Industry brief: U.S. supermarkets
Over the past decade, there has been a steady consolidation of supermarket chains. This movement was slowed slightly in 2000 by some objections from the Federal Trade Commission, which was trying to keep some geographical areas competitive.
The big national players have wound down to five. These are:
Chain # of supermarkets Brand names
Kroger 2,400+ Kroger, Ralphs, Dillons, Smith's, King Soopers, Fry's, QFC, City Market, Hilander, Owen's, Jay C, Cala Foods/Bell Markets, Kessel Food Markets, Pay Less, Baker's, Gerbes, plus discount supermarkets Food 4 Less, Foods Co.
Albertson's 2,300 + Albertson's, Jewel, Smitty's, Super One, Lucky, Acme, Sav-On, Seessel's, and Buttrey
Safeway 1,500+ Safeway, Vons, Genuardi's, Randalls. Tom Thumb and Carrs
Winn Dixie 1,200+ Winn-Dixie, Buddies, Foodway, SaveRite (discount), Thriftway
Ahold 1,100+ Tops, Giant, Stop & Shop, Bruno's,and BI-LO (discount)
It's not easy to separate grocery sales from other interest of these companies, particularly in drug stores and in many non-grocery items sold. But it's not hard to imagine that these five stores between them account for nearly 50% of all grocery sales in the US.
1998 was a banner year for acquisitions as Kroger acquired Fred Meyer (800 stores) and Albertson's acquired American Stores (1,558). But the acquisitions keep on coming. As with other field, competitors have realized that they can compete more comfortably in an oligopoly rather than a free-for-for-all.
As the big five companies have worked to eliminate competition by restricting the ownership of supermarkets, they have been challenged by new, and to some extent unexpected, competition outside the industry. The biggest is Wal-Mart, which has aggressive expanded its grocery efforts in the last yea, followed by Target and Meijer's. Second are major drug chains (Walgreen's, CVS, etc.) that now sell many grocery items as well. A third area is convenience store chains, of which Southland (Seven Eleven) is by far the biggest. Some of these chains are migrating up with are termed “mega-mini” stores, with a wide variety of grocery products. A fourth set of competitors comes from super discount and club stores like BJs, Sam's Club (Wal-Mart), and Costco.
Wal-Mart is the big disruptor in the supermarket industry. The company has come from no-where in the grocery market to a position that really threatens supermarket chains, winning big on comparative pricing, in some cases 30-40% lower than the other big chains. It has opened 50 or more of so-called “Neighborhood markets,” smaller grocery-oriented markets that compete even more directly with regular supermarkets. It has plans to build thousand of these markets in the upcoming decade.
Wal-Mart now is the biggest grossing food retailer. According to Business Week