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

Updated February 2010.

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 $547 billion in sales during 2008. The United States has 35,394 supermarkets with annual sales of $2 million or more. The median square footage of a supermarket was 46,755 in 2008, more than 8,000 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 more than 46,800 different items for sale. 

Food retailers experience intense competition. After-tax net profit for the U.S. supermarket industry was 1.84 percent during fiscal 2007-08, based on FMI’s 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 187,000 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 (U.K.) 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. According to FMI, many food retailers are building smaller stores that emphasize fresh and prepared meals. Other offerings for niche retail stores include organic, ethnic and gourmet foods.

Tesco, the British supermarket giant with more than 2,300 stores in the U.K. and another 2,025 worldwide, launched a new format called Fresh & Easy Neighborhood Markets in the United States in 2007. The stores, which are up to 15,000 in square feet, or a third of the average supermarket, feature fresh produce and take-out items. There are 115 Fresh & Easy stores located in Southern California. Tesco is the third largest grocery retailer in the world.

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 2007.
* 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.
 

Sources

Supermarket Facts, Industry Overview, Food Marketing Institute. 

Tesco

Wal-Mart Facts, Retail divisions.

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


Links checked February 2010.