The economic downturn in parts of south Louisiana due to depressed oil prices is having a negative impact on the local supermarket industry. Overall sales at regional independent stores are either flat or up just slightly compared to the same period last year, according to Associated Grocers President and CEO Emile Breaux, who adds the wholesaler’s revenues are also relatively flat.
Still, the independent grocery stores are outperforming some of their chain-owned counterparts in the market, Breaux says.
“Our stores are doing remarkably well—even in the headwinds of that economic downturn,” Breaux says. “We look at industry data and it shows stores are flat or down. Our stores, generally, or either flat or marginally up.”
The downturn in the energy industry, which has hit pockets of southwest Louisiana and the Houma-Thibodaux area particularly hard, directly affects supermarket sales, Breaux says. AG distributes to nearly 200 stores in Louisiana, Mississippi and east Texas.
“Whenever consumers are not feeling good about their economic circumstances they tend to trade down on their purchases—you don’t buy the Cadillac, you buy the Buick,” he says. “We see that in food as well. People will trade down, so maybe this week they don’t buy the ribeyes but the ground beef.”
Compounding the problem is a global deflation in livestock prices, which has driven down the cost, primarily, of beef. While that’s good for consumers, it’s eating into the razor-thin profit margins of supermarkets.
“The stores are still dealing with the same expenses, wages, and so on,” he says. “So we have to try to sell more in a deflationary environment just to keep our dollars even.”
—Stephanie Riegel
