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Grocery Analysis

Delivered April 11th, 2019. Contributors: Chidile S., Praise O., Leonard L., Khen R., Prafful K., Funmi A., Rosalyn D., Francis and

Part
01
of eight
Part
01

Grocery Category Drivers

In 2017, the top 5 category drivers for the US grocery stores are grocery (food), meat, produce, dairy, and frozen food. This ranking was based on the sales generated by each product category in the US.

METHODOLOGY

To address this request, we began our search by going through news publications such as Forbes, PR Newswire, IBIS World, among other sites but we could not find data the top 5 category drivers for grocery stores by revenue. We could only find information around the trends and the specialty food stores industry in the US, among others.

Next, we changed our research strategy by combing through statistical sites and statistics aggregators such as Statista and Statistics Brain while limiting our search to only 2017-2019 as data for 2018 was unavailable. We were only able to unearth data for 2017 from Statista that listed product categories that drove sales in supermarkets in the US for that year.

We went further by checking Grocers Associations in America to get the latest report on the top 5 category drivers for grocery stores from the National Grocers Association but the data was unavailable. Hence, we concluded that there was limited data available in the public domain for the just concluded year, 2018, and as such, we reported on the year 2017. This 2017 data from Statista focused on the top product category across the US supermarkets. However, we found that the grocery retail industry uses the terms 'grocery stores' and 'supermarkets' interchangeably. More so, "50% of U.S. households say that supermarkets are their primary shopping location for groceries." These are the reasons why we provided the data on the top product categories in the US supermarkets for the top product categories in the US grocery stores.

We also provided some useful information on grocery products ranked by sales in the year 2016. While this list was ranked according to sales, not all the sales figures were listed for the products.

TOP CATEGORY DRIVERS FOR THE US GROCERY STORES

For 2017, the top 5 category drivers based on sales according to Statista are as follows:
Grocery (food) — $124.94 billion 
Meat — $51.61 billion 
Produce — $45.41 billion 
Dairy — $30.97 billion 
Frozen food — $27.66 billion 

USEFUL FINDINGS

According to Date Check Pro, the top grocery items in the US ranked by revenue in 2016 include soda, milk, bread, beer, salty snacks, cheese, frozen foods, cereals, wine, and cigarettes. Soda products generated $12 billion in sales, milk products generated $11.2 billion in sales, and cheese products generated $7.6 billion in sales per year.

"The retail grocery industry considers grocery stores and supermarkets an interchangeable term" and, "50% of U.S. households say that supermarkets are their primary shopping location for groceries, with the average family spending $110 per week on food to prepare and eat at home."

Part
02
of eight
Part
02

Grocery Category Drivers: Heatables

After conducting extensive research, we were unable to identify the top five drivers of the pre-packaged heatable foods category for US grocery stores, as individual grocery stores can prepare pre-packaged consumables, thus fragmenting the market, and because no publication is publicly available for the topic. However, we identified that a culture of snacking and a high rate of processed food consumption are two drivers of shelf-to-table heatable foods in US grocery stores. We have presented the details of our findings in the research brief below, as well as the strategies used to determine that the requested information is unavailable.

RESEARCH STRATEGY

We began the research by searching for industry studies and market reports that could provide the top drivers of pre-packaged heatable foods for grocery stores in the US. However, most of the reports that we found, provided by leading research firms such as Global Industry Analysts and Infinium Global Research, provided details for overall microwavable foods. Such foods include all frozen, refrigerated and shelf-stable foods/meals. As such, we obtained limited information for non-frozen pre-packaged foods/meals. We, however, identified some drivers of the overall shelf-stable foods/meals segment.
As a result of our findings, we conducted an additional search to identify any industry reports or market studies regarding the U.S. shelf-stable foods/meals market and U.S. ambient ready foods/meals market to find the requested information. However, we could not find any report that specifically addressed the shelf-stable or ambient ready meals market from any leading market research firms.
The sources that we checked include, but are not limited to, Forrester Research, IDC, Euromonitor International, Frost & Sullivan, Markets & Markets, among others. Again, most of the reports found using this strategy focused on the overall microwavable foods/meals with the inclusion of frozen and refrigerated foods.

Next, we searched for any information on the providers of shelf-stable foods/meals. The idea here was to study such providers and identify leading/top categories of pre-packaged consumables sold in grocery stores. However, none of the research reports mentioned earlier provided a pre-compiled list of such providers that could be used to answer the question. Afterward, we searched through various industry publications related to grocery stores from sites such as Grocery Dive and The Grocer, which provided general business information on the providers of shelf-stable foods/meals. Through these articles, we were able to identify drivers for pre-packaged consumables in grocery stores.

As a last resort, we checked through various leading media outlets including but not limited to Forbes, New York Times, Wall Street Journal, Financial Times, Business Insider, Fortune, and Bloomberg, among others for any useful information. The idea here was to find any news article or press release that could provide any trends related to the pre-packaged heatable foods category in grocery stores. However, most of the news articles found on Forbes only provide general information on shelf-stable foods/meals and why they are gaining over frozen meals or meal kits. However, these articles did not provide useful information to answer the question completely.

CATEGORIES OF PRE-PACKAGED CONSUMABLES IN THE U.S.

In 2019, WW (formerly known as Weight Watchers) launched six fresh meal options through Hy-Vee grocery stores including "grilled chicken tacos and a dragon bowl with Thai peanut sauce." Ready-to-eat meals in the U.S. consist of meat, poultry, fish, rice, pasta, vegetables, and often come with packets of sauce or seasoning. Unlike meal kits, ready-to-eat meals are available for breakfast, lunch, and dinner.

