Supermarkets & Grocery Stores in the US

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Supermarkets & Grocery Stores in the USApril 2019 1

Shop smart: Increasing premium brand sales and healthy eating trends will spur growth

This report was provided to Illinois SBDC (2133312863)

by IBISWorld on 28 June 2019 in accordance with their license agreement with IBISWorld

IBISWorld Industry Report 44511

Supermarkets & Grocery Stores in the US

April 2019

Darshan Kalyani

2 About this Industry

2 Industry Definition 2 Main Activities 2 Similar Industries 3 Additional Resources

4 Industry at a Glance

5 Industry Performance

5 Executive Summary 5 Key External Drivers 7 Current Performance 9 Industry Outlook 12 Industry Life Cycle

14 Products and Markets

14 Supply Chain 14 Products and Services 16 Demand Determinants 17 Major Markets

18 International Trade 19 Business Locations

21 Competitive Landscape

21 Market Share Concentration 21 Key Success Factors 22 Cost Structure Benchmarks 23 Basis of Competition 24 Barriers to Entry 25 Industry Globalization

26 Major Companies

26 The Kroger Co. 27 Albertsons Companies LLC 28 Publix Super Markets Inc. 29 Ahold Delhaize 30 HEB Grocery Company LP 30 Meijer Inc. 30 ALDI US 31 Trader Joe's

31 Whole Foods Market Inc. 31 Wakefern Food Corporation 32 Walmart Inc.

33 Operating Conditions

33 Capital Intensity 34 Technology and Systems 35 Revenue Volatility 35 Regulation and Policy 36 Industry Assistance

37 Key Statistics

37 Industry Data 37 Annual Change 37 Key Ratios 38 Industry Financial Ratios

39 Jargon & Glossary

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About this Industry

Supermarkets & Grocery Stores in the USApril 2019 2

Industry Definition

The Supermarkets and Grocery Stores industry makes up the largest food retail channel in the United States. Establishments in this industry retail general lines of food products, including

fresh and prepared meats, poultry and seafood, canned and frozen foods, fresh fruits and vegetables and various dairy products. Delicatessens primarily retailing food are also included.

Main Activities

The primary activities of this industry are Retailing a general line of food Retailing health and beauty products

The major products and services in this industry are Beverages Dairy products Drugs and health products Fresh and frozen meat Frozen foods Fruit and vegetables Other foods Other nonfood items

Similar Industries

44512 Convenience Stores in the US Establishments in this industry primarily retail a limited line of goods, known as convenience stores or food marts (except those with fuel pumps).

44611 Pharmacies & Drug Stores in the US Establishments in this industry retail a range of prescription and over-the-counter medications, health and beauty items, toiletries and consumable goods directly to consumers on a walk-in basis.

44711 Gas Stations with Convenience Stores in the US Establishments in this industry primarily retail automotive fuels in combination with a convenience store or food mart.

45291 Warehouse Clubs & Supercenters in the US Establishments in this industry wholesale general groceries (but not as their primary activity), as well as general lines of new merchandise.

45439 Direct Selling Companies in the US Establishments in this industry retail frozen food and freezer plans via direct sales to residential customers.

Provided to: Illinois SBDC (2133312863) | 28 June 2019

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About this Industry

Supermarkets & Grocery Stores in the USApril 2019 3

Additional Resources

For additional information on this industry Food Marketing Institute

National Grocers Association

Supermarket News

The Association for Convenience & Fuel Retailing

The World Bank

IBISWorld writes over 1000 US

industry reports, which are updated up to four times a year. To see all reports, go to

Provided to: Illinois SBDC (2133312863) | 28 June 2019

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Supermarkets & Grocery Stores in the USApril 2019 4

