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This chapter presents information on foodstore sales
and sales growth, the share of food sales by retail segment,
industry structure, trends and developments in retail
food markets, and recent ERS research related to public
policy topics.
Sales and Sales Growth
The Nation's 210,000 traditional foodstores sold $548
billion of retail food and nonfood products in 2009. Grocery
stores, including supermarkets, accounted for the largest
share of foodstore sales (89.6 percent), followed by convenience
stores without gasoline (6.4 percent). Specialized foodstores,
including meat and seafood markets, produce markets, retail
bakeries, and candy and nut stores, accounted for the
remaining 4 percent of the total (see Glossary
for store type definitions).
In 2008 and 2009—a period of recession and economic uncertainty—traditional
grocery retailers experienced negative inflation-adjusted
growth. During the past decade, there were many years
in which grocery store sales growth (in current dollars)
exceeded the rate of inflation. Inflation-adjusted sales
growth was small, averaging 0.07 percent per year.
The slow and negative inflation-adjusted growth in annual
sales at traditional grocery stores was likely due in part
to increased competition from nontraditional food retailers—such
as warehouse clubs, supercenters, drugstores, and other
retailers—as more consumers economized on food spending.
Industry Structure
Sales by the 20 largest food retailers totaled $404.2
billion in 2009, amounting to 64.2 percent of U.S. grocery
store sales, an increase from 39.2 percent in 1992. Although
shares held by the largest 4, 8, and 20 supermarket and
supercenter retailers decreased slightly from 2008 to
2009, the longer term trend shows an increasing concentration
of sales among the Nation’s largest grocery retailers.
One contributing factor to such increases over the past
decade has been the rapid growth of Wal-Mart Supercenters.
Their food and nonfood grocery sales amounted to an estimated
$103.7 billion in 2009, making it the largest U.S. retailer
of grocery products. In comparison, second-place Kroger,
the largest traditional grocery retailer, had sales of
$65.6 billion in 2009.
Mergers and acquisitions contributed to increasing shares
of the largest 4, 8, and 20 grocery retailers during the
mid-to-late 1990s; however, divestitures and internal
growth have played the greatest role in changing industry
structure since 2007:
- The acquisition of 1,124 Albertson’s supermarkets
in 2006 by Supervalu boosted its ranking from the eighth-largest
grocery retailer in 2005 to the fourth-largest in 2009.
- In 2007, 12th-ranked A&P Tea Company acquired Pathmark, operator of 141 supermarkets in the New York metropolitan area.
- In 2007, Publix Supermarkets acquired 49 Albertson’s supermarkets located in Florida.
- Among natural foods and organic retailers, 20th-ranked
Whole Foods Market purchased Wild Oats, operator of
110 supermarkets, in 2007.
Underscoring internal growth, the combined sales of the
9th- through 20th-ranked retailers grew by 18.2 percent
between 2007 and 2009, while the largest four firms’
combined sales grew by 5.9 percent and the 5th- through
8th-largest firms’ combined sales grew by 6.5 percent.
Trends and Developments
Nontraditional stores
Since the late 1990s, nontraditional retailers have steadily
increased their relative share of food-at-home sales,
compared with traditional retailers. Nontraditional stores’
share of food-at-home sales increased from 18.6 percent
in 1999 to 27.8 percent in 2009 (traditional foodstores
and nonstore food sales—such as mail order, home delivery,
and direct sales by farms, processors, and wholesalers—account
for the remaining shares). Most of the growth in food
sales is due to supercenters and warehouse club stores,
whose sales more than doubled over the period. More recently,
dollar stores—such as Dollar General and Family Dollar—and
drugstores—such as Rite Aid, CVS, and Walgreens—have increased
sales by expanding retail food offerings.
Traditional foodstores
In response to the sales inroads made by nontraditional retailers, traditional grocers are expanding the number and types of product offerings, designing new store formats, and using innovative instore technologies. Hannaford Supermarkets, a division of Delhaize Group (Belgium), introduced “Guiding Stars,” a simplified nutrition label to help consumers make more healthful food choices. According to a recent ERS report, leading supermarket chains are expanding their private label (store brands) to meet the needs of economizing consumers. Many food retailers such as Safeway, Kroger, and Giant Eagle have added gasoline pumps in their parking lots and other locations. In addition, some supermarkets offer promotional tie-ins to grocery purchases, such as gasoline discounts, in an attempt to increase sales.
