The Future of Food Retailing in the U.S.: Shopper Insights and Market Opportunities, 4th Edition

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The Future of Food Retailing in the U.S.: Shopper Insights and Market Opportunities, 4th Edition
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The retail market for foods and beverages is undergoing some of its greatest changes since supermarkets came to the fore in the 1940s and '50s. Economic, demographic, lifestyle and technological changes have created not only a fertile environment but the absolute necessity for new concepts to engage shoppers, capture share of stomach, and re-invent food and beverage retailing.

While the greatest competition to supermarkets and grocery stores comes from supersized "one-stop shopping" venues like supercenters and warehouse clubs, the threat has spread out across myriad retail channels, including drugstores, dollar stores, limited assortment chains, and (the elephant in the room) online grocery shopping. Although supermarkets remain the majority force in food shopping, they are no longer calling the shots—a role now shared with Whole Foods and Trader Joe's on the natural/specialty side, Walmart, club stores, and dollar stores on the value front, and farmers markets and food trucks in trend-setting.

At the same time, 2012 and 2013 have been big years for mergers and acquisitions in the retail food industry, as strategic buyers and private investors seek a way to expand their businesses to additional markets. And while the economy has shown positive signs of recovery in the past year, many consumers remain buffeted if not traumatized by higher gas prices, rising food prices, mounting healthcare costs, and increased payroll taxes. As a result, most are still feeling economically squeezed and spending-shy.

This study provides in-depth analysis of trends in four key retail channels through which foods and beverages are sold:

• Grocery—supermarkets, natural food stores, small grocery stores, ethnic markets, specialized food stores, and gourmet/specialty stores;
• Value—supercenters, mass merchandisers, warehouse clubs, dollar stores, and limited assortment stores such as ALDI;
• Convenience—convenience stores and drugstores; and
• Alternative—online grocery services, vending machines, farmers' markets and community supported agriculture programs (CSAs), and other alternative venues.

Among the topics examined are which types of stores they shop, how much they spend, how they plan for their trip and what in-store services they use; attitudes toward wellness, nutrition, food labeling, natural/organic foods, food safety, and store brands; and which food departments attract shoppers to stores.

The data analyzed in Food Shopper Insights are largely derived from Packaged Facts February/March 2013 Food Shopper Insights (FSI) Survey, supplemented by data from our Food Shopper Insights (FSI) Survey conducted in June 2013. Each survey had a sample size of 2,000 U.S. adults who had shopped for groceries within 24 hours of being surveyed. The sample composition is representative of the national population by gender, age bracket, geographic region, race/ethnicity, household income bracket, and presence of children in the household.

Chapter 1: Executive Summary

Scope of Report
Report Methodology

Food Shopper Insights

Supercenters, Warehouse Clubs, Dollar Stores Strong Competition for Grocery Trips

Table 1-1: Type of Store(s) Shopped on Most Recent Grocery Shopping Trip, 2013 (percent of grocery shoppers)

Majority Like Their Store, But Only 56% Like Grocery Shopping
85% Perform Some Type of Preparation for Shopping
Saving Money an Important Consideration
Wellness a Concern for Many Grocery Shoppers
Shoppers Seek Specific Nutritional Benefits
Fresh Fruits and Vegetables the Most Important Shopping Draw
Two Out of Three Purchase Store Brands
Store-Prepared Food Items Attract Many Grocery Shoppers

Table 1-2: Type of Products Purchased on Most Recent Grocery Shopping Trip, 2013 (percent of grocery shoppers)

Kids Influence Parents' Grocery Choices

Figure 1-1: Percent of Parents Agreeing "My Kids Play an Important Role in the Groceries I Choose," 2013

Retail Trends

Total Retail Food and Beverage Sales Almost $640 Billion in 2013

Table 1-3: U.S. Retail Sales of Foods and Beverages, 2013-2018 (in millions of dollars)

