The same consolidation and concentration that economics has driven in retailing has occurred in wholesaling, Henger says.

In an overview of the wholesaling sector from the ERS, analysts explain: “As consolidation in food retailing increases, manufacturers and large retailers offering a broad assortment of items have found it advantageous to negotiate directly with each other, reducing the power and influence of traditional wholesalers. Self-distribution is the preferred method of vertical coordination for large grocery chain stores (those with 11 or more stores). In 2001, 82% of chain stores were self-distributing.”

Some of the largest wholesalers are taking a similar integrated approach.

“Given uncertainty about the ability of independent retailers to compete with the larger chains, some of the largest grocery wholesalers are placing greater emphasis on owning retail operations,” ERS analysts say. “This is illustrated by Supervalu’s purchase of Albertsons in 2006, or the second-largest grocery wholesaler purchasing the third-largest grocery retailer.”

According to ERS, sales by the 20 largest food retailers in 2009 tallied $404.2 billion. That was about 64.2% of U.S. grocery store sales, compared to 39.2% in 1992.

A Closer Look: It’s Not Your Grandmother’s Grocery Store

“The nation’s 210,000 traditional food stores sold $548 billion of retail food and nonfood products in 2009,” say ERS analysts. “Grocery stores, including supermarkets, accounted for the largest share of food store sales (89.6%), followed by convenience stores without gasoline (6.4%).”

Non-traditional retail stores continue to account for more food-at-home sales, too. Think here of the cold cuts sold at the local drugstore, as an example. In 1999, non-traditional store’s share of food-at-home sales was 18.6%. It was 27.8% in 2009, according to ERS.

“Some wholesalers get bigger, buying smaller regional wholesalers,” Henger says. “One reason smaller wholesalers don’t make it is that they can’t afford new technology or to update facilities to compete with larger players.”

If you’ve ever had a chance to stand amid the automated, high-speed chaos of a packer’s boxed-beef distribution facility, then you have some idea of the seven-figure-plus investments required of modern, competitive inventory tracking and control, distribution and all the rest. The technology employed in these areas is truly mind-boggling.