industry, while also seeing some grocers leave the industry.
Post-pandemic issues persist
According to Pfuhl, many grocers in Minnesota continue to struggle with post-pandemic challenges.
“We are still hearing about some supply chain issues. Challenges with labor is astronomical on multiple levels,” she said.
Minnesota’s unemployment rate is “incredibly low,” with about 51 workers for every 100 jobs. “I think our industry, our folks here in Minnesota, are doing the best they can to come up with inventive ways to manage labor, but it’s a challenge.”
Some retailers are turning to self-checkout as a way to mitigate labor issues in the stores, and Pfuhl has definitely seen growth there.
“We have some communities where I’ve talked with our grocer partner there, and they never expected that particular city or community would be welcoming to self-checkout,” she said. “And actually, they’re unable to find cashiers, people that are willing to work the hours, work those jobs, and the communities have actually embraced self-checkout. So we’re seeing the pivot.”
To Pfuhl, the pandemic forced the food industry in the state and across the nation to become much more fluid.
“We had to pivot a lot. And I think we’ve maintained that ability to flex as we face these other challenges and continued challenges,” she said.
In addition to self-checkout, grocers also are embracing other areas of technology to help offset a labor shortage.
“I think honestly, for those that are growing and really doing that reinvestment, there’s nothing that’s off the table,” Pfuhl said. “They try different things to really engage and bring that customer into their store.”
She added that inflation remains one of the more “top of mind, topical conversation points” for MGA board members. There still is a “tremendous amount” of pressure trying to navigate pricing amid inflationary pressures.
She noted Minnesota had one of the “most impactful” legislative sessions in the history of the state during 2023.
“A tremendous amount of laws were passed that have a great impact on how we go to market. Navigating those, on top of inflation, and trying to be the price leader to our customers and be sensitive to their baskets – it’s really putting pressure on our members.”
Among the legislation passed were labor laws, including a mandated earned safe and sick time that went into effect Jan. 1 and a paid family leave law. The state also legalized marijuana.
Pfuhl said grocers have been able to sell edibles and low-dose beverages in their stores for a couple of years, but with the legalization of marijuana “there’s been a tremendous amount of regulation that went through.”
Member resources
With industry challenges and new state laws to navigate, the Minnesota Grocers Association offers a variety of resources to its members.
MGA has started share groups. Pfuhl said an HR share group has met a handful of times in an effort to bring the industry together to “try to navigate the changes, the challenges and work with the administration. We’re able to take that intel from those folks that are frontline, bring it back and work with the agencies as to how to implement these things. We’re in a really unique position to be able to do that.”
Pfuhl said they are working collaboratively to try to navigate and solve issues and challenges that arise from the new laws.
“We’re starting a loss prevention share group as well, to try to answer some of the problems that we’re seeing store wise, legislative wise, regulatory wise.”
Biggest issues
Consolidations and pricing top the list of challenges facing independent grocers in Minnesota. Pfuhl said this includes “being able to be competitive and nimble to get the consumer basket in their store, and then also to have the staffing ability to service the customer.”
“There are so many moving parts, and it just seems to be getting larger and larger and more fatiguing. Trying to be what a grocer is to its community is really getting challenging. I think our independents feel that tenfold because in some communities after COVID, they’re the only point left in that community,” she said.
“Maybe the whole main street has shut down, the restaurants may have not come back, some retail may have not made it back. So they really are that point for every aspect of that community, not only just the food but being that community partner. There’s just a lot of pressure.”
Pfuhl predicted this year’s legislature will continue both policy and budget work. She said there has been conversation about bringing the Market Bucks program into retail. Previously, it has focused on farmers’ markets.
“That might be a great opportunity, especially in some of our rural communities, to be able to help expand sales within the stores and bring more fresh produce out to customers in need. So we’re excited about that partnership and seeing what can happen with that.”
Through the program, she noted that SNAP participants can increase their benefits for fruit and other fresh produce through supplemental funding.
MGA also is supporting a vendor collection allowance. Pfuhl said Minnesota is one of the few states where retailers don’t receive any fiscal consideration for collecting sales tax.
She added that last year’s organized retail crime legislation “brought a much more robust conversation around retail crime, but we still need more to happen. We’re hoping that there’ll be a space to continue having those conversations and find some additional solutions there.”
Environmental regulations, a bottle deposit bill and conversations on plastic and paper bag use also may come up this session. Pfuhl said there also may be opportunities to clean up legislation passed last year, including paid family leave and the legalization of marijuana.
Support continues for MGA’s Carts to Careers program, a Retail Management Certificate program in conjunction with Alexandria Technical College.
“We’re able to support 50 percent of tuition reimbursement for those students going through the program. We’ve got over 75 students that have graduated successfully,” she said. “We’ve got another almost 50 students in the program right now, and we’ve probably got room to add that many again.”
Read more association news from The Shelby Report.
