The Future of Food Retailing in the U.S., 3rd Edition


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Food retailers continue to face challenging economic times as the Great Recession, albeit now officially over, has changed and accelerated changes in consumer behavior and the retail marketplace. Shopping patterns have shifted as consumers have re-evaluated the price-value equation, and the lines dividing retail channels continue to blur.

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The Future of Food Retailing in the U.S., 3rd Edition

  1. 1.    Get more info on this report!The Future of Food Retailing in the U.S., 3rd EditionFebruary 1, 2011 Food retailers continue to face challenging economic times as the Great Recession,albeit now officially over, has changed and accelerated changes in consumer behaviorand the retail marketplace. Shopping patterns have shifted as consumers have re-evaluated the price-value equation, and the lines dividing retail channels continue toblur. Growing competition, emerging and merging retail formats, price wars, theburgeoning strength of private labels, retailers as arbiters of wellness and nutritionmanagement, SKU rationalization (or not), and experiments with Internet marketing anddigital technologies are just a few of the trends that promise to reshape food retailing inthe near-term future. More than ever, retailers and marketers of consumer packagedgoods need to keep a close watch on macro and micro trends alike, and adjust theirmerchandise assortments, pricing, and marketing strategies accordingly.The Future of Food Retailing in the U.S. offers a comprehensive examination of theoverriding trends in the market, highlighting opportunities and strategies retailers andCPG marketers can use to optimize their businesses during the coming years. Thereport provides detailed analysis of trends in the key retail channels through whichfoods and beverages are sold, including Grocery (major and independent supermarkets,natural food stores, ethnic supermarkets, traditional small grocery stores, andgourmet/specialty stores), Value (supercenters, mass merchandisers, warehouse clubs,dollar stores, and limited assortment stores), Convenience (convenience stores), andAlternative (drugstores, farmers’ markets, online grocery services, vending machines,and other alternative venues). In-store merchandising and food preparation trends,category sales trends, marketing trends, and media trends including use of new socialmedia are also covered.Market Insights: A Selection from the reportAlmost Two out of Three Consumers Buy Supermarket Take-Out
  2. 2. A February 2010 proprietary consumer survey by Packaged Facts determined that—notsurprisingly—with its strong value, cost, and convenience propositions, the fast-foodindustry enjoys usage consumer that approaches saturation (93%). However, almosttwo out of three (64%) survey respondents have bought ready-to-eat and heat-and-eatfood from a grocery store/supermarket in the past month, a testament to the highlikelihood of grocery store/supermarket use and the continuing growth of prepared foodsin that retail channel.[Figure 3-1]Warehouse Clubs to Push the Prepared Foods EnvelopeWith its strong private-label program (driven by the well-known Kirkland brand, generallyknown for both high-quality and competitive prices) we believe Costco has significantpotential to grow its prepared foods sales. Its strong, high-quality private-label presenceis an ideal platform: Costco’s private-label Kirkland brand has strong brand equity and aloyal consumer following. This private-label halo can only give consumers confidence insimilarly marketed prepared foods. Costco does not break out its prepared foods sales.However, in a November 11, 2010 telephone interview with Packaged Facts, CostcoCFO Richard Galanti said that Costco now sells “close to 50 million rotisserie chickens”annually.Prepared Foods in C-StoresAs discussed in Chapter 5—”Convenience Channel Trends,” according to ConvenienceStore News’ latest “Industry Report” (June 2010) foodservice now accounts for 13% ofin-store sales at convenience stores, making it the largest in-store category aftercigarettes. Many cstore operators have successfully turned their stores into populardestinations for both hot and cold foods prepared on-site, such as deli sandwiches, flatbreads, hoagies, breakfast sandwiches, hamburgers, pizza, grilled chicken sandwiches,salads, soups and wraps.Yet, with competition from drugstores on the horizon, convenience stores will no longerbe the only “around the corner” pick-up-and-go choice. With respondents to PackagedFacts’ February 2010 proprietary survey giving c-stores relatively low scores on foodenjoyment, great taste, and high quality, convenience stores may find customers goingelsewhere for food that offers better taste and quality.A Look at the FutureLooking a bit further down the road, we believe that hybridized food retailers andrestaurants will, in fact, be the rule rather than the norm, representing a seismic shift inboth the food retailing and foodservice industries. Accordingly, Packaged Facts expectsto see both food retailing and foodservice channels continue to converge around freshprepared foods, working fervently to make their consumption more convenient. As aresult, the competitive lines between grocery stores, restaurants, convenience stores,and other channels will continue to blur.