Industry at a Glance

Supermarkets & Grocery Stores in 2019

Key Statistics Snapshot

Revenue

$654.6bn

Profit

$10.5bn

Annual Growth 14?19

0.9%

Wages

$66.5bn

Annual Growth 19?24

1.0%

Businesses

42,470

Market Share

The Kroger Co. 16.4% Albertsons Companies LLC 9.7% Publix Super Markets Inc. 5.7%

p. 26

Key External Drivers Per capita disposable income Agricultural price index Urban population Healthy eating index

% change % change

Revenue vs. employment growth

Per capita disposable income

4

4

3 2

2 0

1

-2 0

-1 Year 11 13 15 17 19 21 23 25

Revenue

Employment

Products and services segmentation (2019)

5.5%

Drugs and health products

3.7%

Fruit and vegetables

6.4%

Frozen foods

9.1%

Fresh and frozen meat

-4 Year

12 14 16 18 20 22 24

SOURCE: WWW.

35.0% Other foods

9.4%

Other nonfood items

p. 5

12.8%

Dairy products

18.1%

Beverages

Industry Structure

Life Cycle Stage Revenue Volatility Capital Intensity Industry Assistance Concentration Level

Mature Low Low Low Low

Regulation Level Technology Change Barriers to Entry Industry Globalization Competition Level

FOR ADDITIONAL STATISTICS AND TIME SERIES SEE THE APPENDIX ON PAGE 37

SOURCE: WWW.

Medium Medium Medium

Low High

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Supermarkets & Grocery Stores in the USApril 2019 5

Industry Performance

Executive Summary | Key External Drivers | Current Performance

Industry Outlook | Life Cycle Stage

Executive Summary

The Supermarkets and Grocery Stores industry has grown over the five years to 2019, benefiting from a strengthening economy. As per capita disposable income increased during the period, many consumers shifted to premium, organic and all-natural brands, helping lift industry revenue. Conversely, inflationary food costs have caused many consumers to continue purchasing private-label brands over the past five years. While a shift toward more generic goods curbs revenue growth, it helps operators maintain profit margins, as store brands are less costly to produce

Large operators engaged in a variety of mergers and acquisitions, as the saturated market prevented organic growth

than national brands. Overall, industry revenue is expected to grow an annualized 0.9% to $654.6 billion over the five years to 2019, including a 1.0% increase in 2019 alone.

Despite revenue growth during the period, industry operators experienced intensifying competition from alternative retailers. Consumers turned toward warehouse clubs and supercenters, such as Costco and Walmart, because of the cost savings and convenience of these retailers. Mass merchandisers are able to offer lower prices due to their scale of operations. Consumers also shifted

toward limited assortment and fresh format stores like Aldi and Trader Joe's that provide a simpler layout and primarily sell less costly store-brand products. Due to increased competition from a variety of retailers, many large national grocery chains offered big discounts and promotions to drive foot traffic to their stores and strengthen consumer loyalty. Large operators also engaged in a variety of mergers and acquisitions, as the saturated market prevented organic growth. Due to high consolidation costs and intense price competition, industry profitability is expected to increase only slightly during the period.

Over the five years to 2024, the industry is anticipated to grow steadily, resulting from rising discretionary income and consumer preferences. As health concerns intensify, more consumers will seek all-natural and organic products. Operators are also anticipated to benefit from steadier commodity markets that will cause input costs to rise much more conservatively than in the past. Consequently, industry revenue is forecast to rise at an annualized rate of 1.0% to $687.6 billion over the five years to 2024. Profit margins are expected to remain stable over the next five years as increasing competition persists but private-label brands and more efficient store layouts prevail.

Key External Drivers

Per capita disposable income Per capita disposable income determines an individual's ability to purchase discretionary goods and services. When disposable income declines, consumers limit purchases to essential items and more affordable brands, curbing industry revenue growth. Per capita disposable income is expected to increase in 2019,

representing a potential opportunity for the industry.

Agricultural price index The agricultural price index measures the prices received by farmers for all agricultural products, including livestock and crops. As prices increase, industry operators often raise the price of their

Provided to: Illinois SBDC (2133312863) | 28 June 2019

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