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

Chapter 1: Executive Summary

Scope of Report

Report Methodology

A Broad Spectrum of Retail Channels

Total Retail Food and Beverage Sales Almost $560 Billion

Table 1-1: U.S. Retail Sales of Foods and Beverages, 2006-2015 (in millions of dollars)

C-Stores Outnumber Supermarkets Four to One

Supermarkets Ring Up Over Half of 2010 Food and Beverage Sales

Figure 1-1: Share of Food and Beverage Dollar Sales by Retail Channel, 2010 (percent)

The Top 20 U.S. Food Retailers

Market Outlook

Table 1-2: Top 20 U.S. Retailers by Estimated Food and Beverage Sales, 2010 (in billions of dollars)

Some Stores Walloped; Others Thrive in the New Economy

Conservative Spending Expected to Continue

Consumers Dining Out Less, Cooking More

The Overriding Trend: Value

More Competition

Small Is Big

SKU Rationalization

Increased Private-Label Penetration

In-Store Foodservice

Fresh Formats

Health and Wellness

Sustainability Is Profitability

Marketing and Media Trends

Chapter 2: Introduction

Market Overview

Scope of Report

A Broad Spectrum of Retail Channels

Share-of-Stomach Competition Also Includes Foodservice

Total Retail Food and Beverage Sales Almost $560 Billion

Table 2-1: U.S. Retail Sales of Foods and Beverages, 2006-2015 (in millions of dollars)

Other Estimates in the Same Ballpark

Figure 2-1: Sales of Food-at-Home and Food-Away-from-Home, 1959-2009 (in billions of dollars)

Retail Food and Beverage Sales Will Near $700 Billion by 2015

Market Composition

C-Stores Outnumber Supermarkets Four to One

Supermarkets Ring Up Over Half of 2010 Food and Beverage Sales

Figure 2-2: Share of Food and Beverage Dollar Sales by Retail Channel, 2010 (percent)

Table 2-2: Competitive Analysis of Retail Food and Beverage Channels, 2010

The Competitive Landscape

The Top 20 U.S. Food Retailers

Table 2-3: Top 20 U.S. Retailers by Estimated Food and Beverage Sales, 2010 (in billions of dollars)

Recent Mergers and Acquisitions

Market Outlook

Economic Environment

Inflation + Deflation, But Food Prices Projected to Rise in 2011

Table 2-4: Changes in Consumer Price Indexes for Food, 2008-2011

Some Stores Walloped; Others Thrive in the New Economy

Conservative Spending Expected to Continue

Consumers Dining Out Less, Cooking More

Government Regulation

Food Safety Bill Passes Congress

USDA to Require Nutrition Labels on Meat

Chapter 3: Trend Overview

The Overriding Trend: Value

The Top Consumer Priority

More Competition

More Types of Stores Focusing on Foods

Channel Migration: Who’s on the Winning Side of the Equation

Table 3-1: Consumer Packaged Goods Household Penetration by Retail Channel, 2010 (percent)

Different Channels Satisfy Different Trip Missions

Small Is Big

Pendulum Swinging Back to Smaller Store Formats

Fresh & Easy Inspired Seismic Market Shifts

Walmart Experiments with Several Smaller Formats

Walmart Plans Small Format Urban Stores

Safeway Also Testing Smaller Format

How Viable Are Smaller Stores?

SKU Rationalization

Product Proliferation Is Rampant

Table 3-2: U.S. Food and Beverage New Product Launches, 2001-2010 (number)

SKU Rationalization (or Not)

Examples of SKU Rationalization Strategies

Kroger Successfully Eliminates 30% of Cereal SKUs

Walmart Cuts Too Deep

How Giant-Carlisle Analyzes Categories

Jewel-Osco Slashes SKUs by as Much as 25%

Doing SKU Optimization Wrong—and Right

Increased Private-Label Penetration

Private Label a Top Retail Differentiation Strategy

Private Label Ripe with Opportunities

Table 3-3: U.S. Retail Sales of Private-Label Foods and Beverages, 2009-2014 (in millions of dollars)

Private-Label Introductions Double in 2010

Table 3-4: U.S. Private-Label Food and Beverage New Product Launches, 2006-2010 (number)

Fresh & Easy Leads in Private-Label Introductions

Table 3-5: Top 20 U.S. Retailers/Wholesale Grocers Launching Private-Label Foods and Beverages by Number of SKUs, 2006-2010 (number)