  3. 3. Table of ContentsChapter 1: Executive Summary Scope of Report Report Methodology A Broad Spectrum of Retail Channels Total Retail Food and Beverage Sales Almost $560 Billion Table 1-1: U.S. Retail Sales of Foods and Beverages, 2006-2015 (in millions of dollars) C-Stores Outnumber Supermarkets Four to One Supermarkets Ring Up Over Half of 2010 Food and Beverage Sales Figure 1-1: Share of Food and Beverage Dollar Sales by Retail Channel, 2010 (percent) The Top 20 U.S. Food Retailers Market Outlook Table 1-2: Top 20 U.S. Retailers by Estimated Food and Beverage Sales, 2010 (in billions of dollars) Some Stores Walloped; Others Thrive in the New Economy Conservative Spending Expected to Continue Consumers Dining Out Less, Cooking More The Overriding Trend: Value More Competition Small Is Big SKU Rationalization Increased Private-Label Penetration In-Store Foodservice Fresh Formats Health and Wellness Sustainability Is Profitability
  4. 4. Marketing and Media TrendsChapter 2: Introduction Market Overview Scope of Report A Broad Spectrum of Retail Channels Share-of-Stomach Competition Also Includes Foodservice Total Retail Food and Beverage Sales Almost $560 Billion Table 2-1: U.S. Retail Sales of Foods and Beverages, 2006-2015 (in millions of dollars) Other Estimates in the Same Ballpark Figure 2-1: Sales of Food-at-Home and Food-Away-from-Home, 1959-2009 (in billions of dollars) Retail Food and Beverage Sales Will Near $700 Billion by 2015 Market Composition C-Stores Outnumber Supermarkets Four to One Supermarkets Ring Up Over Half of 2010 Food and Beverage Sales Figure 2-2: Share of Food and Beverage Dollar Sales by Retail Channel, 2010 (percent) Table 2-2: Competitive Analysis of Retail Food and Beverage Channels, 2010 The Competitive Landscape The Top 20 U.S. Food Retailers Table 2-3: Top 20 U.S. Retailers by Estimated Food and Beverage Sales, 2010 (in billions of dollars) Recent Mergers and Acquisitions Market Outlook Economic Environment Inflation + Deflation, But Food Prices Projected to Rise in 2011 Table 2-4: Changes in Consumer Price Indexes for Food, 2008-2011 Some Stores Walloped; Others Thrive in the New Economy
  5. 5. Conservative Spending Expected to Continue Consumers Dining Out Less, Cooking More Government Regulation Food Safety Bill Passes Congress USDA to Require Nutrition Labels on MeatChapter 3: Trend Overview The Overriding Trend: Value The Top Consumer Priority More Competition More Types of Stores Focusing on Foods Channel Migration: Who’s on the Winning Side of the Equation Table 3-1: Consumer Packaged Goods Household Penetration by Retail Channel, 2010 (percent) Different Channels Satisfy Different Trip Missions Small Is Big Pendulum Swinging Back to Smaller Store Formats Fresh & Easy Inspired Seismic Market Shifts Walmart Experiments with Several Smaller Formats Walmart Plans Small Format Urban Stores Safeway Also Testing Smaller Format How Viable Are Smaller Stores? SKU Rationalization Product Proliferation Is Rampant Table 3-2: U.S. Food and Beverage New Product Launches, 2001-2010 (number) SKU Rationalization (or Not) Examples of SKU Rationalization Strategies Kroger Successfully Eliminates 30% of Cereal SKUs
  6. 6. Walmart Cuts Too DeepHow Giant-Carlisle Analyzes CategoriesJewel-Osco Slashes SKUs by as Much as 25%Doing SKU Optimization Wrong—and RightIncreased Private-Label PenetrationPrivate Label a Top Retail Differentiation StrategyPrivate Label Ripe with OpportunitiesTable 3-3: U.S. Retail Sales of Private-Label Foods and Beverages, 2009-2014(in millions of dollars)Private-Label Introductions Double in 2010Table 3-4: U.S. Private-Label Food and Beverage New Product Launches, 2006-2010 (number)Fresh & Easy Leads in Private-Label IntroductionsTable 3-5: Top 20 U.S. Retailers/Wholesale Grocers Launching Private-LabelFoods and Beverages by Number of SKUs, 2006-2010 (number)Poor Economy Helps Private Label Get AheadPrivate Label vs. National BrandsSafeway and Supervalu Strengthen PL HoldIn-Store FoodserviceFood Retailers Morphing into FoodserviceHow that Translates to DollarsAlmost Two out of Three Consumers Buy Supermarket Take-OutFigure 3-1: Foodservice Use in Past 30 Days: By Channel, February 2010(percent)Mean Use of FoodserviceFigure 3-2: Foodservice Mean Use in Past 30 Days: By Channel, February 2010Foodservice by Usage OccasionsFigure 3-3: Foodservice Use Occasions in Past 30 Days: By Channel, February2010