SOME DRIVERS OF SHELF-STABLE HEATABLE FOODS IN US GROCERY STORES

The U.S. has established a culture of snacking. US consumers have a high rate of processed food consumption, as they prefer to eat meals that can be prepared quickly (fast foods). Consumers in the U.S. are losing interest in meal kits wherein they would have to prepare the entire meal at home using the ingredients provided in the kits. The shift from meal kits is as a result of less time-consuming preferences/quick meal options. American consumers are also moving away from frozen dinner options to more freshly-prepared meals. Amazon and 915 Labs have adopted microwave-assisted thermal sterilization as a method of preserving food. The technique involves placing sealed foods in pressurized water and heating them in a microwave to retain the natural flavor, texture, and nutrients in the food.

GLOBAL DRIVERS OF SHELF-STABLE HEATABLE FOODS

Some global drivers of shelf-stable heatable foods include the increase in the number of working women, innovations in microwave packaging, at-home food consumption preference, and the growing value for convenience and ease of meal preparation.

Part
03
of eight
Part
03

Private Label Brand Growth

Private label brands have been on the rise in recent years. This change has been driven by a number of factors, among them change in consumer demands as well as the ability by grocers to experiment with new premium offerings. Private labels continue to experience a resurgence in popularity and are significantly changing the way consumers do their shopping. This research looks at how private label grocery brands are growing in comparison to standard brands.

GROWTH OF PRIVATE LABEL GROCERY BRANDS COMPARED TO STANDARD BRANDS

According to a report by Nielsen, private label brands are growing three times faster than national brands. The report further says that a big chunk of this growth is in premium brands, which account for nearly one-third of dollar volume and accounted for 8% of the growth in the segment in 2017. In 2017, store brand dollar sales increased eight times to 3.2% from 0.4% reported in 2016.

Another report by the Private Label Manufacturers' Association (PLMA) shows that private-label sales grew 2.5% in 2014, versus 1.1% for national brands. PLMA says in the current economic conditions, private label brands tend to be 25% to 50% cheaper compared to national brands.

At the start of 2018, private label was growing by 4.1% compared to national brands which were growing by 1.4%. This is according to a report by Cadent Consulting Group. The report further says that private label is expected to grow at an annual rate of 5% over the next three years. Millennials are leading the way in private label purchases, filling 32% of their baskets with private label products. 95% of millennials surveyed said they would purchase the same amount of private brand items the following year, while half would purchase more.

SUPPLY DRIVERS BEHIND ADOPTION OF PRIVATE LABELS

There are three supply-related issues that are driving growth of private labels- the need to differentiate, cost control, and having a variety of options. Many consumers are seeking convenient ways of shopping, a trend that has sparked competition between grocers and mass retailers and e-commerce players. In addition, many retailers are stocking private label brands because they allow them remove or reduce marketing costs.

PRIVATE label SHARE COULD GROW 25% IN NEXT DECADE

Private label's share is expected to grow to 25% in the next decade. Many retailers project that “organic” private label will grow 7.7% annually over the next three years, almost twice as fast as “value” private label.

In addition to grocery, private label is expected to open channels in other sectors like health, beauty, wellness and pet products.

Part
04
of eight
Part
04

Grocery Product or Service Growth

The top growing grocery products or services categories in the US are Sauces, Condiments & Dressing, savory snack products, and packaged foods. While the top grocery services are omnichannel shopping settings and in-store experiences.

Methodology

We started the search by identifying the top grocery products that were sold in the US in the past year. Unfortunately, the results from the search were too general and included different products sold in grocery stores such as milk, bread, soda, and the likes. We then concentrated our search on key metrics such as revenue, annual sales, and market growth, but this strategy did not yield any useful results.

We decided to focus our search into industry reports and market reports during the last two years. We looked into reliable sources such as Nielsen, Hexa Research, Allied Markets, Grandview Research, and Packaged Facts. We were able to determine the top grocery categories using this search, and this included chilled ready meat, staple pantry items, savory appetizers and snack, prepared salads, beverages, meat packaged meals, frozen fish, pre-packaged foods, meal kits, fresh produce (fruits and vegetable), specialist ingredients, and saucers, condiments & dressing.

After this process, we decided to determine as to which of these categories are popular among Americans. We looked into famous and known grocery stores such as Amazon Prime, Kroger Co, Albertsons Companies, Safeway, Wal-Mart, and Publix Super Markets Inc, to help us determine the category that is most popular with Americans. After an extensive search into each of these companies, and with the help of other sources such as Forbes and Winsight Grocery Business Supermarket News, we were able to find the right categories. These categories are pre-packaged foods and meal kits, savory appetizers, specialist ingredients, and saucers, condiments & dressing. After this, we focused on determining the market size of the categories and the growth and chose the top three categories with the biggest market size and highest growth.

We then searched for the top grocery services in the US. We looked into reliable databases such as Forbes, Supermarket News, and Grocery Dive among others. From this search, we were able to identify several grocery services that are transforming the grocery landscape, and these are delivery services, Omni-channels shopping experiences, natural wellness, premiumization of grocery products, and customization of in-store experiences. We identified the top grocery services by choosing a category that is commonly pointed out by industry experts.