Poor Economy Helps Private Label Get Ahead

Private Label vs. National Brands

Safeway and Supervalu Strengthen PL Hold

In-Store Foodservice

Food Retailers Morphing into Foodservice

How that Translates to Dollars

Almost Two out of Three Consumers Buy Supermarket Take-Out

Figure 3-1: Foodservice Use in Past 30 Days: By Channel, February 2010 (percent)

Mean Use of Foodservice

Figure 3-2: Foodservice Mean Use in Past 30 Days: By Channel, February 2010

Foodservice by Usage Occasions

Figure 3-3: Foodservice Use Occasions in Past 30 Days: By Channel, February 2010

Prepared Foods in Supermarkets

Figure 3-4: Supermarket Deli Prepared Foods, Share of Sales: By Food Type, 2009 (percent)

Walmart Moving into Prepared Foods with Marketside

Target Creates Springboard for Prepared Foods

Warehouse Clubs to Push the Prepared Foods Envelope

Prepared Foods in C-Stores

Drugstores Moving into Prepared Foods Territory

Turning Grocery Stores into Restaurants

A Look at the Future

Fresh Formats

Emphasis on Fresh Foods Continues to Grow

Organic Foods Slowing, But Remain an Area of Opportunity

Local and Artisanal Foods Are Growing Trends

A Return to In-Store Butchers?

Illustration 3-1: TOPS “Real Meat — Real Butchers” Ad

Health and Wellness

Retailers Becoming Arbiters of Wellness and Nutrition Management

Health and Wellness a Marketing Hook

Healthy Eating Programs

Supermarkets Offering In-Store Dietitians

Retailers’ Nutrition Ratings

Sustainability Is Profitability

Ethical Consumerism

Retailers Spearhead Animal Welfare Standards

Cage-Free Eggs a Hot Button

More Retailers and Dairies Go Hormone-Free

Fair Trade Going Mainstream

Greener Stores

Walmart’s Sustainability Scorecard Makes Slow Progress

Sustainability = Profitability

Plastic or Paper?

Tesco Testing Zero-Carbon Supermarket in England

Chapter 4: Grocery Channel Trends

Grocery Channel Leads Food Sales

Figure 4-1: Growth of Sales at Traditional Food Stores, 1999-2009 (percent)

Even National Supermarket Operators are Regional Players

Table 4-1: Top 10 U.S. Supermarket Chains by Retail Dollar Sales, 2009 (in billions of dollars, percent, and number)

Kroger: Solid Strategies Mean Solid Gains

Kroger Is Sophisticated in Mining Consumer Data

Private Label a Competitive Strength

Safeway Combines Lifestyle with Price Parity

Lifestyle Format Stung by Recession

Safeway Experiments with Small Formats

Targeting More Private Label

Supervalu Realigning Its Business

New Focus is Consumer-Centric, Hyper-Local

SKU Rationalization, Clean Floor Strategy

Supervalu Sells Some Supermarkets; Expands Save-A-Lot Discount Chain

Supervalu Targets Consumers with Health and Wellness Options

A&P’s Struggles Continue

While Winn-Dixie Rises from the Ashes

Regional Chains Set Exemplary Examples

Publix a Public Favorite

Publix’s GreenWise Market

Wegmans Raises the Bar on Grocery Shopping

Whole Foods: The Natural Leader Reemerges as a Growth Leader

Focusing on Value Yields Rewards

Good Deeds

New Sustainable Seafood, Animal Welfare, and Healthy Eating Initiatives

Strong Focus on Prepared Foods and In-Store Dining

Ethnic Food Markets Thriving

Specialty Food Stores

The Secrets of Trader Joe’s

Chapter 5: Value Channel Trends

Supercenters

Walmart Is the Nation’s Largest Food Retailer

Groceries Grow to 51% of Walmart’s Sales

Walmart Revamps Great Value Private-Label Brand

Economy Hits Walmart Customers Hard

Walmart Makes Serious Mistakes…

…and Tries to Correct Them

Thinking Small, Walmart Is Downsizing Stores for Urban Markets

Walmart Testing Pick Up and Delivery Services

Supermercado de Walmart Opens in Houston

Walmart Seeks Collaborative Sourcing with Suppliers

Target-ing Foods

Target Pushing into Fresh Foods

And Opening Smaller Format Urban Stores

Kmart Still Struggling to Find a Path

Warehouse Clubs Maintain Balance, But Not Status Quo

Costco Wholesale Corp

Costco Looking to Open More Stores in Malls

Sam’s Club Seeks to Catch Up with Costco in Foods

Sam’s Targets Hispanics with Mas Club

BJ’s Wholesale Club

Dollar Stores Adding More Food to Their Product Mix

Dollar General Revamping Store Format(s)

