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Grocery Store Retailing - US - January 2011

The grocery industry generates billions of dollars in revenue for manufacturers and retailers every year. With so much at stake, it is easy to see why there is such a competitive market for everyone involved. While some people consider the grocery market to be recession-proof, that concept is somewhat misleading. It is true that people will always have to eat, but that does not mean they have to buy food from the same retailers that they always have in the past. Although supermarkets still account for the overwhelming majority of grocery sales, they have been losing out to other store formats, particularly mass merchandisers. This pattern started prior to the recession and has only been magnified by consumers’ focus on stretching the family budget as far as possible. In fact, the tough economy has made it possible for “dollar stores” to become more of a factor in the grocery industry.

This report takes an in-depth look at what has been driving grocery store retailing in 2010, and provides insights on the following topics that give an indication of what the grocery marketplace of the near future may look like:

  • In light of the continuing recession, how have consumers further changed their shopping habits with regard to what products they buy and where they buy them?
  • How are manufacturers and retailers adapting to Americans’ interest in eating better, and what opportunities is it creating for future growth?
  • What type of impact has the recession had on the various store formats, and which ones are more likely to emerge stronger once the economy recovers?
  • As food recalls and processing methods have been receiving extensive media coverage, what can the grocery industry do to maintain consumers’ confidence in its operating methods?
  • What role does household income, gender, race/ethnicity and other demographic factors play in buying behavior in grocery outlets?
  • Which retailers have been the most aggressive in terms of private label/store brand innovations, and are they in sync with what consumers are looking for?
  • In terms of the supermarket channel, what keeps some shoppers coming back, and more importantly, what is driving them away?
  • What types of advertising/marketing strategies are the grocery industry embracing to maximize revenues and appeal to consumer trends, while also effectively managing competitive threats?
  • What are retailers doing to address “food deserts” that leave city dwellers underserved in terms of the availability of fresh food and produce?

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Table of contents

  1. Scope and Themes

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

                      • Grocery products market grows minimally in 2010
                        • Non-supermarket channels continuing expansion into grocery
                          • Consumer spending may stay restrained beyond recession
                            • More shoppers buying only what they need rather than stocking up
                              • Supermarkets still seen as not offering the best value proposition
                                • New product introductions down during 2009-10, but there are highlights
                                  • Grocery marketing strategies focus on value and freshness
                                    • Who is the grocery consumer and where do they shop?
                                    • Insights and Opportunities

                                      • Drive-thru retailers
                                        • Going beyond eco-friendly: labeling of products as animal-friendly
                                          • Let the children play—in-store play areas may drive business/loyalty
                                            • Make it easier for patrons to be healthier, while also driving loyalty
                                              • Pharmacists offering food “prescriptions”
                                                • Promote private label for meal solutions
                                                  • Wider adoption of nutritional rating systems
                                                  • Inspire Insights

                                                      • Trend—New Fundamentalism
                                                      • Market Size and Forecast

                                                        • Key points
                                                          • Supermarkets and specialty channels losing sales to formats perceived as offering better value
                                                            • Figure 1: Expenditures for food at home, share by type of retail channel, 2000-10
                                                          • Non-supermarket total U.S. retail sales expected to continue outselling supermarkets
                                                            • Sales and forecast for all grocery products selling through FDMx channels
                                                              • Figure 2: Total FDMx sales of grocery products*, at current prices, 2005-15
                                                            • Sales and forecast for all products selling in supermarkets
                                                              • Figure 3: Supermarket sales of grocery products*, at current prices, 2005-15
                                                              • Figure 4: Supermarket sales of grocery products*, at inflation-adjusted prices, 2005-15
                                                            • Sales and forecast for all products selling in drug/other outlets
                                                              • Figure 5: Drug/other outlet* sales of grocery products**, at current prices, 2005-15
                                                              • Figure 6: Drug/other outlet* sales of grocery products**, at inflation-adjusted prices, 2005-15
                                                            • Fan-chart forecast
                                                                • Figure 7: FDMx sales of grocery products*, with fan-chart forecast, 2005-15
                                                              • Walmart sales
                                                              • Market Drivers

                                                                • Consumers are interested in trying to eat better
                                                                  • Hispanics favor supermarkets for grocery shopping
                                                                    • Price index forecast favorable for at-home food purchases
                                                                      • Figure 8: Consumer Price Index: all food, food at home and food away from home, 2008-11
                                                                    • Shoppers cutting back on stocking up
                                                                      • Sustainability of growing interest to younger shoppers
                                                                      • Competitive Context

