Dave Davis, president and CEO of the Utah Food Industry Association, said it’s good to live in Utah. There are several reasons for that.
“Fiscally, we’re in a good place,” Davis said. “I think that both our legislative branch and our executive branch do a good job of managing the economy here in the state.”
One of the keys to growing the state’s economy has been diversification, Davis said. “There’s been a real focus on the technology sector.”
This focus has led to some to refer to the area between Salt Lake and Provo as the “second Silicon Slopes,” he said.
That term is first attributed to Josh James, founder and CEO of Domo, who used it in a branding campaign to promote Utah’s growing technology community. Lehi was the first hotspot; the area between Salt Lake City and Provo is in the second wave.
“We’re getting a lot of influx of technology, which, quite frankly, is good for the food business because there’s been a lot of population growth here,” Davis said.
In addition to job opportunities, Utah naturally presents other benefits.
“It’s a great place to live, especially if you’re into outdoor recreation. I tell people all the time I can be skis down in 30 minutes. And in the summer, if you love mountain biking or hiking, those things are just so nearby, you can really make them part of your life.
“I think the combination of having attracted a lot of businesses and the quality of life that’s here, it’s caused us, from a population perspective, to grow at a significant rate,” he said.
In the 2020 census, Utah’s population growth rate of 18.5 percent was more than double the national average of about 7 percent.
Utah’s population is concentrated in four counties on the Wasatch Front – 2.8 million of the state’s total 3.4 million population reside there. That’s 82 percent of the population living in the contiguous counties of Salt Lake, Davis, Utah and Weaver.
Davis noted that Utah’s population actually is more diverse than commonly thought. In addition to notable Asian and East Indian populations, Utah has some of the highest concentrations of Pacific Islanders of anywhere on the mainland, particularly in West Valley City, the state’s second-largest city.
Challenges of growth
“People are coming here,” Davis said. “There are blessings and curses to that, of course. The downside, as I’m sure you’re hearing across the country, is there’s all sorts of labor concerns.”
Hiring is a challenge, so available workers are in the driver’s seat. “As that supply of labor gets constrained, then obviously market forces take over, and the cost of that labor goes up,” said Davis, noting that that’s tough in an industry with margins typically around 1.5-2 percent.
“There’s just not margin to be compressed. It just can’t be absorbed, so it has to be passed along in the cost of goods,” he said, adding that inflation also is a big concern of his member retailers, as are credit card fees. Davis said those fees have risen to become the No. 2 cost on their P&L statements for many grocers, behind labor. Not that long ago, labor was No. 1, followed by lease costs.
“As these costs go up, I think what consumers just need to understand is where we would love to somehow be able to compress our margins at a retail level, we just don’t have any real ability to do that. Because if you’re operating on a 1.5 to to 2 percent margin, you can’t compress that further,” he pointed out.
On legislative agenda
In Utah’s next 45-day legislative session that begins in January, Davis and his team will be communicating industry concerns in a few areas.
A couple are related to alcohol. In Utah, alcoholic beverages cannot be taken outside of licensed premises. So, if a shopper places a grocery order online that includes alcoholic beverages, they have go inside the store to pick up the order, which takes away the convenience.
“We’d like to see the ability to deliver product at least curbside,” Davis said. “More and more consumers are wanting to order their groceries online.”
UFIA and its members also would like to see a simplification of the rules about where alcoholic beverages can be sold. Currently, it is determined whether products will be sold in the “general market stream of commerce” – grocery and convenience stores – or through the control/state store system based on how they are manufactured and what ingredients are in them, which makes for a lot of complexity.
Instead, UFIA is lobbying for more clear-cut rules – if a beverage has 5 percent or less alcohol by volume, it is sold in the general stream; if more than 5 percent, it would go into the control stream.
Much easier to administer, according to Davis.
Pharmacy reimbursements continue to be a problem for retailers, so UFIA will continue to work with pharmacy benefits managers on solutions. These include Medicaid reimbursements, he said.
In addition, members have asked the association “to work on reducing, as much as we can, the taxes that we have on groceries,” said Davis, noting that Utah is one of 13 states in the U.S. that still taxes groceries at either the full rate or a reduced one.
Members have been appreciative of a new program UFIA rolled out for small and mid-size grocers over the last 18 months, Davis said. The association health plan is designed for retailers that have 100 or fewer covered employees to help them get benefits similar to those available to large groups. “It’s been really good,” he added.
UFIA also listened to members in planning the sessions at its conference in August.
“They’re really fascinated with and wrestling with artificial intelligence – how are we going to utilize artificial intelligence to deliver better services and products just in time, in a better way for our consumers? How are we going to better deliver a better experience for our team members and our employees?” said Davis, equating the magnitude of AI with the impact the internet has had on the world.
“We’ve got something that’s really cool, a neat new thing, but we haven’t quite figured out what we are going to be able to do with that. So these next few years are going to be really interesting in the grocery business and business generally. What are we going to do with artificial intelligence, and how are we going to put that to work?”
Kasey Lobaugh, chief consumer industry futurist for Deloitte, spoke about AI and looking into the future with technology at the conference.
More people need more grocery stores
“As our population grows, it demands more retail stores, grocery stores, so we’re seeing some organic growth,” Davis said.
He said there’s a good mix of chain and independent grocers in the state. The larger retailers – including Kroger, Walmart, Trader Joe’s, Whole Foods Market and Target – tend to stick to the higher population density areas, while independents tend to operate more outside these areas, Davis said.
“The independent retailer really dominates in the rural communities, but we have really good independent retailers that compete in urban areas as well,” he said. “We have some very, very progressive independents that are out there and standing toe to toe with a lot of the chains in urban areas as well.”
The state’s strong independent community includes Harmons, Macey’s, The Fresh Market, Lin’s Fresh Market, Kent’s Market and many others.
The independent grocer community in Utah is “anchored” by Associated Food Stores, a member-owned cooperative that got into the retail business about 30 years ago to strategically preserve its wholesale volume.
Today, AFS supplies about 450 independents in eight Intermountain states plus its own stores. Davis noted that AFS is in the midst of a major technology project at its distribution center, adding auto-selecting and other upgrades.
The good news is that the technology is not expected to eliminate jobs but transition some roles “to other jobs, which may be higher paying jobs, like drivers,” said Davis, adding that he and AFS officials have taken some elected officials on tours of the facility.
[RELATED: Davis Food & Drug To Launch Instacart’s Caper Carts At All Stores]
Also in the technology realm, Davis Food & Drug said that it plans in coming months to replace the majority of its traditional shopping carts with Instacart’s AI-powered Caper Carts at its three Utah stores – in La Verkin, Roosevelt and Vernal.
“At Davis Food & Drug, putting our customers first is at the heart of everything we do. Introducing Caper Carts is part of our ongoing commitment to not just keep up with industry trends but to lead them, ensuring our customers enjoy the most convenient and innovative shopping experience possible,” said President Constantine Davis. “This is how we’re growing our business – by making every visit to our stores easier, rewarding and more fun for everyone who walks through our doors.”
Caper Carts feature an interactive screen to engage customers, track their spending and access coupons and deals.
