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Grocery Store Retailing - US - January 2010

Grocery retailing has grown into a $355 billion annual business in the US. While some industry observers believe that the grocery industry is recession-proof, that is only partly true. The reality is that while consumers do need to buy food and other household items regardless of economic conditions, and tend to eat out less during recessionary times, they’re highly likely to have shifted their purchasing behavior. Consequently, these cash-strapped shoppers tend to focus more on necessities, cutting into retailers’ overall revenues and profit margins.

With this in mind, Mintel analyzes the grocery retailing industry in unprecedented detail. This report gauges the current health of the industry with a prognosis for what the future might hold, including in-depth case studies on several retailer formats. Combining this with insight from consumer research findings, Mintel explores major trends in the markets and highlights both the market’s challenges and opportunities including:

  • How supermarket retailers are faring in a marketplace where consumers no longer buy all their grocery items from these traditional outlets
  • The impact of an increasingly competitive environment as non-supermarket outlets have become more aggressive in attracting supermarket customers
  • An overview of external factors that are shaping the grocery retailing environment and observations on how some of the industry’s biggest names are adapting their business strategies
  • The role of private label not only as a way for consumers to save money but as a tool for retailers to establish their brand identity
  • The role that innovation and marketing play in helping retailers differentiate themselves in a crowded marketplace
  • Consumers’ attitudes toward shopping in general and how this influences the marketplace and grocery retailers
  • Where consumers buy their groceries and the reasons behind shopping at one outlet type over another
  • The impact of race/Hispanic origin on where shoppers tend to do their grocery shopping

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Table of contents

  1. Scope and Themes

    • What you need to know
      • Definition
        • Data sources
          • Sales data
            • Consumer survey data
              • Advertising clips
                • Abbreviations and terms
                  • Abbreviations
                    • Terms
                    • Executive Summary

                      • Drug and other outlets driving sales
                        • Consumers cherry-picking categories most often
                          • Consumers’ perception of grocery retailers evolving
                            • Economy and household income primary market drivers
                              • Retailers are brands in their own right
                                • Manufacturers not the only ones being innovative
                                  • Consumers keep options open when it comes to grocery shopping
                                  • Insights and Opportunities

                                    • Maximizing private label revenue
                                      • Co-branding with like-minded retailers
                                        • Creating environments that encourage shopping
                                          • Online grocery shopping
                                            • Frequent-buyer loyalty programs could drive purchases
                                              • Portable grocery scanners
                                                • Sourcing of product origin
                                                • Inspire Insights

                                                    • Binge On
                                                      • What’s it about?
                                                        • What we’ve seen
                                                          • Specifics
                                                            • Implications
                                                              • Spice Station
                                                                • What is it?
                                                                  • What we’ve seen
                                                                    • Implications
                                                                    • Market Size and Forecast

                                                                        • Key points
                                                                          • Drug and other outlets driving most of FDMx growth
                                                                            • Sales and forecast for all products selling through FDMx channels
                                                                              • Figure 1: Total U.S. retail sales in FDMx, at current prices, 2004-14
                                                                            • Food store sales growth continues to be small
                                                                              • Sales and forecast for all products selling in supermarkets
                                                                                • Figure 2: Total U.S. retail sales in supermarkets, at current prices, 2004-14
                                                                              • Impact of inflation primary source of food store growth
                                                                                • Figure 3: Total U.S. retail sales in supermarkets, at inflation-adjusted* prices, 2004-14
                                                                              • Walmart sales
                                                                              • Competitive Context

                                                                                • Grocery industry not immune to recession
                                                                                  • Key points
                                                                                    • Recessionary effects linger
                                                                                      • Value positioning and promotions a key strategy
                                                                                        • Non-traditional grocery outlets well positioned for growth
                                                                                          • Grocery store sales growth pales in comparison to other outlets
                                                                                            • Total annual sales at various retailer outlets, 1992-2007
                                                                                              • Figure 4: Total annual sales at selected retailer outlets, 1992-2007
                                                                                            • Supermarket sales share peaked in 2000
                                                                                              • At-home consumption of food, and locales where it’s purchased, 2000-08
                                                                                                • Figure 5: Food purchased for off-premise (at home) consumption, by where purchased, 2000-08
                                                                                              • Brand loyalty still a factor in buying behavior
                                                                                                • Demographic changes influencing shopping trends
                                                                                                • Case Study—Grocery Retailing: Mass and Club Outlets