                                                                        • Key points
                                                                          • Drug and dollar stores aggressively ramping up grocery efforts
                                                                            • Food deserts provide reservoir of opportunity
                                                                              • Getting store brand/name product assortment right
                                                                                • Frugality may extend beyond recession
                                                                                  • Online grocery emerging around the world and in the U.S.
                                                                                    • Technology as a competitive advantage
                                                                                    • Format Developments—Supermarkets

                                                                                        • Overview
                                                                                          • Supermarkets
                                                                                            • Retailers promoting BFY product choices
                                                                                            • Format Developments—Drug Stores

                                                                                              • Overview
                                                                                                • Walgreens
                                                                                                  • CVS
                                                                                                  • Format Developments—Mass Merchandisers

                                                                                                    • Overview
                                                                                                      • Walmart
                                                                                                        • Target
                                                                                                        • Format Developments—Club Stores

                                                                                                            • Costco
                                                                                                              • Sam’s Club
                                                                                                              • Format Developments—Dollar Stores

                                                                                                                • Overview
                                                                                                                  • Dollar General
                                                                                                                    • Family Dollar
                                                                                                                      • Dollar channel posing threat to Walmart and other discount outlets
                                                                                                                      • Format Developments—Online

                                                                                                                        • Overview
                                                                                                                          • Peapod
                                                                                                                            • Amazon
                                                                                                                            • Private Label Impact on Grocery Operations

                                                                                                                              • Overview
                                                                                                                                • Private label gains market share across all FDMx departments
                                                                                                                                  • FDMx sales by department, with private label sales
                                                                                                                                    • Figure 9: FDMx sales, by department, with private label sales, 2009 and 2010
                                                                                                                                  • Private label accounts for nearly a fifth of supermarket sales
                                                                                                                                    • Supermarket sales by department, with private label sales subtotal, 2009-10
                                                                                                                                      • Figure 10: Supermarket sales, by department, with private label sales, 2009 and 2010
                                                                                                                                    • Private label programs reinforce retailer’s brand identity
                                                                                                                                      • Successful private label over-the-counter (OTC) and HBA programs boosting drug stores’ grocery sales as well
                                                                                                                                      • Innovations and Innovators

                                                                                                                                        • Key points
                                                                                                                                          • Product introductions, 2005-10
                                                                                                                                            • Figure 11: Private label product introductions, by grocery retailer, 2005-10
                                                                                                                                            • Figure 12: New product introductions, by department and category, 2005-10
                                                                                                                                          • Private label product innovations
                                                                                                                                            • BFY
                                                                                                                                              • Premium
                                                                                                                                                • Value
                                                                                                                                                  • Non-food
                                                                                                                                                  • Marketing Strategies

                                                                                                                                                    • Key points
                                                                                                                                                      • Supermarket marketing strategies
                                                                                                                                                        • Supermarkets increasing ad spending to project new pricing image
                                                                                                                                                          • Target getting fresh with its food marketing
                                                                                                                                                            • Target updates coupon processing policy
                                                                                                                                                              • Walmart and P&G “go Hollywood” to boost sales
                                                                                                                                                                • Advertising effectiveness in grocery stores
                                                                                                                                                                  • Figure 13: Influence of in-store advertising on consumer behavior, by age and gender, April 2009-June 2010
                                                                                                                                                                • Target and Walmart putting best face forward in social media
                                                                                                                                                                  • Television commercials
                                                                                                                                                                    • Aldi
                                                                                                                                                                      • Figure 14: Aldi, “Honest to Goodness Savings,” June 2010
                                                                                                                                                                    • Kroger
                                                                                                                                                                      • Figure 15: Kroger, “Tested for the Things that Matter,” June 2010
                                                                                                                                                                    • Publix
                                                                                                                                                                      • Figure 16: Publix, “Where Shopping is a Pleasure,” August 2010
                                                                                                                                                                    • Target
                                                                                                                                                                      • Figure 17: Target, “Expect More. Pay Less.,” October 2010
                                                                                                                                                                    • Walmart
                                                                                                                                                                      • Figure 18: Walmart, “Save Money. Live Better.,” March 2010
                                                                                                                                                                  • Outlets Where Consumers Buy Groceries

