Competition for your grocery dollar drives changes in the U.S. grocery business

Discount, dollar and drug stores have made big strides in the U.S. grocery business.

Deflation in retail food price and tough competition characterize today’s U.S. grocery industry valued at an estimated $641 billion, according to Mintel Group Ltd.’s report, Grocery Retailing US, November 2016. Food and beverage sales account for 75 percent of that figure which is expected to rise by 12 percent in the next five years with health and beauty, and household supplies on the increase.

Traditional grocery stores haven’t been the majority grocery retailers since 2011. Mintel cites data from the Supermarket News putting Walmart as the top retailer followed by Kroger, club giant, Costco, and Albertsons. Drugstore chains made big gains with CVS Health fifth and Walgreens eighth, each with around 8000 stores nationwide. Discount grocery retailer, Aldi, ranks 22nd  through growth in the number of stores and its non-brand sensitive customer base. Dollar stores “have changed the game forever”, says Mintel. Supermarket News puts Dollar Tree at 19th and Dollar General at 24th.

Competition will be hot for the American consumer who spends, on average, 10% of their household income on groceries. Mintel says German grocery discount chain, Lidl, is set to take on Aldi on the east coast where it’s strongest. On-line grocery orders with store pick-up is expected to be popular with those who enjoy Internet shopping. Amazon is exploring this concept with physical stores called Amazon Fresh as pickup locations.

Customer traits and behaviors factor greatly into this ever-changing industry. U.S. food consumed at home is just holding its own against food consumed away from home, for example. For now, grocery retailers hold the advantage based on price.

For information on marketing, managing, or starting a food, agriculture, bio economy and natural resources business development, contact the Michigan State University Product Center at www.productcenter.msu.edu or 517-432-8750. Michigan State University Extension Innovation Counselors are available statewide for free business counseling.

Related Articles