                                                                                                  • Mass merchandisers
                                                                                                    • Walmart
                                                                                                      • Implications
                                                                                                        • Target
                                                                                                          • Implications
                                                                                                            • Club Stores
                                                                                                              • Costco
                                                                                                                • Implications
                                                                                                                  • Sam’s Club
                                                                                                                    • Implications
                                                                                                                    • Case Study—Grocery Retailing: Supermarkets

                                                                                                                      • Traditional Supermarkets
                                                                                                                        • Kroger
                                                                                                                          • Implications
                                                                                                                            • SUPERVALU
                                                                                                                              • Implications
                                                                                                                                • Publix/GreenWise
                                                                                                                                  • Implications
                                                                                                                                    • Natural Supermarkets
                                                                                                                                      • Whole Foods Market
                                                                                                                                        • Implications
                                                                                                                                        • Market Drivers

                                                                                                                                          • Household income decrease magnifies recession’s impact
                                                                                                                                            • Consumers eating at home more often
                                                                                                                                              • Flu concerns creating market for wellness products
                                                                                                                                                • Dynamics of retailer loyalty similar to brand loyalty
                                                                                                                                                  • Special offers/bargains a draw for majority of shoppers
                                                                                                                                                  • Retailer Brand Qualities

                                                                                                                                                    • Overview
                                                                                                                                                      • Private label share greater in food versus non-food
                                                                                                                                                        • FDMx sales by department, with private label sales subtotal, 2008-09
                                                                                                                                                          • Figure 6: FDMx sales, by department, with private label sales subtotal, 2008 and 2009
                                                                                                                                                        • Supermarket private label results mirror FDMx
                                                                                                                                                          • Supermarket sales by department, with private label sales subtotal, 2008-09
                                                                                                                                                            • Figure 7: Supermarket sales, by department, with private label sales subtotal, 2008 and 2009
                                                                                                                                                        • Retailer Brand Qualities: Mass and Club Outlets

                                                                                                                                                          • Mass Merchandiser Private label Programs
                                                                                                                                                            • Walmart
                                                                                                                                                              • Target
                                                                                                                                                                • Club Stores’ Private label Programs
                                                                                                                                                                  • Costco
                                                                                                                                                                    • Sam’s Club
                                                                                                                                                                    • Retailer Brand Qualities: Supermarkets

                                                                                                                                                                      • Traditional Supermarket Private label Programs
                                                                                                                                                                        • Publix
                                                                                                                                                                          • Kroger
                                                                                                                                                                            • SUPERVALU
                                                                                                                                                                              • Natural Supermarkets’ Private label Programs
                                                                                                                                                                                • Trader Joe’s
                                                                                                                                                                                  • Whole Foods Market
                                                                                                                                                                                    • Figure 8: Whole Foods upscale organics, 2009
                                                                                                                                                                                • Innovations and Innovators

                                                                                                                                                                                  • Key points
                                                                                                                                                                                    • Trader Joe’s accounts for 10% of private label introductions during 2004-09
                                                                                                                                                                                      • Figure 9: Private label product introductions, by retailer, 2004-09*
                                                                                                                                                                                    • Retailers’ product introductions include food and non-food items
                                                                                                                                                                                      • Convenience
                                                                                                                                                                                        • Health and wellness
                                                                                                                                                                                          • Health and beauty care
                                                                                                                                                                                          • Advertising and Promotion

                                                                                                                                                                                            • Overview
                                                                                                                                                                                              • Albertsons Holiday List
                                                                                                                                                                                                • Figure 10: Albertsons “Your holiday list for less,” November 2009
                                                                                                                                                                                              • Albertsons nutrition iQ
                                                                                                                                                                                                • Figure 11: Albertsons Nutrition IQ, April 2009
                                                                                                                                                                                              • Kroger featuring Lewis Taylor Farms
                                                                                                                                                                                                • Figure 12: Kroger’s “Lewis Taylor Farms,” November 2009
                                                                                                                                                                                              • Vons Ingredients for Life
                                                                                                                                                                                                • Figure 13: Vons “Ingredients for life,” February 22, 2009
                                                                                                                                                                                              • Wegmans’ Wine
                                                                                                                                                                                                • Figure 14: Wegmans “Tell Albany to allow wine,” March 23, 2009
                                                                                                                                                                                              • Other promotional programs
                                                                                                                                                                                              • Outlets Where Consumers Buy Groceries