C-Stores Outnumber Supermarkets Almost Five to One
Supermarkets Lead Food and Beverage Market with 53% Share

Figure 1-2: Share of Food and Beverage Dollar Sales by Retail Channel, 2012 (percent)

An Industry in Flux
Consumers Still Spending-Shy
Grocery Sales Trend Higher
The Top 20 U.S. Food Retailers

Table 1-4: Top 20 U.S. Retailers of Foods and Beverages, as of June 2013 (in billions of dollars)


More Types of Stores Focusing on Foods
More Actual Stores
Multi-Channel Shopping
Small Is Big
Private Label Foods & Beverages Top $104 Billion in 2012
Consumers Widely Accepting of Private Label
The Debate Over Loyalty Cards
Technology Changing How Consumers Shop for Groceries
Emphasis on Fresh Foods Continues to Grow
Prepared Foods Drive Store Traffic and Profits
Retailers Becoming Arbiters of Wellness and Nutrition Management

Chapter 2 Highlights
Chapter 2: Food Shopper Insights

Methodology

Shopping Trips: The Basics

Supercenters, Warehouse Clubs, Dollar Stores Strong Competition for Grocery Trips

Table 2-1: Type of Store(s) Shopped on Most Recent Grocery Shopping Trip, 2013 (percent of grocery shoppers)


Six in Ten Spend Less than $100 on Groceries Weekly

Figure 2-1: Average Amount Spent Weekly on Groceries, 2013 (percent of grocery shoppers)


Majority Like Their Store, But Only 56% Like Grocery Shopping

Table 2-2: Attitudes of Grocery Shoppers Toward Grocery Shopping, 2013


Environmental Concerns Affect What Happens in the Aisles of Grocery Stores

Figure 2-2: Percent of Grocery Shoppers Agreeing "'Green' Packaging is Important to Me in Choosing Which Groceries I Buy," 2013
Figure 2-3: Percent of Grocery Shoppers Using Reusable Shopping Bags During Most Recent Grocery Shopping Trip, 2013

Planning Ahead

85% Perform Some Type of Preparation for Shopping

Figure 2-4: Percent of Grocery Shoppers Doing Any Kind of Planning Before Most Recent Grocery Shopping Trip, 2013
Figure 2-5: Percent of Grocery Shoppers Agreeing "I Often Stop by the Grocery Store on the Spur of the Moment," 2013


Shopping List Is Most Common Preparation Before Shopping Trip

Table 2-3: Type of Planning by Grocery Shoppers Before Most Recent Grocery Shopping Trip, 2013 (percent of grocery shoppers)


Saving Money Remains an Important Consideration

Table 2-4: Retailer Programs Used During Most Recent Grocery Shopping Trip, 2013 (percent of grocery shoppers)
Figure 2-6: Percent of Grocery Shoppers Agreeing "I Buy a Lot of
Groceries That Are On Sale or Promotion," 2013

Wellness and Nutrition

Wellness a Concern for Many Grocery Shoppers
Table 2-5: Attitudes of Grocery Shoppers Towards Food and Health,2013 (percent of grocery shoppers)
Certain Foods Have a High Wellness Profile

Table 2-6: Attitudes of Grocery Shoppers Towards Healthy Foods,2013 (percent of grocery shoppers)


Whole Grain, Multi-Grain the Most Appealing Characteristics

Table 2-7: Characteristics Sought When Buying Food Products, 2013(percent of grocery shoppers)


Wellness Concerns Help Drive Purchase Decisions for One in Two

Grocery Shoppers

Figure 2-7: Percent of Grocery Shoppers Agreeing "The Groceries I Choose Are Determined in Part by Specific Wellness Goals and Concerns," 2013

Marketers and Retailers Need to Do More

Table 2-8: Attitudes of Grocery Shoppers Toward Responsibility for Eating Healthfully, 2013 (percent of grocery shoppers)


