Retailers Offer More Choices than Ever Before

The Food Marketing Institute released a new study on consumer retail behavior at its annual convention and trade show in Chicago last month. Today’s supermarkets are competing against more than a dozen other types of retailers for consumer food spending, according to FMI.
“Food retailers today include conventional supermarkets, superstores, supercenters, membership clubs, combination (food and drug) stores, convenience stores, dot-coms and gasoline stations. Consumers have never had more choice in variety, value, nutrition and quality,” the association said in the report.
Restaurants now make up nearly half of the $800-billion food market, and FMI says dual-income couples, generation Xers and the echo boom generation are driving away-from-home consumption. Add to that a lack of growth in the general population, and retail competition gets even tighter.
The competition has kept food inflation low — at a yearly average of 2.5 percent for the past decade. And food continues to become a smaller part of family spending, from 50 percent of a family’s income during the 19th Century to a little more than 10 percent today.
It might surprise manufacturers to know that as far as consolidation is concerned, the United States is on the low end of the spectrum. In France, 90 percent of the retail food market is controlled by the top five supermarket companies, while in Belgium they control 82 percent and in the Netherlands they hold 64 percent. By comparison, the top five retailers in the United States hold 35 percent of the market.
Consumers speak
FMI’s Trends in the United States: Consumer Attitudes & the Super-market 2004, indicates that the average U.S. household spends $90 per week on groceries, a slight drop from previous years that indicates consumers are economizing. Eighty-four percent of those dollars are spent at the primary grocery store. Suburban consumers spend an average of $104 per week, while urban consumers are pinching pennies and have dropped from $90 per week in 2003 to $75 per week this year.
Fast food accounts for the highest percentage of take-out food sales, with 35 percent of respondents citing fast food as the most-used alternative to home cooking. Prepared meals from supermarkets came in second, with 27 percent of consumers buying take-out there, and 18 percent said they most often use full-service restaurants for take-out.
Despite the low-carb trend, 48 percent of respondents say fat content is their top nutritional concern, while only 20 percent cite carbohydrates. Sugar follows closely at 18 percent, while calories come in at 16 percent and salt at 14 percent.
Price is by far the most important factor shoppers consider when trying a new product. Sixty-seven percent of survey respondents say they almost always look at price when deciding to buy an item for the first time. Thirty-seven percent trust a brand name to help them make that decision, 30 percent look at health claims, 34 percent consider the product’s preservative or additive content, and 18 percent will try a product if it is organic.

Grocery industry market share by format
  2002 2007
Store Number $Share2 Number $Share
Superstore 7,900 25.8% 7,800 21.7%
Conventional supermarket 12,650 18.1% 12,150 16.6%
Food/Drug combination 4,500 15.0% 5,000 15.2%
Supercenter1 1,706 10.1% 2,020 15.4%
Wholesale club 966 8.5% 1,135 9.2%
Convenience 43,000 6.0% 41,500 5.5%
Convenience with gasoline 46,600 4.6% 44,600 4.2%
Warehouse 650 2.5% 600 2.3%
Super warehouse 510 3.0% 460 2.8%
Internet 100 0.2% 200 0.5%
Limited assortment 2,000 1.7% 2,600 2.1%
Deep discounter 130 0.2% 80 0.2%
Mini club 189 0.3% 80 0.2%
Hypermarket 7 0.1% 7 0.1%
Other 30,000 4.2% 28,000 4.0%
Total 150,908   146,232  
1Includes Kmart, Super Target, Wal-Mart Supercenters, Fred Meyer and Meijer stores. 2Percentages do not add up to 100 due to rounding.
Source: Food Marketing Institute, Willard Bishop Consulting, Ltd., Store Format 2003