By Mary Holz-Clause, mclause@iastate.edu, and Malinda Geisler, content specialist, AgMRC, malindag@iastate.edu

Updated September 2007.

Grocery Retailing Profile

U.S. consumers have more choice in food variety, value, nutrition and quality than ever before. Competition for the consumer food dollar has never been more vigorous than today with more than a dozen types of retailers vying for food market share. The retail outlets range from conventional supermarkets and supercenters, to combination and convenience stores.

U.S. supermarkets had $499.5 billion in sales during 2006. The United States has 34,052 supermarkets with annual sales of $2 million or more. More than three-quarters of those supermarkets, 25,890, belong to a chain. The remaining 8,162 are independent supermarkets. Grocery stores with less than $2 million in annual sales account for 13,047. The United States has 1,067 wholesale club stores that market groceries and 140,241 convenience stores.

The median square footage of a supermarket was 48,750 in 2006, 10,000 square feet larger than a decade earlier, according to the most recent figures from the Food Marketing Institute (FMI). An average-sized supermarket now carries 45,000 different items for sale.

Food retailers experience intense competition.  After-tax net profit for the U.S. supermarket industry was 1.46 percent during fiscal 2005-06, based on FMI’s 2006 Annual Financial Review. FMI indicates stores generally rely on generating high volume sales by making a penny on each sale of 100 items versus making 10 cents by selling 10 items.

Certainly a factor in the U.S. food retailing industry was the introduction of Wal-Mart’s Supercenter. Now the nation’s largest grocery retailer, Wal-Mart developed the one-stop family shopping Supercenter concept in 1988, which offered consumers groceries and general merchandise under one roof. Supercenters average 185,000 square feet and carry 142,000 different items.

Additional supermarket competition comes from more take-out restaurant meals, particularly from fast-food outlets. Today’s consumers are spending nearly half of their food budget on food-away-from-home, up from one quarter spent about 40 years ago.

While mergers and consolidation affect the U.S. food industry, it is not to the same level as other countries. The top five food retailers in the United States control about one-third of the market, according to Deloitte Consulting. However, this is less than many European countries. The top five supermarket companies in United Kingdom control a 50 percent market share, in Germany 60 percent and France 90 percent.

There is a trend toward smaller, convenient store locations catering to the specialty markets. Tesco, the British supermarket giant, is launching a new format called Tesco Express on the West Coast in the United States. With up to 3,000 square feet, the Tesco Express store format will feature fresh produce, in-house baked products and wine. While this will be the first foray of the British retail giant into the United States, Tesco has opened more than 800 stores, mostly in Central Europe and Asia, and they now account for more than a fifth of Tesco’s total sales.

Grocery stores are searching for ways to innovate and capture the lucrative convenience store markets by carrying new items such as gasoline.

Directory of Supermarket, Grocery and Convenience Store Chains 2006.

* Grocery Revenue Only

Store Definitions

Grocery store – a retail store that sells dry groceries, canned goods or nonfood items in addition to some perishable items.

Supermarket – a full-line, self-service grocery store that generates annual sales of $2 million or more.

Convenience store – This full-line, self-service grocery store offers a limited line of high-convenience items. The store has long hours and provides easy access. Most sell gasoline with annual sales of $2 million or more.

Independent – an operator of fewer than 11 retail stores.

Chain – an operator of 11 or more retail stores.

Conventional supermarket – This is the original supermarket format with a full line of groceries, meat and produce. It has annual sales of $2 million or more. It carries approximately 15,000 items, offers a service deli and frequently has a service bakery.

Superstore – a supermarket with at least 40,000 square feet in selling space and 25,000 items. This format offers an expanded selection of nonfoods.

Food/Drug combo – A combination of a superstore and drug store with common checkouts. It includes a pharmacy.

Warehouse store – A low-margin grocery store that offers reduced variety, lower service levels and minimal decor.

Super warehouse – This is a high-volume, hybrid format combining a superstore and warehouse store. It typically offers a full range of service departments, quality perishables and reduced prices.

Limited-assortment store – This is a low-priced grocery store that provides limited services and carries fewer than 2,000 items. It has limited, if any, perishables.

Other – The small corner grocery store that carries a limited selection of staples and convenience goods. This format generates approximately $1 million in sales annually.

Convenience store – The traditional model is a smaller, higher-margin store offering a limited selection of staple groceries, nonfoods and other ready-to-heat and ready-to-eat foods.

Convenience store (petroleum-based) – This is primarily a gas station with a convenience store.

For other grocery related topics, please visit Retailing and Foodservice/Retailing Trends. 

Testing Tesco’s Reach, Time Bonus Section, Inside Business, 2006.
 

Wal-Mart Facts, Retail divisions.

Wal-Mart, Kroger, Safeway better watch out. The British are coming, CNNMoney.com, Feb. 27, 2006.

Links checked February 2008.