Nutritional Content of Foods Important

Table 2-9: Attitudes of Grocery Shoppers Toward Nutrition, 2013(percent of grocery shoppers)


Shoppers Seek Specific Nutritional Benefits

Figure 2-8: Frequency of Buying Foods and Beverages for Specific Nutritional Ingredients, 2013
Figure 2-9: Frequency of Buying Foods and Beverages for Specific Health Concerns, 2013


"Low/No/Free" Characteristics Sought When Buying Food Products

Table 2-10: "Low/No/Free" Characteristics Sought When Buying Food Products, 2013 (percent of grocery shoppers)

"High" Characteristics Sought When Buying Food Products

Table 2-11: "High" Characteristics Sought When Buying Food Products, 2013 (percent of grocery shoppers)


Highly Processed Foods an Issue for More than Half of Shoppers

Table 2-12: Attitudes of Grocery Shoppers Toward Highly Processed Foods, 2013 (percent of grocery shoppers)


Health-Enhancing Food and Beverage Products Favored

Table 2-13: Attitudes of Grocery Shoppers Toward Foods Designed to Promote Health and Nutrition, 2013


Food Restrictions Matter to a Substantial Minority

Figure 2-8: Percent of Grocery Shoppers Agreeing, "Food Restrictions,Food Avoidances, or Food Allergies Play and Important Role in

What My Household Eats," 2013
Many Shoppers Worried About Food Safety

Table 2-14: Attitudes of Grocery Shoppers Toward Food Safety, 2013


Many Shoppers Skeptical of Label Claims

Table 2-15: Attitudes of Grocery Shoppers Toward Trustworthiness, 2013 (percent of grocery shoppers)


Shoppers Also Avoiding Growth Hormones and GMOs

Table 2-16: Attitudes of Grocery Shoppers Toward Growth Hormones and GMOs, 2013

Which Foods Shoppers Want

Fresh Fruits and Vegetables the Most Important Shopping Draw

Table 2-17: Most Important Products in Choosing a Grocery Store, 2013 (percent of grocery shoppers)


Two Out of Three Purchase Store Brands

Table 2-18: Attitudes of Grocery Shoppers Toward Brands and Store Brands, 2013
Figure 2-9: Percent of Grocery Shoppers Who Bought Store Brand Groceries During Their Most Recent Grocery Shopping Trip, 2013


Store-Prepared Food Items Attract Many Grocery Shoppers

Table 2-19: Type of Products Purchased on Most Recent Grocery Shopping Trip, 2013 (percent of grocery shoppers)
Table 2-20: Attitudes of Grocery Shoppers Toward Ready-to-Eat Meal Items, 2013


Almost Two out of Three Like Trying New Foods

Table 2-21: Attitudes of Grocery Shoppers Toward New, Spicy, and Ethnic Foods, 2013
Figure 2-10: Percent of Grocery Shoppers Who Bought

International/Foreign Groceries During Their Most Recent Grocery Shopping Trip, 2013
Kids Influence Parents' Grocery Choices

Figure 2-11: Percent of Parents Agreeing "My Kids Play an Important


Role in the Groceries I Choose," 2013

Chapter 3 Highlights
Chapter 3: Retail Overview
Introduction

A Broad Selection of Retail Channels
Total Retail Food and Beverage Sales Almost $640 Billion in 2013
Table 3-1: U.S. Retail Sales of Foods and Beverages, 2009-2013 (inmillions of dollars)
Estimates from Other Sources
Figure 3-1: Sales of Food-at-Home and Food-Away-from-Home,1960-2012 (in billions of dollars)

Market Composition

C-Stores Outnumber Supermarkets Almost Five to One
Supermarkets Lead Food and Beverage Market with 53% Share

Figure 3-2: Share of Food and Beverage Dollar Sales by Retail Channel, 2012 (percent)


Government Data Underestimate Sales Through Supercenters, Warehouse Clubs, and Convenience Stores