  7. 7. Prepared Foods in SupermarketsFigure 3-4: Supermarket Deli Prepared Foods, Share of Sales: By Food Type,2009 (percent)Walmart Moving into Prepared Foods with MarketsideTarget Creates Springboard for Prepared FoodsWarehouse Clubs to Push the Prepared Foods EnvelopePrepared Foods in C-StoresDrugstores Moving into Prepared Foods TerritoryTurning Grocery Stores into RestaurantsA Look at the FutureFresh FormatsEmphasis on Fresh Foods Continues to GrowOrganic Foods Slowing, But Remain an Area of OpportunityLocal and Artisanal Foods Are Growing TrendsA Return to In-Store Butchers?Illustration 3-1: TOPS “Real Meat — Real Butchers” AdHealth and WellnessRetailers Becoming Arbiters of Wellness and Nutrition ManagementHealth and Wellness a Marketing HookHealthy Eating ProgramsSupermarkets Offering In-Store DietitiansRetailers’ Nutrition RatingsSustainability Is ProfitabilityEthical ConsumerismRetailers Spearhead Animal Welfare StandardsCage-Free Eggs a Hot ButtonMore Retailers and Dairies Go Hormone-FreeFair Trade Going Mainstream
  8. 8. Greener Stores Walmart’s Sustainability Scorecard Makes Slow Progress Sustainability = Profitability Plastic or Paper? Tesco Testing Zero-Carbon Supermarket in EnglandChapter 4: Grocery Channel Trends Grocery Channel Leads Food Sales Figure 4-1: Growth of Sales at Traditional Food Stores, 1999-2009 (percent) Even National Supermarket Operators are Regional Players Table 4-1: Top 10 U.S. Supermarket Chains by Retail Dollar Sales, 2009 (in billions of dollars, percent, and number) Kroger: Solid Strategies Mean Solid Gains Kroger Is Sophisticated in Mining Consumer Data Private Label a Competitive Strength Safeway Combines Lifestyle with Price Parity Lifestyle Format Stung by Recession Safeway Experiments with Small Formats Targeting More Private Label Supervalu Realigning Its Business New Focus is Consumer-Centric, Hyper-Local SKU Rationalization, Clean Floor Strategy Supervalu Sells Some Supermarkets; Expands Save-A-Lot Discount Chain Supervalu Targets Consumers with Health and Wellness Options A&P’s Struggles Continue While Winn-Dixie Rises from the Ashes Regional Chains Set Exemplary Examples Publix a Public Favorite Publix’s GreenWise Market
  9. 9. Wegmans Raises the Bar on Grocery Shopping Whole Foods: The Natural Leader Reemerges as a Growth Leader Focusing on Value Yields Rewards Good Deeds New Sustainable Seafood, Animal Welfare, and Healthy Eating Initiatives Strong Focus on Prepared Foods and In-Store Dining Ethnic Food Markets Thriving Specialty Food Stores The Secrets of Trader Joe’sChapter 5: Value Channel Trends Supercenters Walmart Is the Nation’s Largest Food Retailer Groceries Grow to 51% of Walmart’s Sales Walmart Revamps Great Value Private-Label Brand Economy Hits Walmart Customers Hard Walmart Makes Serious Mistakes… …and Tries to Correct Them Thinking Small, Walmart Is Downsizing Stores for Urban Markets Walmart Testing Pick Up and Delivery Services Supermercado de Walmart Opens in Houston Walmart Seeks Collaborative Sourcing with Suppliers Target-ing Foods Target Pushing into Fresh Foods And Opening Smaller Format Urban Stores Kmart Still Struggling to Find a Path Warehouse Clubs Maintain Balance, But Not Status Quo Costco Wholesale Corp
