Grocery Stores & Supermarkets
Companies in this industry primarily retail a general line of food such as canned and frozen foods, fresh fruits and vegetables, as well as prepared meats, fish, and poultry. Major companies in the industry include Costco, Kroger, Target, and Walmart (all based in the US), as well as foreign companies such as Aeon (Japan); Aldi, Kaufland, and Lidl (all based in Germany); Carrefour (France); and Tesco (the UK).
The global grocery retail market is projected to have an additional $2.2 trillion by 2024, according to research firm IGD. Asia is projected to account for nearly 50% of all new global grocery retail sales generated between 2019 and 2024. North America and Europe are some of the other leading players in the global grocery retail market.
Companies in this industry operate retail stores that offer a general selection of food products. Discount stores and warehouse clubs, which are leading sellers of groceries, are covered in separate industry profiles.
Competitive Landscape
Consumer migration online has grocers racing to increase their online presence, while online players -- including Amazon and China's Alibaba -- are trying out brick-and-mortar retail. Fierce competition, particularly at the high and low ends of the market, and cost advantages enjoyed by online retailers have sparked supermarket price wars, which benefit consumers but threaten to erase the grocery industry's razor-thin profit margins.
The global grocery delivery market is expected to reach more than $1.1 trillion by 2027, with Cina, the US, Japan, the UK, and India as the leading markets, according to Statista.
Online grocery sales is expected to reach about 11.7% by 2027, according to Supermarket News. However, the health crisis has accelerated the shift to online shopping to the extent that we may have now reached the projected percentage of the population using online commerce by 2025, according to Food Logistics citing a study by Mercatus. Improvements made to e-commerce operations by major food retailers to meet the surge in demand should also help make online shopping more reliable and popular in years to come.
Amazon is proving to be a formidable competitor in the grocery sector since buying Whole Foods Market in 2017. In addition to trimming prices at the high-end chain, the company is winning customers with the offer of free two-hour delivery of Whole Foods groceries to members of its Prime program in some 30 metro areas in the US. The combination of Amazon's e-commerce, data, and distribution expertise combined with Whole Foods' stores and distribution centers puts immense pressure on Kroger and Walmart -- the largest sellers of groceries in the US -- and other brick-and-mortar grocers to up their digital games and redefine the role of the store in the Digital Age. Incumbents have responded by reducing prices, launching online delivery and in-store pick up services, and streamlining their supply chains, among other measures.
Facing mature markets at home, European chains continue to look abroad for growth. After upending European grocery shopping, German deep-discount chains Aldi and Lidl have been expanding aggressively in the US. Both chains offer limited selections of mostly private-label goods and rock-bottom prices. After focusing on low-income consumers, the chains are working to improve their stores' appearance to broaden their customer base.
Competitive Advantages:
Low Prices - eep discount grocery chains are flourishing in markets worldwide, including Germany, the UK, and Australia, aided by economic pressures and evolving consumer perceptions of value.
Omni-Channel Business Model - As the number of households buying food online continues to grow, grocery retailers that successfully merge their in-store and digital operations to offer quick home delivery and in-store pickup will come out ahead, especially among younger, tech-savvy consumers.
Focus on Fresh & Prepared Foods - Because many consumers decide where to shop based on the quality of the produce, traditional grocery stores' best defense against online grocery players is high-quality fruits and vegetables.
Private-Label Brands - Exclusive store brands typically are less expensive than national brands, more profitable for retailers, and increase customer loyalty. Kroger's private label products account for about 20% of sales. Whole Foods Market's 365 Everyday Value brand is the #2 best-selling private-label brand on Amazon.com.
Company Spotlight:
Aldi is a deep-discount grocery chain based in Germany that operated more than 2,400 locations and is set to open 120 new stores. Aldi is also targeting the UK and Australia.
Amazon, the world's largest online retailer, has dramatically increased its grocery footprint with Whole Foods Market. After a modest start with online delivery service AmazonFresh and a tech-infused store prototype called Amazon Go. The Amazon-Whole Foods deal will be felt throughout the grocery supply chain.
Kroger is the world's largest traditional grocery chain by sales. To defend its position, Kroger is investing in e-commerce and in-store pickup for groceries ordered online, stocking more organic foods, and reducing prices. Kroger is scaling back new store openings amid a glut of US retail grocery space. In 2018, Kroger entered the vast Chinese market, offering its Simple Truth brand of natural and organic products on Alibaba's Tmall virtual storefront.
Lidl operates roughly 12,000 stores and more than 200 goods distribution and logistics centers in 31 countries. From a small base in the southeastern US, deep-discounter Lidl has grown its US store count to more than 100 locations with a strong presence along the East Coast.
Walmart, the world's largest retailer with operations in 20 countries, operating about 10,500 stores. The company is investing heavily in e-commerce to grow online sales, play catch up with Amazon.com, and defend its top US ranking. In China, the US giant is partnering with JD.com, the #2 online player.
Products, Operations & Technology
Grocery stores and supermarkets stock a wide variety of food, beverages, and household items. Generally, stores sell a mix of fresh and frozen foods, packaged
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Also includes the following chapters:
Quarterly Industry Update
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Industry Indicators
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Business Challenges
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Trends and Opportunities
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Call Preparation Questions
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Financial Information
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Industry Forecast
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Industry Websites
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Glossary of Acronyms