Figure 3-3: Food-At-Home Sales by Type of Outlet, 2000-2011
Table 3-2: Food-at-Home Sales by Type of Outlet, 1993-2011

Market Outlook

An Industry in Flux
Consumers Still Spending-Shy
10% of Pre-tax Income Goes for Food

Table 3-3: Average Annual Expenditures and Income of All Consumers Units and Percent Changes, 2008-2011


Grocery Sales Trend Higher
Food Prices Projected to Rise 2.5% to 3.5% in 2013

Market Projections

Retail Food and Beverage Sales Will Near $800 Billion by 2018
Table 3-4: U.S. Retail Sales of Foods and Beverages, 2013-2018 (inmillions of dollars)


The Competitive Landscape

The Top 20 U.S. Food Retailers
Table 3-5: Top 20 U.S. Retailers of Foods and Beverages, as of June 2013 (in billions of dollars)
Recent Mergers, Acquisitions, and Divestments

Competition for Retail Sales

More Types of Stores Focusing on Foods
More Actual Stores

Figure 3-4: Net Change in U.S. Store Count for Selected Retail Chains, 2012


Multi-Channel Shopping

Table 3-6: Consumer Packaged Goods Household Penetration by Retail Channel, 2012 (percent)

Store Design

Small Is Big—and More Convenient
Retailers Retrofitting Spaces

Private Label

Total Private Label Foods & Beverages Top $104 Billion in 2012

Table 3-7: U.S. Retail Sales of Private Label Foods and Beverages,2008-2016 (in millions of dollars)

Private Label Penetration Varies by Category and Retailer
Consumers Widely Accepting of Private Label


Loyalty Programs

The Debate Over Loyalty Cards
Gas Rewards

Illustration 3-1: Safeway's Gas Rewards Points Program

Going Digital

Technology Changing How Consumers Shop for Groceries
Handheld Scanners in Retail Stores
Will Digital Coupons Replace Paper?
Online Grocery Shopping and Home Delivery

Fresh Foods

Emphasis on Fresh Foods Continues to Grow
Refocusing on the Center Store
Natural and Organic Foods Remain a Fast-Growing Area of
Opportunity
Locally Grown Produce


In-Store Foodservice

Prepared Foods Drive Traffic and Profits
Prepared Foods Grow in Popularity and Sophistication
Illustration 3-2: Prepared Foods at King Food Markets' MarketSquare

Health and Wellness
Retailers Becoming Arbiters of Wellness and Nutrition
Management
In-Store Dietitians a Growing Competitive Weapon for
Supermarkets

Illustration 3-3: Hy-Vee, an In-Store Dietitians Pioneer


Retailers' Nutrition Ratings
Chapter 4 Highlights
Chapter 4: Grocery Channel Trends

Grocery Channel Leads Food Sales

Figure 4-1: Growth of Sales at Supermarkets and Grocery Stores, 2000-2011 (percent)


Kroger, Safeway the Largest Supermarket Operators

Table 4-1: Top 10 U.S. Supermarket Chains, 2012 (in billions of dollars, percent, and number)


The Kroger Co.

Illustration 4-1: A Kroger Marketplace Store
Kroger's Data Advantage
Private Label Another Competitive Strength
Kroger Acquiring Harris Teeter
Using Technology to Improve Customer Service

Safeway Tweaks Store Formats

Lifestyle Format Stung by Recession
Illustration 4-2: Gondolas Add Interest to Safeway's Lifestyle Stores
Safeway Going Forward
Strong Private Brands Focus
Loyalty Marketing
Online Grocery Delivery Service Not a Growth Vehicle

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

The New, Trimmer Supervalu

Publix a Public Favorite

A Publix Fight with Walmart
Illustration 4-3: A Publix Ad Fights Back at Walmart


Ahold and Delhaize: Two Foreign-Owned Groups

Ahold USA Is Reshaping Retail
Illustration 4-4: Ahold's Stop & Shop Offers ScanIt!, a Mobile App for
Smartphones
Delhaize America Trims its Portfolio
Bloom, a Concept Ahead of its Time
Illustration 4-5: Shopping Cart Featuring a Map of Bloom's Innovative
Store Layout

The Natural Foods Channel

Whole Foods Market Continues to Surge

Illustration 4-6: The Crowd at Whole Foods Market's Detroit Store Opening
Ethical Focus Continues
Will Whole Foods Open a Health Resort?