                                                                                                                                                                                                • Key points
                                                                                                                                                                                                  • Supermarkets most popular outlet for groceries but threats loom
                                                                                                                                                                                                      • Figure 15: Outlets where groceries are purchased, October 2009
                                                                                                                                                                                                    • Non-supermarket outlets more popular with younger shoppers
                                                                                                                                                                                                        • Figure 16: Outlets where groceries are purchased, by age, October 2009
                                                                                                                                                                                                      • Higher-income shoppers willing to pay for convenience
                                                                                                                                                                                                          • Figure 17: Outlets where groceries are purchased, by household income, October 2009
                                                                                                                                                                                                        • Regions favor different store types
                                                                                                                                                                                                            • Figure 18: Outlets where groceries are purchased, by U.S. region, October 2009
                                                                                                                                                                                                          • Households with children favor more affordable grocery retailers
                                                                                                                                                                                                            • Figure 19: Outlets where groceries are purchased, by presence of children, October 2009
                                                                                                                                                                                                        • Frequency of Shopping and Spending at Grocery Outlets

                                                                                                                                                                                                          • Key points
                                                                                                                                                                                                            • Number of monthly visits driven by convenience
                                                                                                                                                                                                              • Figure 20: Frequency of shopping at outlets where groceries are sold, October 2009
                                                                                                                                                                                                            • Supermarket grocery shopping done primarily on a weekly basis
                                                                                                                                                                                                              • Figure 21: Frequency of shopping at supermarkets, October 2009
                                                                                                                                                                                                            • Wealthiest households tend to buy groceries on weekly basis
                                                                                                                                                                                                              • Figure 22: Frequency of shopping at supermarkets, by household income, October 2009
                                                                                                                                                                                                            • Walmart and supermarket visits nearly identical
                                                                                                                                                                                                              • Figure 23: Frequency of shopping for groceries at Walmart, October 2009
                                                                                                                                                                                                            • Walmart’s shopper income profile yields surprises
                                                                                                                                                                                                              • Figure 24: Frequency of shopping for groceries at Walmart, by household income, October 2009
                                                                                                                                                                                                            • Typical weekly spend on groceries at outlets where groceries are sold
                                                                                                                                                                                                              • Figure 25: Typical weekly spend on groceries at outlets where groceries are sold, October 2009
                                                                                                                                                                                                            • Majority of respondents spend less than $100 a week at supermarkets
                                                                                                                                                                                                              • Figure 26: Typical weekly spend on groceries at supermarkets, October 2009
                                                                                                                                                                                                            • Supermarkets need to maintain bond with growing families
                                                                                                                                                                                                              • Figure 27: Typical weekly spend on groceries at supermarkets, by age, October 2009
                                                                                                                                                                                                            • Weekly spending grows with income
                                                                                                                                                                                                              • Figure 28: Typical weekly spend on groceries at supermarkets, by household income, October 2009
                                                                                                                                                                                                          • What Consumers Buy in Supermarkets

                                                                                                                                                                                                            • Key points
                                                                                                                                                                                                              • Unique departments offer supermarkets a competitive advantage
                                                                                                                                                                                                                  • Figure 29: Sectors frequently purchased at supermarkets, October 2009
                                                                                                                                                                                                                • Older shoppers attracted to supermarkets regardless of product category
                                                                                                                                                                                                                    • Figure 30: Sectors frequently purchased at supermarkets, by age, October 2009
                                                                                                                                                                                                                  • Supermarkets need to attract lower-income households
                                                                                                                                                                                                                      • Figure 31: Sectors frequently purchased at supermarkets, by household income, October 2009
                                                                                                                                                                                                                    • Sectors infrequently purchased at supermarkets, and reasons
                                                                                                                                                                                                                        • Figure 32: Sectors infrequently purchased at supermarkets and reasons not to purchase, October 2009
                                                                                                                                                                                                                    • Barriers to and Reasons for Purchasing in Supermarkets

