Most people in America today don’t need someone to tell them that things are a mess. Since the wealth transfer from the many to the few is completely obvious to most of us, let’s take some time to focus on solutions which are within our collective power right now – without any legislative changes. Specifically, let’s talk about lowering food prices, reducing food waste, and, making sure that the grocery store employees, whom we have called essential employees for the better part of the last two years, actually make a living wage. To the details!
First, let’s talk in broad terms. How do we make this happen without legislation? The first step is to form a non-profit. The term non-profit conjures ideas of a perpetually cash strapped organization, which is constantly needing to fundraise or seek donations to fund its operations. This isn’t always the case, and, specifically in this instance, it wouldn’t be the case. The reason that the grocery store would be started as a non-profit would be because there would be no distribution of annual profits to shareholders. Employees would actually receive greater compensation in the non-profit structure than they would working for any existing grocery store, with the exception of the executives, who would be very well compensated, but, not nearly to the extent of the large grocery chain executives. For example, the two highest paid executives working for the Albertsons chain made over $42,000,000.00 in fiscal year 2019. Albertsons’ pre-tax net income for fiscal year 2020 was $1,128,700,000.00. Since non-profits do not pay income taxes, this would be the annual income for a non-profit of similar size. Now, naturally, this would not be the starting point, but, the long term goal. Albertsons, for instance, was founded in 1905, and, presently has 2277 retail stores. However, when comparing the expected profits for an individual grocery store with the estimated profits per store of Albertsons, we find that Albertsons stores (assuming each store generated the same numbers as every other Albertsons Store) performed very well, at $495,696.09 annual pre-tax profit per store, compared to a high end average of 300,000.00 profit for the owner of an individual store. The chief difference between a non-profit and a for profit enterprise, is the use to which that net income is put. Initially, some portion of that income is going to be required for down payments on additional stores. However, the majority of that money can go into the pockets of customers and employees.
When it comes to examining the profit and loss margins for a grocery store, there is one particularly jarring figure – the value of annual food waste. US grocery stores throw away around 30% of the food that they stock. The value of the discarded food is twice the annual per-store-profit. Grocery stores throw this food away because they want to keep it on the shelf until expiration, in the hopes of being able to sell the item, even at a steep discount, to permit them to recoup some of the item’s cost. In so doing, the store ends up throwing out 30% of the food, because they simply couldn’t sell it before it expired. This would not happen in a non-profit grocery store. Instead, the food could be distributed to the employees, free of charge, at the point at which it would have been discounted. This would amount to a serious increase in employee compensation, without incurring any additional costs. Furthermore, it would create immense good will with your workforce.
A changing market: The way in which we are buying our groceries is changing for many of us. There are now many more businesses attempting to have the entire process be a warehouse to consumer model, wherein the consumer simply places their order from home, and, the order is filled from a grocery warehouse, and, delivered direct to consumer. There is also a major shift to automation. This should be factored into any business plan, and, workers should be given skills training which can prepare them for future employment, as well as allowing the employee to contribute to the immediate needs of the company.
Start up costs: The out of pocket costs to start a small to medium sized grocery store are approximately $500,000.00. Due to fluctuating market conditions, the ideal startup budget would be $1,000,000.00. Efforts should be made to raise as much of the capitol towards these start up costs by crowd sourcing – with the return to contributors coming in the form of future grocery credits, and, public acknowledgment. The grocery store credits would be distributed over several years, so that immediate redemption of the credits didn’t strain the cash flow of the company, but, which would also permit the company to be debt free in relatively short order, thereby expediting the opportunity for more locations to be opened.
Sources: 1. https://www1.salary.com/ALBERTSONS-COMPANIES-INC-Executive-Salaries.html 2. https://www.businesswire.com/news/home/20210426005160/en/Albertsons-Companies-Inc.-Reports-Fourth-Quarter-and-Full-Year-Results 3. https://www.rts.com/resources/guides/food-waste-america/ 4. https://thegrocerystoreguy.com/is-owning-a-grocery-store-profitable/
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