Natural Foods Competitors Coming Up Fast

Sprouts Farmers Market LLC Plans IPO
Natural Grocers by Vitamin Cottage Also Planning Major Expansion
Fresh Thyme Farmers Market Just Starting Up
The Fresh Market Expanding Westward
Will Wild Oats Return?

The Ethnic Foods Channel

Ethnic Grocery Chains Proliferate

Illustration 4-7: Ethnic Chain Food Bazaar Slogan

The Specialty Food Store Channel

Specialty Food Stores
Trader Joe's

Illustration 4-8: Whimsical Banner on Trader Joe's Website

Chapter 5 Highlights
Chapter 5: Value Channel Trends
Supercenters, Mass Merchandisers, Warehouse Clubs, and Dollar Stores

Supercenters and Mass Merchandisers
Walmart—The Nation's Largest Food Retailer

Rebounding from the Recession
Walmart Steps Up Small Formats
Illustration 5-1: Walmart Neighborhood Market Store in Chicago
Walmart Struggles to Keep Shelves Stocked; Upgrades Fresh
Produce
Walmart TV Ads Target Local Grocery Competitors
Walmart Testing Mobile Checkout
…and Home Delivery of Groceries

Target Is Targeting Foods

Target Continues Remodeling Stores to Add Fresh Foods
Target Also Testing Smaller-Format Stores
Target Fashion Ads Spotlight Groceries
Illustration 5-2: Target's "Everyday Collection: Bake Sale" TV Commercial
Target Testing Social Media to Drive Sales

Warehouse Clubs

Warehouse Clubs Serve Consumers and Businesses
Costco Wholesale Corp.

Illustration 5-3: Costco's In-House Monthly Magazine, The Costco Connection
Sam's Club Seeks to Catch Up with Costco in Foods
BJ's Wholesale Club

Dollar Stores

Dollar Stores Growing Rapidly, Adding More Food
Dollar General: More Locations than Any Other Retailer

Illustration 5-4: Television Commercial Showing Dollar General Market Stores


Family Dollar Carries Mostly Brand Names
Dollar Tree Inc.: $1 All the Time

Limited Assortment Chains

Limited Assortment Grocery Stores Offer Fewer Choices, Bigger Savings
ALDI

Illustration 5-5: Billboard Advertising ALDI Limited Assortment Stores

Chapter 6 Highlights
Chapter 6: Convenience Channel Trends
Convenience Stores and Drugstores Ramping Up Foods
Convenience Stores
C-Stores Thriving
Foods and Beverages More Than 45% of C-Store In-Store Revenues
C-Stores a Growing Competitor for Foodservice Dollars
7-Eleven Expanding Rapidly

Illustration 6-1: 7-Eleven's Corporate Webpage

Fresh & Easy: The British Are Leaving

The Fresh & Easy Model
Tesco Also Imported its Own Infrastructure
The Post-Mortem
Illustration 6-2: Fresh & Easy is Telling Customers It's Still Open


Sheetz and Wawa Enjoy Regional Loyalty

Sheetz, Inc. 191
Illustration 6-3: TV Commercial Featuring Sheetz' Touchscreen Menu
Wawa, Inc. 192
Illustration 6-4: A Wawa Convenience Store


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

Food Helps Drugstores Fight Back as Retail Lines Blur
Changes Rooted in Healthcare