                                                                                                                                                                    • Key points
                                                                                                                                                                      • The grocery shopper
                                                                                                                                                                          • Figure 19: Grocery shopping frequency, by gender, September 2010
                                                                                                                                                                          • Figure 20: Grocery shopping frequency, by gender and age, September 2010
                                                                                                                                                                          • Figure 21: Grocery shopping frequency, by gender and household income, September 2010
                                                                                                                                                                        • Outlets shopped
                                                                                                                                                                            • Figure 22: Types of stores where shoppers buy groceries, by gender, September 2010
                                                                                                                                                                            • Figure 23: Types of stores where shoppers buy groceries, by age, September 2010
                                                                                                                                                                            • Figure 24: Types of stores where shoppers buy groceries, by household income, September 2010
                                                                                                                                                                        • Grocery Shopping Frequency and Spending by Outlet

                                                                                                                                                                          • Key points
                                                                                                                                                                            • Frequency
                                                                                                                                                                              • Figure 25: Frequency of grocery shopping, September 2010
                                                                                                                                                                            • Frequency of visits at top outlets
                                                                                                                                                                              • Supermarkets
                                                                                                                                                                                • Figure 26: Frequency of grocery shopping at supermarkets, by household income and age, September 2010
                                                                                                                                                                              • Mass merchandisers
                                                                                                                                                                                • Figure 27: Frequency of grocery shopping at specific mass merchandisers, by household income and age, September 2010
                                                                                                                                                                              • Club stores
                                                                                                                                                                                • Figure 28: Frequency of grocery shopping at club stores, by household income and age, September 2010
                                                                                                                                                                              • Spending on groceries by outlet/outlet type
                                                                                                                                                                                • Figure 29: Spending on groceries, by outlet/outlet type, September 2010
                                                                                                                                                                            • The Supermarket Shopping Cart

                                                                                                                                                                              • Key points
                                                                                                                                                                                • What consumers buy at supermarkets
                                                                                                                                                                                  • Figure 30: What consumers buy at supermarkets versus other outlets, September 2010
                                                                                                                                                                                  • Figure 31: What consumers buy at supermarkets versus other outlets, by age, September 2010
                                                                                                                                                                                  • Figure 32: What consumers buy at supermarkets versus other outlets, by household income, September 2010
                                                                                                                                                                                  • Figure 33: What consumers buy at supermarkets versus other outlets, by race/Hispanic origin, September 2010
                                                                                                                                                                              • Why Shoppers Prefer Supermarkets

                                                                                                                                                                                • Key points
                                                                                                                                                                                  • Reasons consumers choose supermarkets
                                                                                                                                                                                    • Figure 34: Reasons for choosing supermarkets, September 2010
                                                                                                                                                                                    • Figure 35: Reasons for choosing supermarkets, by age, September 2010
                                                                                                                                                                                    • Figure 36: Reasons for choosing supermarkets, by race/Hispanic origin, September 2010
                                                                                                                                                                                • What Shoppers Don’t Buy at Supermarkets and Why

                                                                                                                                                                                  • Key points
                                                                                                                                                                                    • What and why
                                                                                                                                                                                      • Figure 37: What and why consumers don’t buy at supermarkets versus other outlets, September 2010
                                                                                                                                                                                    • What and why
                                                                                                                                                                                      • Figure 38: Reasons for not buying groceries at supermarkets, September 2010
                                                                                                                                                                                      • Figure 39: Reasons for not buying groceries at supermarkets, by household income and age, September 2010
                                                                                                                                                                                  • Supermarket Innovations/Improvements Consumers Want

                                                                                                                                                                                    • Key points
                                                                                                                                                                                      • Innovations and improvements interesting to supermarket shoppers
                                                                                                                                                                                          • Figure 40: Innovations and improvements consumers would like in supermarkets, by gender, September 2010
                                                                                                                                                                                          • Figure 41: Innovations and improvements consumers would like in supermarkets, by age, September 2010
                                                                                                                                                                                          • Figure 42: Innovations and improvements consumers would like in supermarkets, by household income, September 2010
                                                                                                                                                                                      • Cluster Analysis

