In a recent article from Forbes, the author offers options trading advice for a few companies in the grocery store industry. As she points out, demand for basic goods has risen approximately 0.6% to 2.6% this April from a year ago, while total food sales have declined by 3.1%. This means that many recession conscious households have shifted disposable income from eating out to more practical food choices that can be found in grocery stores.

While it would seem that all grocery store and wholesale food chains should be experiencing an uptick in performance from this recessional boon, this is not the case. The article compares the technical performance of floundering companies like Kroger and Costco (which, intuitively, should be doing well) with the strong performance of Whole Foods (whose success as a high-end chain during a recession seems counter-intuitive). So, the question becomes, “If it’s not all economics, what other performance drivers are affecting companies in the grocery store industry?”

In some cases, a sour balance sheet or poor financial management could be the cause of poor performance. In others, the lack of a completely integrated marketing and communications program could be costing big in revenues. And for others still, the cause for poor technical performance under favorable economic conditions is the result of short-sighted, reactive management of business functions such as…you guessed it…purchasing.

While the purchase of items for resale is clearly a strategic keystone for grocery stores and wholesale food chains, many managers may forget the impact that the sourcing of non-resale goods and services can have on the bottom line. In a weak economy, good non-resale purchasing managers can attack soft markets to drive enormous cost savings that can mean the difference between red and black ink at the end of the day.

With this in mind, I was interested to see that Price Chopper has recently transitioned/promoted Rick Mausert from Manager of Continuous Improvement to Director of Non-Resale Purchasing. It seems that Price Chopper’s management team has realized the enormous opportunity to reduce spend in the non-resale area, and has made a very wise choice in resource allocation. With a background in continuous improvement, Mausert should have the proactive mindset, strategic focus, and high levels of patience that are necessary to revamp (or even overhaul) a company’s purchasing system.
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Steve Tatum

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