Tariffs, Inflation Top Concerns for Food Industry
Tariffs and inflation remain the biggest concerns for retailers and product suppliers in the food retailing industry, with an overwhelming majority of both groups saying these two issues will affect their businesses in the coming months, according to a new report from FMI — The Food Industry Association.
The organization’s annual report, "The Food Retailing Industry Speaks 2025," revealed retailers and suppliers are in lockstep when it comes to topics of concern for the year ahead. The two groups said trade and tariffs will affect price and supply chains (retailers 81%, suppliers 79%), with both saying economic concerns and/or inflation will lead to changes in consumer shopping behavior (retailers 76%, suppliers 89%).
Industry concern about the impact of tariffs and inflation on pricing is consistent with consumers' views. FMI’s “U.S. Grocery Shopper Trends” found that 70% of shoppers are extremely or very worried about rising grocery prices. And while consumers are spending more each week on food, they remain positive about shopping for groceries as FMI’s “Grocery Shopper Sentiment Index” sits at 72 out of 100.
With pricing a concern for all parties involved in the grocery shopping experience, value has become a buzzword throughout 2025. The food industry is responding to this with enhanced private label options and solutions for shoppers as they expand their definition of value to include convenience, experience, relevance and quality.
Growing private-label assortments are also playing a significant role in retailers’ efforts to enhance in-store experiences, according to FMI.
Food retailers are actively seeking to expand space for fresh/perimeter departments, most notably fresh-prepared grab-and-go foodservice and fresh produce. As was the case in 2024, most food retailers are expanding space for private brands. Some are also planning to expand space for online fulfillment or diets (heart-healthy, diabetes-friendly, gluten-free, etc.).
Additionally, local sourcing is widely used by food retailers as a differentiation strategy, and many retailers are finding success. To maximize this strategy, 61% of food retailers indicate that they plan to increase the number of SKUs that are locally sourced. To fill their growing space allocation, 68% also plan to carry a larger number of private brand items. About half of retailers are devoting more SKUs to organic produce and organic products overall, as well as to nutrition, health and wellness items.
Other notable findings in FMI’s report include:
- Transactions: Nearly 60% of transactions in 2024 took place at regular cashier lanes, up from 52% the year before. More than one-third of transactions were at self-checkout lanes, a decrease from 44% in 2023.
- Profits: Retail profit margins continue to be quite low. These margins, at 1.7% in 2024, were on par with results from the prior year, which represented the lowest level since 2019. Retailers are focusing on improving cost controls and eliminating unnecessary expenses. Suppliers reported net income of 7.7%, consistent with 2023.
- Supplier Innovation: The most widely used supplier differentiation strategies in 2024 included product innovation (84%); products with beneficial attributes for health and well-being (84%); focus on nutrition, health and well-being (79%); private brand co-packing (53%); organic assortment (47%); and ethnic/multicultural assortment and experience (47%).
- Differentiation: Among the three most significant retailer differentiation strategies employed in 2024, 90% sold local assortments, 87% operated fresh prepared/foodservice programs, and 84% leveraged private brand programs.