Grocery Products

Sauces, Condiments, and Dressing

Sauces, condiments, and dressings are all essential for any household. As of 2019, the revenue of these products have amounted to $42.72 million, and it is expected to grow with a CAGR of 2.84% in the years of 2017-2021. This growth in the market is being led by three factors namely, the growing demand for healthier sauce options, a growing likeness to international cuisine, and the increase of disposable income from workers all around the world. Additionally, organic sauces are becoming part of the trend, and it is predicted to be one of the key drivers of the products in the US during the next few years. The increase of health-conscious consumers is driving this demand for organic products.

Savory Snack Products

The snack industry is one of the biggest markets in the world. In 2017, it was reported that savory snack products had seen an increase of 3.2% in retail sales, totaling $46.6 billion in sales in the US. The first strongest-growing segment of savory snack products is vegetables, pulse, and bread chips, with a CAGR of 9.1% in the years of 2013 to 2017. The second strongest-growing segment is “other savory snacks,” which is dominated by high-protein meat snacks and trail mixes. It has a sales value of $5.7 billion in 2017 with a CAGR of 5.4% in the years 2013 to 2017. Additionally, the current market is driven by ready-to-eat brands and health-focused products.

Packaged Foods

The increase of professional and busier lifestyles has led to the growth of packaged foods. In 2016, the packaged foods industry had generated revenue totaling to $735.5 billion. Additionally, the market is expected to grow by a CAGR of 4.5% in the years 2017 to 2025. The market is driven by three factors, consumer health, and wellness, growing disposable income, and busier work schedules.

Grocery Services

Omni-Channel Experiences

Convenience is fueling the grocery services category. This compelled more grocery stores to adopt a more omnichannel experience, which includes online shopping channels, pick-up deliveries, and in-store experiences. The omnichannel grocery landscape has an estimated $1.01 trillion in its industry.

Furthermore, the omnichannel strategy has given consumers the chance enjoy shopping while making it convenient for them by giving them the chance to manage their purchases online and having their products delivered to their door step. A study from Harvard Business Review found that 73% of 46,000 consumers use multiple channels when they shop. In addition to this, the study also found that consumers that use multiple channels for shopping tend to be more loyal, hence, making them spend more. Additionally, in a survey conducted by Unata found that 31% of US consumers are likely to shop online for groceries and 80% of these consumers are willing to do so again. 68% of those who have shopped online have claimed that they would switch to another grocer that can provide a better digital experience.

Moreover, it was found that click-and-collect purchases are linking the gap between online and offline retail. It was found that click-and-collect purchases are responsible for nearly half (48%) of all online grocery purchases. This information was found during the 52-week period in 2018, which ended on August 25, 2018.

In-Store Shopping Experiences

Grocery stores are finding ways to improve their physical stores, by upgrading consumers’ shopping experiences and dedicating places for consuming packaged foods. Many grocers are reinventing their stores and making them more personalized and interactive. Transformation is essential to all grocers as it is a significant driver of grocery stores in the US. Additionally, it was found that consumers are not only comparing grocery stores to one another; they are also comparing it to other shopping experiences that they have encountered across different industries.
Part
05
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Part
05

Grocery Revenue Drivers

The primary areas driving revenue for grocery chains in the US include the organic (perishable) produce category sales, other category goods & services (e.g., membership fee), fuel category, pharmacy category, and the non-perishable/general merchandise categories such as health and beauty care, and natural foods. Although direct information on the primary areas driving revenue for grocery chains in the US is not available publicly, using the major grocery chains such as Kroger, Safeway, and Costco located in the US, we were able to provide the requested information.

Below we have provided a deep dive in our methodology and findings.

METHODOLOGY

To find the primary areas driving revenue for grocery chains in the US, we first searched for precompiled information through media reports, market analysis, company annual reports, and others. Unfortunately, there were no such precompiled reports found. So, we assumed such a broad study is yet to be conducted or not available to the public.

Next, we tried to search for granular pieces of information such as percentages of revenue in order to triangulate the total revenue derived from various categories of products and services of grocery including products, services, home meal kits, in-store restaurants/cafes, and the like. Again, there were no such reports available.

Then, we searched for the top grocery chains in the US. The insights obtained from the Balance SMB revealed that Costco, Kroger, Albertson's (Safeway), and Publix are among the leading providers of grocery services and products in America. Later, we searched for the top drivers of revenue for the identified grocery chains. We prioritized our findings based on the revenues reported by various grocery companies. Due to the limited availability of information on the overall market, we used large chains such as Kroger, Safeway, and Costco as a proxy to represent the entire market.

Grocery Revenue Drivers

The primary areas driving revenue for grocery chains in the US are as follows:

1. ORGANIC (PERISHABLE) PRODUCE CATEGORY

Why it is considered a top driver of revenue:
Costco is one of the largest US-based grocery and retail service providers. In 2018, Costco had $138.43 billion in annual revenue. According to a 2018 Organic Produce Network web publication, the sale of Costco organic produce is $4 billion.

For 2018, the annual revenue from organic produce sales on Kroger had reached $1 billion. Kroger has a dedicated team for procurement that partners with over 300 organic produce growers as well as suppliers annually to bring its customers a wide selection of organic vegetables and fruits. According to its 2017 annual report, Kroger's annual revenue consists of $29.145 million primarily from the sales of produce, including floral, meat, deli, seafood, bakery, and freshly prepared items. This represented 23.8% of annual sales.

