As more states are allowing some increased level of business activity, food retailers are gearing up for changes in their own ways of going to market as well. By the end of this month, more than 40 states will have eased restrictions on previous stay at home orders.
Some retailers have viewed the easing of those state “shelter in place” mandates as an indicator that their temporary bonus pay programs for their associates should also be ended. Kroger and its affiliates (including Harris Teeter, Kings Sooper, Fry’s, Fred Meyer) were the first to announce it will terminate its $2 per hour bonus program on May 16. Kroger began its “hero pay” program on March 29 and has extended it twice since. While some retailers have extended their temporary wage increase offers through the end of the month, a consensus of the 25 retailers in the Mid-Atlantic and Northeast that we polled said that they too, will look for a date to end their bonus pay programs when the states begin to rescind or partially rescind their restrictions.
“Our commitment is that we will continue to listen and be responsive, empowering us to make decisions that advance the needs of our associates, customers, communities and business. We continuously evaluate employee compensation and benefits packages. Our average hourly wage is $15 and with benefits factored in, like health care, the hourly wage is over $20,” Kroger said in a written statement.
Kroger will also be making a one-time $130 million “thank you” appreciation bonus that will pay $400 for qualified full-time associates and $200 for qualified part-time associates. It will be paid out in two installments on May 30 and June 18.
Those polled said that their increased expenses are now running 11-15 percent weekly (the largest current expense is the bonus pay) and all of our panelists said that their current sales increases are able to cover those elevated costs. However, all expressed caution about future behavior especially in light of flattening sales over the past two weeks.
“We’ve got a window that’s going to be around for at least several more months or as long as we’re not competing with restaurants and schools for a piece of the pie,” said the president of a Pennsylvania-based chain retailer. “But that window is going to close at some point and all of us need to make plans as best we can on how we cover some of these long-term expenses that remain. Can we reduce our expense load enough to offset what our sales will be in three months, six months, a year from now? That’s a real challenge.”
“Well, you don’t want to be the first retailer to end the program,” said one Maryland-based merchant. “That moment is coming, but we’re all cautious of pulling back too soon, because our associates have truly been heroes over the past two months. Still, maintaining that level of compensation over the long-term is unsustainable, especially when sales continue to flatten even further.”
Mark Perrone, president of the UFCW International, which estimates that 65 of its members have died and nearly 10,000 have been infected by the coronavirus, strongly disagreed with Kroger’s decision and urged other retailers to not end their bonus pay programs.
“Millions of American grocery workers have been rightfully called essential by our nation’s elected leaders. Given the daily risks faced, these workers deserve critical protections, benefits, and a higher wage for as long as this public health crisis endures. That your companies are even considering cutting the pay of these frontline workers, while you experience record sales, is shocking in its indifference. If you truly believe that the threat of COVID-19 has passed for your workers, then you should be willing to admit this publicly. Until that day comes, you have a responsibility to provide your workers with essential protections and benefits, including so-called hero/appreciation/hazard pay, until this terrible threat has passed. For the sake of these workers, our families, and our nation’s food supply, we ask you to remember your responsibility to ensure that these workers are receiving the premium pay that they have rightfully earned by facing the very risks that so many Americans – including all of you – have been lucky enough to avoid,” Perrone wrote in a letter to 49 grocery and related CEOs in the U.S.
In the Mid-Atlantic and Northeast, retailers told us that their absentee rate in their stores and their warehouses (if they are self-supplied) is running about 15 percent over the past three weeks.
And as the country begin to open up more segments of the economy there are new and ongoing concerns which will certainly impact food retailers.
Unemployment for April reached 14.7 percent (probably 5 percent higher if you factor in uncounted categories), the biggest job loss since the Great Depression and over the past six weeks a staggering 36.5 million Americans have filed for unemployment.
Overall retail sales plummeted 16.4 percent last month, the largest monthly decline ever. That followed an 8.3 percent dip in March. And if it weren’t for significant increases in retail food purchase (both in-store and online), that decrease would have been greater.
Additionally, the U.S. Department of Labor reported that grocery prices rose 2.6 percent in April, the largest such increase in 46 years. Not surprisingly, proteins (meat, poultry, seafood, and eggs) experienced the greatest increases (4.3 percent) while produce prices increased 1.5 percent.
“I think we’re just at the beginning of what will be a long and winding road,” said the owner of a Pennsylvania-based independent. We’ve already made changes in how we operate, and we will need to continue to adapt. The ‘new normal’ will be significantly different than what we’ve done for the past decade. I’m most concerned about the economy – even when things open up further, is it realistic to expect to unemployment to drop below 10 percent in the next six months? I’m just not that confident based on what I’m reading and seeing. And if unemployment remains at unacceptable levels, food retailers will find themselves in a far different place than today.”
As of May 15, there were more than 4.5 million positive cases detected globally with more than 306,000 deaths. In the U.S. more than 1.5 million people have been infected resulting in more than 87,000 deaths.
For a recap of the actions retailers that operate stores in the mid-Atlantic have taken in response to the pandemic, please go to the story, Retailers Persevering Despite Mounting COVID-19 Challenges.