The retail landscape changed dramatically during the last few decades, with massive consolidation on one hand, and non-traditional retailers entering the fray on the other. Both have taken market share from traditional independent grocers. See “Who Sells Beef?” for definitions of different retailer types.

Consolidation in the grocery business took flight in earnest during the 1990s, spawned by mergers and acquisitions. Think here of Supervalu – then the nation’s eighth-largest retailer – acquiring 1,124 Albertson’s Supermarkets in 2006 and becoming the fourth-largest retailer by 2009.

A Closer Look: Who Sells Beef? We Explain

Emergence of non-traditional grocers – primarily warehouse clubs and giant general merchandise stores, such as Costco, Super Target and Walmart Supercenters – was the other catalyst.

“Sales by the 20 largest food retailers totaled $404.2 billion in 2009, amounting to 64.2% of U.S. grocery store sales, an increase from 39.2% in 1992,” say analysts from USDA’s Economic Research Service (ERS) in their Retail Trends report. “Although shares held by the largest four, eight, and 20 supermarket and supercenter retailers decreased slightly from 2008 to 2009, the longer-term trend shows an increasing concentration of sales among the nation’s largest grocery retailers.”

One contributing factor to such increases over the past decade has been the rapid growth of Walmart Supercenters. Its food and non-food grocery sales amounted to an estimated $103.7 billion in 2009, making it the largest U.S. retailer of grocery products. In comparison, second-place Kroger, the largest traditional grocery retailer, had sales of $65.6 billion in 2009.

For perspective, according to the Food Marketing Institute, there were 36,569 supermarkets in 2011 with annual sales of $2 million or more. Total supermarket sales that year were $584.369 billion.

More specifically, the folks at ERS say there were 210,000 traditional food stores in 2009 that sold $548 billion worth of food and non-food products. They point out that traditional grocery retailers experienced negative inflation-adjusted growth through the Great Recession.

“During the past decade, there were many years in which grocery store sales growth (in current dollars) exceeded the rate of inflation. Inflation-adjusted sales growth was small, averaging 0.07%,” ERS analysts say. “The slow and negative inflation-adjusted growth in annual sales at traditional grocery stores was likely due in part to increased competition from nontraditional food retailers – such as warehouse clubs, supercenters, drugstores, and other retailers, as more consumers economized on food spending.”

According to ERS, you can chalk up most food sales growth between 1999 and 2009 to supercenters and warehouse club stores; their sales more than doubled in that time span.

“Since the late 1990s, nontraditional retailers have steadily increased their relative share of food-at-home sales, compared with traditional retailers,” ERS analysts explain. “Nontraditional stores’ share of food-at-home sales increased from 18.6% in 1999, to 27.8% in 2009.

“In response to the sales inroads made by nontraditional retailers, traditional grocers are expanding the number and types of product offerings, designing new store formats, and using innovative in-store technologies,” say the ERS folks.

Now, increased consumer interest in knowing more about their fresh foods is driving more interest in locally grown foods.

“Supermarkets have responded by emphasizing local offerings such as fresh fruits and vegetables, baked goods, meat, poultry and dairy products, depending on the location and time of year,” ERS analysts say. “Safeway, Kroger, Food Lion, and HEB Grocery Company are some of the largest supermarket chains that promote a variety of locally grown or produced foods. Other sources of local food include farm-direct and farmers’ markets. While many local foods are promoted as organic or natural, retailers often claim that local foods support local agriculture and are more environmentally friendly.”

 

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