2. OTHER CATEGORY (E.G. MEMBERSHIP FEES)

Why it is considered a top driver of revenue:
Based on the Motley Fool 2018 report, about 75% of Costco's profit comes from the membership service fee. This profit is possible because Costco relies on ensuring that its customers renew their memberships to benefit from its services yearly. The "other category" of products and services consists primarily of sales that relate to jewelry stores, food production plants sold to outside customers, data analytical services, variable interest entities, as well as specialty pharmacy, digital coupon services, in-store health clinics, and online sales made by Vitacost.com. This category accounted for $4.141 billion of Kroger's sales in 2017 which was 3.3% of the total revenue for that period. The other category of Safeway had $711.7 million representing 1.2% of total annual revenue in 2017.

3. FUEL CATEGORY

Why it is considered a top driver of revenue:
According to the OPIS Global Head for Energy Analysis Tom Kloza, Costco's 500 gas stations recently made more than $9 billion in its 2016 fuel category sales. The annual report of Kroger revealed that fuel sale was the major driver for $16.246 billion in its 2017 revenue. This accounted for 13.2% of Kroger's revenue in that year. The fuel category of Safeway had $3.104 billion which accounted for 5.2% of its annual revenue in 2017.

4. PHARMACY CATEGORY

Why it is considered a top driver of revenue:
In 2017, pharmacy services and products accounted for about $10.752 billion i.e., 8.8% of Kroger's revenue. Another 2017 report by Drug Topics revealed that Kroger Company had $10.8 billion estimated yearly revenue from its pharmacy category operations and sales, while Costco Wholesale Corp., had about $2.6 billion in annual revenue from its pharmacy category within the same period. In 2017, the pharmacy category of Safeway witnessed $5.002 billion, a total of 8.3% of annual revenue.

5. NON-PERISHABLE/GENERAL MERCHANDISE CATEGORY SUCH AS HEALTH AND BEAUTY CARE AND NATURAL FOODS

Why it is considered a top driver of revenue:
The 2017 annual report of Kroger revealed that the non-perishable category that consists primarily of grocery, general merchandise, health as well as beauty care, and natural foods accounted for $62.378 billion which is 50.9% of yearly revenue.

According to the annual report of Safeway, its non-perishable category had annual revenue of $26.522 billion, amounting to 44.3% of annual revenue. The nonperishable category of Safeway is made up of general merchandise (e.g., health as well as beauty), grocery, and frozen foods.



Part
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Part
06

Grocery Store Profit Margins

The typical profit margins of grocery stores in the United States ranges from 1% to 3%. Traditionally, grocery stores are among businesses in the United States with the lowest profit margins with an industry average of 1.6% in 2017. Please see below our methodology that details our approach to this research and attempts to locate information about the breakdown of profit margins into private label and branded foods. We have also presented below our detailed research findings and helpful related findings.

Research methodology

We started our research by searching for pre-compiled information in order to provide the overall average profit margins and a breakdown of private label and branded foods of grocery stores in the United States. We searched through credible industry and business news sources such as Forbes, CNN, NBC, and BBC, however, we only found information about grocery store profit margin, gross profit margin, and how to compute the profit margin. We were unable to find any information about the breakdown of private label versus branded food profit margins of grocery stores.
We next searched through websites, annual reports, press releases, and investor articles of well-known grocery stores in the United States such as Costco, WinCO, Trader Joe's, Fry's, Aldi and Whole Foods hoping to find their profit margins segregated by private label and branded foods. However, following a thorough search of these sources we were unable to find the required information since only overall profit margins were presented.
Finally, we broadened our scope by searching within the aforementioned sources for information that had been published earlier than Wonder's recommended two-year time frame. However, this search was also futile and we could find nothing on the breakdown of private label and branded foods profit margins. Following our extensive search, we concluded that this information is not publicly available because grocers in the United States do not presently segregate their profit margins by private label and branded food.

GROCERY STORE PROFIT MARGINS

  • Supermarket or groceries are among the businesses that have the lowest profit margins.
  • Depending on the item sold, the profit margin of grocery stores typically ranges from 1% to 3%.
  • Walmart's profit margin in the first three quarters of 2017 was 2.1% slightly above the grocery industry average profit margin, which was 1.6%.
  • The profit margin in the grocery industry has remained around 1% for some time.
  • Supermarkets in the United States has an estimated 1% to 3% average profit margin.

PRIVATE LABEL versus BRANDED FOODS — helpful findings

  • Supermarkets make an additional 8 to 10% profit margin from private label products compared to branded products.
  •  85% of retailers in the United States said that investing in private label products had improved their profit margins.
  • Private labels are considered a major factor in the power relations between producers and retailers of packaged goods because they offer higher profit margins.
  • Groceries sell private label products at prices which are 20% to 40% percent below national brands because research has shown that customers are willing to pay 20% to 25% less for private labels.
Part
07
of eight
Part
07

Major US Grocery Players

 Kroger, Albertsons Company Inc., Ahold Delhaize USA, Publix Super Markets Inc., and H. E. Butt Grocery Company are the top 5 grocery companies in the United States by revenue. The companies have stores in 35 states, 35 states, 23 states, 7 states, and 1 state respectively. Below we have provided a deep dive into our research strategy and our findings.