Adding Food Is Not Without Risk


Walgreens "Well Experience" Model

Walgreens Creates "Food Oases"
Walgreens "Flagship" Stores Feature Upscale Prepared Foods
Illustration 6-5: Walgreens Flagship Store in Hollywood
Duane Reade Sets Foodservice Examples

CVS Caremark Clustering Stores into Eight Types
Rite Aid's "Wellness" Stores Integrate Pharmacy and Front-End
Chapter 7 Highlights
Chapter 7: Alternative Channel Trends
Online Shopping

Online Grocery Services
Online Grocery Business Models
Who Grocery-Shops Online
The Major Online Players: AmazonFresh, FreshDirect, and Peapod
AmazonFresh Expands to Los Angeles

Illustration 7-1: AmazonFresh Has Expanded its Grocery Delivery to Los Angeles

Profitable? Or a Strategic Foot in the Door?
FreshDirect Focuses on Premium Fresh Foods

Illustration 7-2: FreshDirect's Website Focuses on Premium Fresh Foods

Peapod Uses Supermarkets to Fulfill Orders

Illustration 7-3: A Peapod Mobile Ad in Philadelphia


Other Online Grocery Services

Alice.com: Direct-to-Consumer from CPG Marketers
Illustration 7-4: The Pantry Section on Alice.com
CobornDelivers: Partnering with General Mills for Frozen Meals
Illustration 7-5: The Website for Betty Crocker Kitchens
FarmStores.com
Google Pilots Google Shopping Express in San Francisco
Instacart Making Waves in San Francisco Bay Area
Illustration 7-6: Instacart Lets Shoppers Choose From Brick-and-Mortar Stores
mySupermarket Lets Consumers Comparison-Shop Groceries
Illustration 7-7: Pantry Categories Available on mySupermarket.com
MyWebGrocer.com: Marketing Services for Brick-and-Mortar Grocers
Relay Foods: Consumers Pick-Up from Delivery Trucks
Illustration 7-8: Relay Foods' Online Service Delivery Trucks
Safeway, Inc.: Online Shopping and Delivery from Some Local Stores
Walmart To Go Grocery Delivery Service in Beta Tests
Illustration 7-9: Walmart To Go Coupon
U.K. Is Most Developed Market for Online Grocery Shopping
France: Retailers Offer Drive-Through Pick-Up Points
Illustration 7-10: A Chronodrive Location in France
Japan: Seven & I and 7-Eleven Offer Online Grocery Services
South Korea: Tesco's Home Plus Launches Virtual Supermarkets
Illustration 7-11: Demonstration of Tesco's HomePlus Mobile Shopping App
China: Yihaodian Pioneers "Augmented Reality" Stores
Illustration 7-12: Browsing Items in Yihaodian's Virtual Supermarket

Vending Machines

Vending Machines Offer Convenience 24/7
Micro Markets

Illustration 7-13: A Canteen Vending Micro Market


Healthier Products Coming to Vending Machines
Vending Machines that Sell Fresh Fruit and Vegetables
Customizable Combos

Illustration 7-14: Coca-Cola's Freestyle Vending Machine

Farmers Markets and Community Supported Agriculture

Farmers' Market Count Grows 68% since 2008, to Over 7,800
Figure 7-1: Growth in Number of Farmers' Markets, 1994-2012
Two Types of Farmers' Markets

Illustration 7-15: Preston Maring, MD, the Kaiser Permanente Physician Who Started Its Hospital-Based Farmers Markets

Community Supported Agriculture Programs (CSAs)


Other Alternative Venues

Pop-Up Stores

Illustration 7-16: Giant Food's Pop-Up Supermarket at Dover Speedway


Food Trucks
Other Alternative Channels Target Impulse Sales

To order this report:
Food_Retailing Industry: The Future of Food Retailing in the U.S.: Shopper Insights and Market Opportunities, 4th Edition

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