                                                                                                                                                                                          • Pricers
                                                                                                                                                                                            • Demographics
                                                                                                                                                                                              • Characteristics
                                                                                                                                                                                                • Opportunity
                                                                                                                                                                                                  • Selectors
                                                                                                                                                                                                    • Demographics
                                                                                                                                                                                                      • Characteristics
                                                                                                                                                                                                        • Opportunity
                                                                                                                                                                                                          • Alternators
                                                                                                                                                                                                            • Demographics
                                                                                                                                                                                                              • Characteristics
                                                                                                                                                                                                                • Opportunity
                                                                                                                                                                                                                  • Cluster characteristics
                                                                                                                                                                                                                    • Figure 43: Grocery retailing clusters, September 2010
                                                                                                                                                                                                                    • Figure 44: Types of stores where shoppers buy groceries, by grocery retailing clusters, September 2010
                                                                                                                                                                                                                    • Figure 45: Innovations and improvements consumers would like in supermarkets, by grocery retailing clusters, September 2010
                                                                                                                                                                                                                  • Cluster demographics
                                                                                                                                                                                                                    • Figure 46: Grocery retailing clusters, by gender, September 2010
                                                                                                                                                                                                                    • Figure 47: Grocery retailing clusters, by age, September 2010
                                                                                                                                                                                                                    • Figure 48: Grocery retailing clusters, by household income, September 2010
                                                                                                                                                                                                                    • Figure 49: Grocery retailing clusters, by race, September 2010
                                                                                                                                                                                                                    • Figure 50: Grocery retailing clusters, by Hispanic origin, September 2010
                                                                                                                                                                                                                  • Cluster methodology
                                                                                                                                                                                                                  • Custom Consumer Groups

                                                                                                                                                                                                                    • Key points
                                                                                                                                                                                                                      • Younger men willing to tune into non-supermarket channels
                                                                                                                                                                                                                          • Figure 51: Types of stores where shoppers buy groceries, by gender and age, September 2010
                                                                                                                                                                                                                        • What consumers buy at supermarkets
                                                                                                                                                                                                                            • Figure 52: What consumers buy at supermarkets versus other outlets, by gender and age, September 2010
                                                                                                                                                                                                                          • Reasons consumers choose supermarkets
                                                                                                                                                                                                                              • Figure 53: Reasons for choosing supermarkets, by gender and age, September 2010
                                                                                                                                                                                                                          • Appendix—Other Useful Consumer Tables

                                                                                                                                                                                                                              • Figure 54: Mean weekly spending on groceries in supermarkets and at Walmart, by household income and age, September 2010
                                                                                                                                                                                                                              • Figure 55: Spending on groceries in a typical week, April 2009-June 2010
                                                                                                                                                                                                                              • Figure 56: Grocery outlets shopped at in last four weeks, April 2009-June 2010
                                                                                                                                                                                                                              • Figure 57: Reasons for choosing supermarkets, by race/Hispanic origin, September 2010
                                                                                                                                                                                                                              • Figure 58: Innovations and improvements consumers would like in supermarkets, by race/Hispanic origin, September 2010
                                                                                                                                                                                                                              • Figure 59: Innovations and improvements consumers would like in supermarkets, by gender and age, September 2010
                                                                                                                                                                                                                          • Appendix—Trade Associations

                                                                                                                                                                                                                            Companies Covered

                                                                                                                                                                                                                            • Brookshire Grocery Company
                                                                                                                                                                                                                            • ConAgra Foods, Inc
                                                                                                                                                                                                                            • Food and Drug Administration
                                                                                                                                                                                                                            • Food Marketing Institute
                                                                                                                                                                                                                            • General Mills Inc
                                                                                                                                                                                                                            • Grocery Manufacturers Association (GMA)
                                                                                                                                                                                                                            • Kantar Media
                                                                                                                                                                                                                            • Kimberly-Clark Corporation
                                                                                                                                                                                                                            • Nestlé USA
                                                                                                                                                                                                                            • Private Label Manufacturers Association (PLMA)
                                                                                                                                                                                                                            • Procter & Gamble USA
                                                                                                                                                                                                                            • Safeway Inc
                                                                                                                                                                                                                            • Trader Joe's Company Inc
                                                                                                                                                                                                                            • U.S. Bureau of Labor Statistics
                                                                                                                                                                                                                            • U.S. Department of Agriculture
                                                                                                                                                                                                                            • Unilever USA
                                                                                                                                                                                                                            • Walgreen Co
                                                                                                                                                                                                                            • Walmart Stores (USA)
                                                                                                                                                                                                                            • Wegmans Food Markets, Inc
                                                                                                                                                                                                                            • Whole Foods Market Inc

                                                                                                                                                                                                                            Grocery Store Retailing - US - January 2011

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