Methodology

In order to determine the top 5 grocery companies in the United States by annual revenue, we conducted a specialized search on Hoovers for the grocery industry. We analyzed the findings to select United States companies that had the highest revenue in the entire industry. We then cross-referenced the findings for each company with their annual reports to confirm the annual revenue findings and obtain the most current research. We then corroborated our rankings through sites like Bloomberg and the BalanceSMB. Since these and other findings had conflicting information, we decided that the analysis of Hoovers was the most legitimate list as it was corroborated by the most current annual reports available.

To determine the executive personnel for each company we analyzed each company website to find company information regarding executive officers and buying personnel. For companies that did not have these people listed on their websites, we then scoured company profiles for the companies on sites like Bloomberg and Crunchbase. The only company that we were unable to find a C-Suite buying employee for was Publix Super Markets Inc. We scoured industry reports, news publications and articles for any mentions of personnel that have buying power. Unfortunately, because the company is private, personnel information was not publicly available excluding chief officers.

The Kroger Company

 The Kroger Company generated $121.2 billion in 2018. The company has 29 sub brands including Dillons, Jay C Food Stores, VitaCost, Fry's Food Stores, Pick 'N Save, Smiths, King Soopers, Kroger Specialty Pharmacy, Foods Co., Copps, Bakers, Mariano's, Gerbes, Home Chef, Harris, Teeter, Metro Market, Roundy's, QFC, Kroger Personal Finance, Pay Less Super Market, 8451, Ryler Foods, The Little Clinic, Fred Meyer, Kroger Corporate Brands & Manufacturing, City Market, Fred Meyer Jewelers, Ralph's, Food4Less, and Owen's. Kroger has stores in 35 states and the District of Columbia. The company does not have a Cheif Marketing Officer, however, Stuart W. Aitken is in charge of marketing as the Senior Vice President of Alternative Business. Additionally, Mary Ellen Adcock is the C-Suite person in charge of buying as the Group Vice President of Retail Operations.

Albertsons Company Inc.

Albertsons Company Inc. generates an annual revenue of $59.924 billion. The company has 21 sub brands including ACME, Albertons, Albertsons Market, Amigos, Andronico's Community Markets, Carrs, Haggen, Jewel Osco, Lucky, Market Street, Pavilions, Olated, Randalls, Sageway, Safeway Community Markets, Shaws, Star Market, Tom Thumb, United Express, United Supermarkets, and Vons. Albertsons has stores in 35 states and the District of Columbia. Shane Sampson is the Chief Marketing Officer and Rick Bunnell is the Senior Vice President of Distribution and Procurement and is the C-Suite person in charge of buying.

Ahold Delhaize USA

 Ahold Delhaize USA generated $44 billion in revenue in 2018. The company has 6 sub brands in 23 states including Food Lion, Gian Martin's, Giant, Hannaford, Stop&Shop, and Peapod. Frans Muller is the President and Chief Executive Officer and Chairman Management Board and Executive Committee. According to his executive description, he is in charge of marketing and buying.

Publix Super Markets Inc.

 Publix Super Markets Inc. generated $36.395 billion in 2018. The company has 3 sub brands in 7 states including Publix Brand, Publix Premium, and Green Wise. According to his LinkedIn profile, Mark Irby is the Cheif Marketing Officer, however, there is no buying personnel publicly available.

H. E. Butt Grocery Company

H. E. Butt Grocery Company generates an annual revenue of $23.939 billion. The company has 10 sub brands all located in Texas including H.E.B., H.E.B. Select Ingredients, H.E.B. Organics, Hill Country Products, H‑E‑Buddy, Central Market, H‑E‑B Kitchen & Table, Cocinaware, ChefStyle, Sear ‘N Smoke, GTC, and Mia's Mirror. According to Bloomberg, the Cheif Merchant and Fincanial Officer in charge of marketing is Martin Otto and the President and Chief Operating Officer in charge of buying is Craig Boyan.
Part
08
of eight
Part
08

Grocery Margin Cutting Trends

Grocers selling more of their own private label brands to cut out the costs of a middleman, and increasingly stocking pre-packaged heatables are the key trends in the US grocery space around margin cutting.

METHODOLOGY

In order to establish some of the current trends around margin cutting in the US grocery space, your research team leveraged a combination of leading industry publications, databases and reports such as fooddive.com and grocerydive.com. We studied these reports, publications and databases to locate information within them that had been repeated more than once, and were able to find two current trends mentioned in more than one industry report. We have used these two trends to address this request. One emerging trend is that grocers are giving their own private brands more preference as compared to the national brands so that they can cut out the cost of middlemen and also gain a better control of their products. Grocers in the US are also increasing the stock of pre-packaged heatables especially in the form of meal kits in order to attract millennials and increase their profit margins. Below is a deep dive into our findings.

GROCERS ARE SELLING MORE OF THEIR PRIVATE BRANDS THAN THE NATIONAL BRANDS

According to Nielsen, one out of every five product sold in supermarkets in the United States in 2016 was a private label. Nielsen also released a report that states that the growth of private brands is three times faster than that of national brands. As a current trend around margin cutting in the US grocery space, grocers are selling more of their own private brands than national brands. Out of the private brands, the premium private brands seem to bring in most of the dollars. The grocers are selling premium private labels and they are doing better than the national brands. Some drivers behind this trend include:

  • the trend has been adopted to help turn consumers toward the companies' premium products and increase profit margins
COMPANIES AT THE FOREFRONT
 Costco is one of the companies at the forefront of this trend. The company's premium private brand, Kirkland Signature, contributes to 25% of Costco's sales. This is higher compared to the industry average where the sales of premium private brands make up 17% of the grocer's total sales. Another pacesetter is Kroger which sells $20 billion worth of private label brands a year and their Simple Truth brand brings in $2 billion annually. Aldi also sells private label brands in its stores including premium brands LiveGFree, organic SimplyNature, and Little Journey.

