It has taken a while, but the grocery industry in New York is beginning to return to normal levels. While this is positive news, grocers in the state still face some formidable challenges.
Mike Durant, president and CEO of the Food Industry Alliance of New York, pointed out that grocers in the state are experiencing similar issues and challenges as their counterparts elsewhere.
“The grocery industry as a whole seems to be going through a recalibration,” Durant said. “Four years post-public health crisis, issues such as labor shortages and supply chain challenges still exist to some extent, and consumer shopping trends are just now returning to what some economists characterize as pre-COVID behavior.
“During the past few years, the retail industry has been on a rollercoaster, and retailers have had to constantly adapt to meet changing consumer needs, which have largely been unpredictable.”
One of the key challenges retailers have had to deal with is the escalation of theft, both organized and unorganized, which has had a significant impact on the industry over the last few years.
“This has assuredly influenced labor and supply chain issues as well,” Durant said. “It should be noted that retailers in New York state are facing similar challenges as those in the rest of the country. Retail theft and labor concerns are a rural, suburban and urban problem everywhere.”
Legislative news
According to Durant, New York has historically been among the top three or four most challenging states in which to own and operate a business. From layers of overregulation to high taxes and health insurance costs, it has many self-imposed barriers to economic investment.
Durant called 2024 “largely a mixed bag legislatively.” While some measures to combat retail theft were enacted and other potentially costly legislation was defeated, including an Extended Producer Responsibility mandate and a bottle bill expansion, he cited the lack of action in other areas as “problematic.”
Speaking specifically about EPR, Durant noted that this is a national emerging public policy issue that has been debated for several years in Albany. Had it been approved, the measure would have assigned the end-of-life financial responsibility of packaging to the producers of the products. This cost increase, he added, would have been passed onto suppliers, grocers and consumers.
Unemployment insurance costs were among the items Durant noted on which there was no action.
“New York still owes the federal government more than $7 billion in loans the state received to address escalating unemployment during the public health crisis. While most states used federal money to pay back the loans, New York did not,” he explained.
“Now in 2024, for the third year in a row, every business in the state must pay an interest assessment surcharge, which is a fixed dollar amount per employee. This additional bill on businesses is used to pay the interest on the federal loans. In 2024, that interest totaled approximately $150 million.”
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Tough choices
Like many states, New York is facing an affordability crisis. Durant expressed his disappointment that little has been done to change this.
“From housing and inflation concerns to taxes and energy costs, New Yorkers are facing rising annual costs throughout their day-to-day lives,” he said. “This affordability crisis impacts not only their purchasing power but also exacerbates the labor concerns the industry is facing, as hiring and retaining workers is also becoming more expensive.”
As consumer needs have shifted, grocers are following suit.
“By constantly adapting to meet the rapidly changing needs of their consumers, grocers in this state and beyond have shown consumers they are listening,” Durant said.
“From investing more in ready-to-eat and grab-and-go meals to understanding that consumers are doing more research on where their food choices come from, retailers are investing more in their operations than ever before.
“It also should be noted that this industry is an unquestioned leader in philanthropic investment in communities throughout the state, and that has never subsided despite the challenges retailers have faced.”
Future
The potential for new regulations related to hydrofluorocarbons or refrigerants is an open public policy issue that Durant said could impact the industry.
“The State Department of Environmental Conservation has proposed regulations which, if passed, could force the total retrofitting of freezer and refrigerator racks in stores,” he said. “If approved, it would impose a consequential cost on every retail food store in New York.”
The FIA opposes the regulations as drafted and has been pushing for modifications. Durant noted that many industry representatives have joined it in expressing concerns about the challenges these regulations would impose.
“[Many of the] arguments we have made relate to cost considerations,” he said. “We have had members estimate that the cost to replace existing racks – should this proposal become law – is anywhere from $700,000 to $1 million per rack. The impact of this alone could prove to be catastrophic for independent grocers and for the chains. There are concerns that the measure could force potential store closures.”
Durant added that closures would most likely occur in less populated areas of the state, which would increase the number of food-insecure communities.
“Resolution to this issue is FIA’s biggest concern in the immediate future,” he said.