  10. 10. Costco Looking to Open More Stores in Malls Sam’s Club Seeks to Catch Up with Costco in Foods Sam’s Targets Hispanics with Mas Club BJ’s Wholesale Club Dollar Stores Adding More Food to Their Product Mix Dollar General Revamping Store Format(s) Family Dollar Dollar Tree Limited Assortment Chains Making WavesChapter 6: Convenience Channel Trends Convenience Stores and Drugstores Filling in for Mom-and-Pop C-stores Changing With—and Changing—the Times Foods and Beverages 37.5% of C-Store In-Store Revenues C-Stores a Growing Competitor for Foodservice Dollars 7-Eleven’s “First, Best, and Only” Strategy Illustration 6-1: 7-Eleven’s 7-Select Store-Brand Packaged Snacks Fresh & Easy: British Invasion Falls Short The Fresh & Easy Model Tesco Also Imported its Own Infrastructure Sheetz, Inc. Wawa, Inc Several Supermarket Chains Also Have C-Stores Kroger Is One of the Largest C-Store Operators Giant Eagle Uses Supermarkets and C-Stores to Create Synergies Drugstores Also Compete on the Convenience Angle Drugstores Fight Back as Retail Lines Blur Drugstores Testing Fresh Foods
  11. 11. Walgreens Creating “Food Oases” Duane Reade Setting Food Examples Illustration 6-2: Duane Reade’s DR Delish Premium Private-Label Snacks and Beverages CVS Caremark Doubling Food Sections in Nearly Half Its Stores Rite Aid Piloting Co-Branded Stores with Save-A-Lot Can the Drugstore Channel Compete in Fresh Foods? Drugstores Will Become the New Neighborhood GrocersChapter 7: Alternative Channel Trends Farmers’ Market Count Increases 16% Since 2009, to Over 6,100 Figure 7-1: Growth in Number of Farmers’ Markets, 1994-2010 Two Types of Farmers’ Markets Produce by Prescription Farmers’ Markets Complain About Grocery Competition Community Supported Agriculture Programs (CSAs) Vending Machines Offer Convenience 24/7 Vending Homes in on Fresh Fruit and Vegetables Kraft Foods Testing Interactive Vending Machines Japan Testing Vending Machines with Facial Recognition Online Grocery Services FreshDirect an Interesting Model Big Guns Testing Online Ordering Services Thinking Outside the Box Mobile Food Trucks Pop-Up Stores Other Alternative Channels Target Impulse SalesChapter 8: Marketing and Media Trends Shopper Marketing
  12. 12. What, Exactly Is Shopper Marketing?Technology Is Changing Marketing VehiclesAdvertising TrendsBiggest Media Spender Is WalmartTable 8-1: Advertising Spending for Selected Top Food and Beverage Retailers,2007-2009 (in millions of dollars)Bloom’s Grill-Board Uses Traditional Ad Medium in a Non-Traditional WayIllustration 8-1: Bloom Grocery’s Steak-Scented BillboardResurgence in CouponsDigital Coupons SoaringCustomized Coupons Leverage Loyalty Card DataKroger the Pioneer in Personalized Coupon OffersSam’s Club eValues a Perk for Plus Club Members OnlySafeway Just for UIllustration 8-2: Safeway’s Online Coupon CenterMeijer’s mPerks uses Phone Numbers, Not CardsCoupon StrategiesUsing Social MediaMaking Use of Websites and Social MediaIllustration 8-3: Whole Foods Market’s Facebook NewslettersIllustration 8-4: Safeway’s Facebook Page BlogTwitterTable 8-2: Selected Retailers’ Facebook and Twitter Fan Bases, January 7, 2011(actual count)F-Commerce Is ComingThe Smartphone RevolutionQR CodesIllustration 8-5: Port Townsend Food Co-op’s On-Shelf QR Code Signage
  13. 13. Illustration 8-6: QR Replica Displayed by Dave’s Killer Bread Illustration 8-7: Dole/Price Chopper Promotion Utilizing QSR Code Technology Check-in Apps Illustration 8-8: CheckPoints Mobile App Featuring Tyson Any’tizers Harnessing the Power of Word-of-Mouth In-Store Messaging Evolves with Technology Direct Consumer Research Illustration 8-9: Walmart Great Value Round Table Survey/Promo Feature Illustration 8-10: Fresh & Easy Favorites Feedback Opt-in Email Program In-Store Merchandising Trends Smartphone App Helps Shoppers Navigate Meijer Supercenters Carpeted Flooring? New On-Site Food Equipment “Clean Floor” Policies Limit Marketers’ Displays Supervalu De-Cluttering In-Store MessagingAppendix: Addresses of Selected Industry Associations and RetailersOrder InformationOnline Download - $3,995.00Global Site License - $6,000.00Hard Copy Mail Delivery - $4,395.00Online Download plus 1 Hard Copy - $4,795.00Available immediately for Online Download at US: 800.298.5699UK + +1.240.747.3093Fax: 240.747.3004