Grocers are increasingly stocking pre-packaged heatables

Grocers are targeting millennials by stocking pre-packaged heatables in form of meal kits. This trend is helping them increase their profit margins and reach growth potential. This trend is driven by millennial young consumers, 24% of whom said in a survey that they subscribe to a meal kit service and most of them do not have the time to prepare meals so they prefer pre-packaged heatables.
COMPANIES AT THE FOREFRONT OF THIS TREND
 Kroger is an example of a company that is leading in this trend by providing pre-packaged heatables. Through the company's owned Mariano’s, this service is even personalized as shoppers can select fresh cut meat, season it, and have it grilled according to their preferences. All these happen in-store.


Sources
Sources
From Part 01

Top 10 Grocery Items in America | Date Check Pro

datecheckpro.com

Top 10 Grocery Items in America _ Date Check Pro 1.pdf

drive.google.com

27 Retail Grocery Industry Statistics, Trends & Analysis

brandongaille.com
Publication Year: 2018

U.S. supermarket sales by product category 2017 | Statistic

statista.com
Publication Year: 2017

Supermarket sales in the US by category.JPG

drive.google.com
Publication Year: 2017
From Part 02
s

Microwavable foods market

strategyr.com
Publication Year: 2018

Microwavable Foods Market Size, Share, Trends, Analysis, Industry Report 2024 | IGR

infiniumglobalresearch.com
Publication Year: 2019
Quotes
  • "Among the geographies, North America dominated the microwavable food market. The growth in the North American region is due to the established culture of snacking, easy meal preparation and processed food consumption in the United States."

Hy-Vee rolls out WW Fresh quick-prep meals in 200 stores

grocerydive.com
Publication Year: 2019
Quotes
  • "A new line of healthy, quick-prep meals from WW (formerly Weight Watchers) is now available at more than 200 Hy-Vee grocery stores across the Midwest, according to a WW press release. "
  • "Each WW Fresh meal serves two people and will be priced around $14 to $20. Ingredients are pre-prepped, pre-cooked and only need to be combined and heated."
  • "There are six WW Fresh meal options coming to Hy-Vee, with selections such as grilled chicken tacos with roasted chipotle sauce and pineapple slaw, a dragon bowl with Thai peanut sauce, and lemon, chicken and kale salad with parmesan and almonds."
  • "Curated by WW, the new quick-prep meals are nourishing, convenient options for anyone looking to pick up a meal on the way home and enjoy a home-cooked dish, ready and on the table in minutes."
  • "Additionally, these meals are not defined as meal kits, and it’s possible that Hy-Vee and WW are hoping to catch the attention of customers who are cooling on the kit craze. "
  • "Shoppers today seem to be gravitating more toward quick meal options, and meal kit cooking can be time-consuming. "

Amazon developing range of long-life ambient ready meals

thegrocer.co.uk
Publication Year: 2017
Quotes
  • "The US giant has enlisted the help of start-up technology company 915 Labs to develop long-life ready meals, which could form a point of difference for its Amazon Fresh grocery delivery service."
  • "According to a Reuters report on Friday, meals such as beef stew and a vegetable frittata could be ready for sale as soon as next year."
  • "The ready meals will use a technique first designed for the US military - microwave assisted thermal sterilisation - which involves placing sealed packages of food in pressurised water and heating them in a microwave."
  • "According to 915 Labs, the method ensures the food keeps its natural flavour, texture and nutrients for up to a year. "

Easy eating: Convenience foods are vital in an on-the-go world

grocerydive.com
Publication Year: 2017
Quotes
  • "Manufacturers, grocery stores and meal kit providers are all willing to play the role of sous chef as today's consumers try to eat healthier in less time."
  • "Today's typical American dinner would not be possible without today’s convenience foods. From a rotisserie chicken and bagged salad mix, to the veggie side dish scooped up at the deli counter, many supper staples have in some way been pre-prepped."
  • "One of the most common reasons consumers turn to these "almost homemade" options is a lack of time."
  • "Moving away from the frozen dinner, you’re getting these options that are maybe recently prepared,” Amy Bentley, a professor in New York University's Department of Nutrition and Food Studies, told Food Dive. "
  • "The trend of convenience foods is continuing to grow in that direction. Grocery stores and food manufacturers are stepping into our busy lives to largely play the role of sous chef. "
  • "While consumers in years past were only able to buy ingredients for meals, today's full-service grocery store sells meals and components almost completely ready prepared."

Meal Kits Are DOA: The Next Big Trends In Food Are Being Driven By Amazon, ICON Meals and Mercatus

forbes.com
Publication Year: 2018
Quotes
  • "A meal kit is consists of ingredients to cook a meal, primarily meat, fish, poultry, vegetables, lettuce, sauce and spices. Consumers mix the ingredients and cook the meal according to the instructions provided. "
  • "Ready-made meals, prepared meals or ready-to-eat meals are meals that arrive already pre-cooked. The meals consist of meat, fish, poultry, pasta, rice, vegetables, and often come with packets of sauce or seasoning. "
  • "Unlike meal kits, which are primarily focused on dinner, ready-made meals are available for breakfast, lunch and dinner."
  • "Consumers only have to heat the meals in a microwave or an oven. Some ingredients may need to be mixed but little to no actual cooking is required."
From Part 03

Premium brands drive private label growth, study finds

grocerydive.com
Publication Year: 2018
Quotes
  • "Private label brands are growing three times faster than national brands, but the big bucks lie in premium ones, according to a Nielsen report. Premium private label sales account for nearly one-third of dollar volume and drove 8% of the growth in the segment in 2017."