                                                                                                                                                                                                                      • Key points
                                                                                                                                                                                                                        • When buying supermarket groceries, convenience beats price
                                                                                                                                                                                                                          • Primary reasons why consumers buy groceries at supermarkets
                                                                                                                                                                                                                            • Figure 33: Primary reasons why consumers buy groceries at supermarkets, October 2009
                                                                                                                                                                                                                          • Convenience major draw regardless of age
                                                                                                                                                                                                                            • Figure 34: Primary reasons why consumers buy groceries at supermarkets, by age, October 2009
                                                                                                                                                                                                                          • Price major reason for not buying groceries at supermarkets
                                                                                                                                                                                                                            • Primary reasons why consumers don’t buy groceries at supermarkets
                                                                                                                                                                                                                              • Figure 35: Primary reasons why consumers don’t buy groceries at supermarkets, October 2009
                                                                                                                                                                                                                          • Supermarket Innovations and Opportunities

                                                                                                                                                                                                                            • Key points
                                                                                                                                                                                                                              • Survey shows desire for better pricing and promotions
                                                                                                                                                                                                                                • Figure 36: Supermarket innovations and opportunities wanted, October 2009
                                                                                                                                                                                                                              • Pricing bigger concern with age
                                                                                                                                                                                                                                • Figure 37: Supermarket innovations and opportunities wanted, by age, October 2009
                                                                                                                                                                                                                              • Types of improvements sought driven by income levels
                                                                                                                                                                                                                                • Figure 38: Supermarket innovations and opportunities wanted, by household income, October 2009
                                                                                                                                                                                                                            • Cluster Analysis

                                                                                                                                                                                                                                • Piece-ers
                                                                                                                                                                                                                                  • Super Fans
                                                                                                                                                                                                                                    • Low-Grocers
                                                                                                                                                                                                                                      • Cluster characteristics
                                                                                                                                                                                                                                        • Figure 39: Grocery retailing clusters, October 2009
                                                                                                                                                                                                                                        • Figure 40: Outlets other than supermarkets where consumers bought groceries, by grocery retailing clusters, October 2009
                                                                                                                                                                                                                                        • Figure 41: Supermarket innovations and opportunities wanted, by grocery retailing clusters, October 2009
                                                                                                                                                                                                                                        • Figure 42: Sectors frequently purchased at supermarkets, by grocery retailing clusters, October 2009
                                                                                                                                                                                                                                      • Cluster demographics
                                                                                                                                                                                                                                        • Figure 43: Grocery retailing clusters, by gender, October 2009
                                                                                                                                                                                                                                        • Figure 44: Grocery retailing clusters, by age, October 2009
                                                                                                                                                                                                                                        • Figure 45: Grocery retailing clusters, by household income, October 2009
                                                                                                                                                                                                                                        • Figure 46: Grocery retailing clusters, by race/Hispanic origin, October 2009
                                                                                                                                                                                                                                      • Cluster methodology
                                                                                                                                                                                                                                      • Custom Consumer Groups

                                                                                                                                                                                                                                        • Overview
                                                                                                                                                                                                                                          • Singles and couples
                                                                                                                                                                                                                                              • Figure 47: Influence of in-store advertising on consumer behavior*, by marital status, April 2008-June 2009
                                                                                                                                                                                                                                            • Marital status and presence of children
                                                                                                                                                                                                                                                • Figure 48: Influence of in-store advertising on consumer behavior*, by marital status and presence of children, April 2008-June 2009
                                                                                                                                                                                                                                              • Gender and age
                                                                                                                                                                                                                                                • Figure 49: Influence of in-store advertising on consumer behavior*, by gender and age, April 2008-June 2009
                                                                                                                                                                                                                                              • Race/Hispanic origin and household income
                                                                                                                                                                                                                                                  • Figure 50: Influence of in-store advertising on consumer behavior*, by race and household income, April 2008-June 2009
                                                                                                                                                                                                                                                  • Figure 51: Influence of in-store advertising on consumer behavior*, by Hispanic origin and household income, April 2008-June 2009
                                                                                                                                                                                                                                              • Appendix: Trade Associations

                                                                                                                                                                                                                                                Grocery Store Retailing - US - January 2010

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