Family Dollar

Dollar Tree

Limited Assortment Chains Making Waves

Chapter 6: Convenience Channel Trends

Convenience Stores and Drugstores Filling in for Mom-and-Pop

C-stores Changing With—and Changing—the Times

Foods and Beverages 37.5% of C-Store In-Store Revenues

C-Stores a Growing Competitor for Foodservice Dollars

7-Eleven’s “First, Best, and Only” Strategy

Illustration 6-1: 7-Eleven’s 7-Select Store-Brand Packaged Snacks

Fresh & Easy: British Invasion Falls Short

The Fresh & Easy Model

Tesco Also Imported its Own Infrastructure

Sheetz, Inc.

Wawa, Inc

Several Supermarket Chains Also Have C-Stores

Kroger Is One of the Largest C-Store Operators

Giant Eagle Uses Supermarkets and C-Stores to Create Synergies

Drugstores Also Compete on the Convenience Angle

Drugstores Fight Back as Retail Lines Blur

Drugstores Testing Fresh Foods

Walgreens Creating “Food Oases”

Duane Reade Setting Food Examples

Illustration 6-2: Duane Reade’s DR Delish Premium Private-Label Snacks and Beverages

CVS Caremark Doubling Food Sections in Nearly Half Its Stores

Rite Aid Piloting Co-Branded Stores with Save-A-Lot

Can the Drugstore Channel Compete in Fresh Foods?

Drugstores Will Become the New Neighborhood Grocers

Chapter 7: Alternative Channel Trends

Farmers’ Market Count Increases 16% Since 2009, to Over 6,100

Figure 7-1: Growth in Number of Farmers’ Markets, 1994-2010

Two Types of Farmers’ Markets

Produce by Prescription

Farmers’ Markets Complain About Grocery Competition

Community Supported Agriculture Programs (CSAs)

Vending Machines Offer Convenience 24/7

Vending Homes in on Fresh Fruit and Vegetables

Kraft Foods Testing Interactive Vending Machines

Japan Testing Vending Machines with Facial Recognition

Online Grocery Services

FreshDirect an Interesting Model

Big Guns Testing Online Ordering Services

Thinking Outside the Box

Mobile Food Trucks

Pop-Up Stores

Other Alternative Channels Target Impulse Sales

Chapter 8: Marketing and Media Trends

Shopper Marketing

What, Exactly Is Shopper Marketing?

Technology Is Changing Marketing Vehicles

Advertising Trends

Biggest Media Spender Is Walmart

Table 8-1: Advertising Spending for Selected Top Food and Beverage Retailers, 2007-2009 (in millions of dollars)

Bloom’s Grill-Board Uses Traditional Ad Medium in a Non-Traditional Way

Illustration 8-1: Bloom Grocery’s Steak-Scented Billboard

Resurgence in Coupons

Digital Coupons Soaring

Customized Coupons Leverage Loyalty Card Data

Kroger the Pioneer in Personalized Coupon Offers

Sam’s Club eValues a Perk for Plus Club Members Only

Safeway Just for U

Illustration 8-2: Safeway’s Online Coupon Center

Meijer’s mPerks uses Phone Numbers, Not Cards

Coupon Strategies

Using Social Media

Making Use of Websites and Social Media

Illustration 8-3: Whole Foods Market’s Facebook Newsletters

Illustration 8-4: Safeway’s Facebook Page Blog

Twitter

Table 8-2: Selected Retailers’ Facebook and Twitter Fan Bases, January 7, 2011 (actual count)

F-Commerce Is Coming

The Smartphone Revolution

QR Codes

Illustration 8-5: Port Townsend Food Co-op’s On-Shelf QR Code Signage

Illustration 8-6: QR Replica Displayed by Dave’s Killer Bread

Illustration 8-7: Dole/Price Chopper Promotion Utilizing QSR Code Technology

Check-in Apps

Illustration 8-8: CheckPoints Mobile App Featuring Tyson Any’tizers

Harnessing the Power of Word-of-Mouth

In-Store Messaging Evolves with Technology

Direct Consumer Research

Illustration 8-9: Walmart Great Value Round Table Survey/Promo Feature

Illustration 8-10: Fresh & Easy Favorites Feedback Opt-in Email Program

In-Store Merchandising Trends

Smartphone App Helps Shoppers Navigate Meijer Supercenters

Carpeted Flooring?

New On-Site Food Equipment

“Clean Floor” Policies Limit Marketers’ Displays

Supervalu De-Cluttering In-Store Messaging

Appendix: Addresses of Selected Industry Associations and Retailers

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