It Pays to Be Premium

nielsen.com
Publication Year: 2018
Quotes
  • "STORE BRANDS WERE POSTING DOLLAR GROWTH OF MORE THAN 3X THE RATE OF BRANDED PRODUCTS BY THE END OF 2017"

Private Label Food Trends: More Choice in Retail Store Brands

thebalancesmb.com
Publication Year: 2018
Quotes
  • "More than 50% said they buy more store brands today vs. last year and also describe themselves as frequent store brand shoppers. The clincher for national brands: 80% of shoppers believe private label are as good as or better than national brands."

Report: Private label grocery sales are a mixed bag for Amazon

grocerydive.com
Publication Year: 2018
Quotes
  • "Despite having big ambitions in grocery, Amazon has a very small private label footprint in food and beverage. So to have a main brand like Happy Belly struggling is not a good sign, and could indicate a weakness for other retailers to exploit."

Private-Label Brands are Hungry for More of the Global Food Pie

nielsen.com
Publication Year: 2018
Quotes
  • "In the U.S., for example, we’ve seen a performance reversal among private-label and manufacturer-branded products over the past year. While manufacturers of all sizes saw flat or positive performance in the fourth quarter of 2016, store-branded products took the lead a year later, growing at 2%"

Private Label Isn’t What It Used to Be

progressivegrocer.com
Publication Year: 2018
Quotes
  • "The key advantage of convenience that grocers once enjoyed has been eliminated by intense competition from mass retailers and ecommerce players. Traditional retailers are struggling to create a reason for people to maintain their physical shopping habits. Unique store brands present a reason to go into a store."

Private Brand Share Could Grow 25% in Next Decade: Study

winsightgrocerybusiness.com
Publication Year: 2018
Quotes
  • "In fact, at the beginning of 2018, private label was growing at 4.1% compared to national brands at only 1.4%, according to a new study from Cadent Consulting Group. Retailers participating in the study said they expected private label to grow 5% annually over the next three years."

Private labels: How are they changing the grocery landscape?

smartbrief.com
Publication Year: 2018
Quotes
  • "“Consumers are seeking more premium food and beverage experiences across multiple categories and eating occasions,” she says. “Private label has innovated and is speaking to consumers’ desires for freshness; health and wellness needs; culinary values; and expectations for transparency and sustainability.”"

Total Consumer Report: March 2018

nielsen.com
Publication Year: 2018
Quotes
  • "As more consumers look to online opportunities, having seamless integration with digital offerings becomes vital for traditional FMCG businesses. It’s pivotal to efficiently manage distribution between online and offline platforms for optimal gain, especially as we see contraction in the number of physical stores. When it comes to capitalizing in-store, retailers should constantly evaluate their portfolios with an eye for what will drive future growth, and then expand carefully with innovation and divest purposefully where it’s needed."
From Part 04

Sauces & Condiments - United States | Statista Market Forecast

statista.com
Publication Year: 2019
Quotes
  • "Revenue in the Sauces & Condiments segment amounts to US$42,720m in 2019. "

Sauces, Dressings, and Condiments Market in the US 2017-2021

researchandmarkets.com
Quotes
  • "The analysts forecast the sauces, dressings, and condiments market in the US to grow at a CAGR of 2.84% during the period 2017-2021."

Sauces, Dressings, and Condiments Market in the US 2017-2021

technavio.com

Sector Trend Analysis – Savoury snacks in the United States - Agriculture and Agri-Food Canada (AAFC)

agr.gc.ca
Quotes
  • "The strongest-growing segment in this category is vegetable, pulse and bread chips, with a CAGR of 9.1% from 2013 to 2017."

U.S. Packaged Food Market Size Worth $1,197.8 Billion By 2025

grandviewresearch.com
Quotes
  • "The rise in the population of working professionals and their busier lifestyles has led to the growing need to cater the changing consumption patterns of masses."
  • "The U.S. generated a revenue of USD 735.5 billion in 2016 and is expected to grow at a CAGR of 4.5% from 2017 to 2025"

Packaged Food in the US

prnewswire.com
Publication Year: 2018

Grocery Omnichannel Sales Hit $1 Trillion in U.S.

winsightgrocerybusiness.com
Publication Year: 2018

How Omnichannel Retail Is Changing the Grocery Industry - Omnichannel Personalization SaaS Solution | NectarOM

nectarom.com
Publication Year: 2017

11 Trends That Will Shape Grocery in 2019

winsightgrocerybusiness.com
Publication Year: 2018

Smartphones to store transformations: 6 grocery trends to watch in 2019

grocerydive.com
Publication Year: 2019
From Part 05

Which Are The Largest U.S.-based Grocery and Retail Chains?

thebalancesmb.com
Publication Year: 2019

Kroger’s Annual Organic Produce Sales Reach $1B

progressivegrocer.com
Publication Year: 2018
Quotes
  • "The Kroger Co.’s organic produce business has achieved $1 billion in annual sales. The Cincinnati-based grocer “offers one of the largest organic produce departments in America, and we are proud to have led the way in making this category more mainstream, accessible and affordable,” noted SVP of Merchandising Robert Clark. In fact, Kroger now represents nearly 20 percent of the United States’ annual organic produce business, according to the company."
  • "Added Clark: “We have a dedicated procurement team that partners with more than 300 organic produce growers and suppliers every year to bring our customers an exciting selection of organic fruits and vegetables.” According to IRI, the U.S. organic produce market reached $5 billion in 2016, and it’s still growing."

Costco Organic Produce Sales reach $4 billion

organicproducenetwork.com
Publication Year: 2018
Quotes
  • "As one of the largest retailers of organic food sales in the United States, Costco announced their commitment to participating in the second annual Organic Grower Summit (OGS) this coming December 12-13, in Monterey, CA. Costco, with annual fresh produce sales of $4 billion, will sponsor two half-day events providing certified organic farmers and growers the opportunity to meet with Costco buyers."

Costco has strong finish to 2018 fiscal year with annual revenue of $138.43 billion

supermarketnews.com
Publication Year: 2018

Can Costco Regain Its Mojo? -- The Motley Fool

fool.com
Publication Year: 2018
Quotes
  • "Consumers join Costco partly to save money, but also for the fun of discovery in its stores. Since the chain makes about 75% of its profit from memberships, its business relies on making sure customers renew each year -- something it has done very well."

This Category Fuels Costco’s Success

fool.com
Publication Year: 2017
Quotes
  • "OPIS Global Head of Energy Analysis Tom Kloza explained that Costco has "the greatest ability to buy cheap and smart." He added that the company's 500 gas stations made over $9 billion in 2016 fuel sales in 2016."
a

Kroger's revenue breakdown

annualreports.com
Publication Year: 2018
d

Central-fill mail pharmacies make up 6 of the of the industry's largest 15 pharmacy companies

drugtopics.com
Publication Year: 2017
p

Safeway: Albertsons Companies, Inc Revenue

pdf.secdatabase.com
Publication Year: 2017
From Part 06

What Is the Profit Margin for a Supermarket?

smallbusiness.chron.com
Publication Year: 2018
a

Profit Margin

aei.org
Publication Year: 2018

The Industry Standard for Gross Margin in Groceries

smallbusiness.chron.com
Publication Year: 2018

Can Supermarkets Profit From Delivery? The Challenges Of Groceries On The Go

forbes.com
Publication Year: 2017

Love them or loathe them, private label products are taking over supermarket shelves

theconversation.com
Publication Year: 2019

Private-Label Products in the Manufacturer-Retailer Power Balance

tuck.dartmouth.edu
Publication Year: 2018
From Part 07
h

Kroger company profile

hoovers.com
Publication Year: 2019
h

Albertsons company profile

hoovers.com
Publication Year: 2019
h

Publix Super Market

hoovers.com
Publication Year: 2019
h

Ahold Delhaize USA Company Profile

hoovers.com
Publication Year: 2019
h

H. E. Butt Grocery company profile

hoovers.com
Publication Year: 2019

Overview – The Kroger Co.

ir.kroger.com
Publication Year: 2019

About Kroger - The Kroger Co.

thekrogerco.com
Publication Year: 2019

Management & Directors

ir.kroger.com

Our Leadership

albertsonscompanies.com
Publication Year: 2019

About Us

albertsonscompanies.com
Publication Year: 2019

My PublixMy Shopping ListMy OrdersMy Coupons

store.publix.com
Publication Year: 2019
f

Annual Report

file
Publication Year: 2019

Publix Brands

publix.com
Publication Year: 2019
l

CMO Publix

linkedin.com
Publication Year: 2019

Our brands in the United States

aholddelhaize.com
Publication Year: 2019

Our Family of Brands

heb.com
Publication Year: 2019

About H-E-B | Company History, Culture & Stores | H-E-B

careers.heb.com
b

Bloomberg - Are you a robot?

bloomberg.com
Publication Year: 2019

Leadership

aholddelhaize.com
Publication Year: 2019
h

Hoovers Grocery industry list by Revenue

hoovers.com
Publication Year: 2019

Which Are The Largest U.S.-based Grocery and Retail Chains Are Largest in the World?

thebalancesmb.com
Publication Year: 2018
From Part 08

Premium brands drive private label growth, study finds

grocerydive.com
Publication Year: 2018
Quotes
  • "Grocers prefer private label brands because they have more control of what goes into the products, according to the National Retail Federation's Stores magazine. They cut out middle-man costs, give retailers the ability to raise national brand prices and increase customer loyalty. "

Smartphones to store transformations: 6 grocery trends to watch in 2019

grocerydive.com
Publication Year: 2019

Why millennials are leading the way in prepared foods

fooddive.com
Publication Year: 2018
Quotes
  • "A growing number of supermarkets have also begun stocking meal kits in their prepared foods departments — a move that targets a service popular with young consumers. According to a survey conducted last year by technology firm Fluent LLC, 24% of millennials said they subscribe to a meal kit service, the highest percentage among any demographic."

Easy eating: Convenience foods are vital in an on-the-go world

fooddive.com
Publication Year: 2017
Quotes
  • "A recent addition to convenience foods is one that also reflects consumers’ desire to eat whole, healthy foods, but recognizes they don’t necessarily have the time to do the shopping and prep work to make a home cooked meal happen on a Tuesday night"