 With many consumers seeking organic and natural foods, traditional supermarkets have responded by adding such products to their shelves. Kroger, Giant Food, and Shaw’s all offer corporate-brand organic or natural products (Naturally Preferred, Nature’s Promise, and Wild Harvest). Publix has introduced its GreenWise supermarkets featuring organic produce, meats with no added hormones, and more healthful prepared foods, along with conventional grocery items.
Local foods
Rising consumer interest in knowing where food is produced
has sparked increases in purchases of locally grown food.
Supermarkets have responded by emphasizing local offerings
such as fresh fruits and vegetables, baked goods, meat,
poultry, and dairy products, depending on the location
and time of year. Safeway, Kroger, Food Lion, and H-E-B
Grocery Company are some of the largest supermarket chains
that promote a variety of locally grown or produced foods.
Other sources of local food include farm-direct and farmers’
markets. While many local foods are promoted as “organic”
or “natural,” retailers often claim that local foods support
local agriculture and are more environmentally friendly.
Food service
In competing for the consumer’s food dollar, foodservice operators, including restaurants, fast food outlets, and institutional foodservice operators in schools, hotels, and recreational sites, have increased their share of total food spending over the years. By 2009, food-away-from-home spending by households and businesses accounted for 48.6 percent of all food spending, up from 47.0 percent in 1999 and 45.2 percent in 1989. Prior to the current recession, the share of household spending for prepared foods and meals had risen as more women entered the workforce and household incomes increased.
In response, some supermarkets have expanded the variety of ready-to-eat entrees and meals in their prepared food departments. Many stores have added a seating area to challenge fast food outlets for business. For example, Wegman’s Food Markets, a Rochester, NY-based operator of 76 supermarkets, introduced the Market Café, an instore foodservice option containing a wide range of prepared and made-to-order foods. The annual sales of prepared foods sold in supermarkets are growing 4 to 4.5 percent annually, compared with 2 to 2.5 percent for other grocery products.
Public Policy Issues and Research
ERS has conducted research on major public policy topics
related to the retail food industry, including access
to affordable and nutritious food, the effect of prices
on healthy food choices, trends in the food marketing
system, and the development of local food systems (see
Recommended Readings).
Access to Affordable, Nutritious Food Is Limited
in "Food Deserts"—A recent
report on access to healthful, affordable food documented
the extent to which low-income households and neighborhoods
lack access to affordable and nutritious food. The study
used walking distances in urban areas to the nearest supermarket
or large grocery store to measure access. In rural areas,
driving distances were used to measure the level of access,
under the assumption that households have access to a
vehicle. Spatial analysis methods were employed to identify
both low-access and low-income areas. The study found
that in the United States, 23.5 million people live in
low-income neighborhoods and have low access (live more
than 1 mile from the nearest large grocery store or supermarket).
Of that total, 11.5 million persons, or 4.1 percent of
the U.S. population, had household incomes less than twice
the Federal Poverty Level, which qualifies them as low-income.
The study also found that 1.1 million rural households
did not have use of a vehicle and had low access.
How Much Lower Are Prices at Discount Stores?
An Examination of Retail Food Prices—Research
on food affordability found that food prices vary
depending on the location and type of store. National
comparisons of identical items showed that discount store
prices averaged 7.5 percent lower than prices in traditional
food retailers such as supermarkets, and discount store
prices were 3 to 28 percent lower among individual food
items. Within metropolitan areas, price differences between
nontraditional stores such as supercenters, warehouse
club stores, and dollar stores also varied by their combined
market share. In high-market share cities such as Atlanta
and San Antonio, the average price difference was 5.3
percent, while in low market share cities such as Philadelphia
and New York, the average price discount was 11.5 percent.
Can Food Stamps Do More to Improve Food Choices? An Economic Perspective—Stretching the Food Stamp Dollar: Regional Price Differences Affect Affordability of Food—Research on the role of prices in consumer food choices was intitiated due to concerns about obesity and obesity-related health issues. ERS studied regional food price differences and their effect on affordability for low-income households that participate in the Food Stamp Program, now called the Supplemental Nutrition Assistance Program (SNAP). Findings reveal that a family of four in the East and West regions could spend $32 to $48 more per month on food than the national average. In contrast, households in the South and Midwest could spend $12 to $28 less per month than the average U.S. household.
Fruit and Vegetable Consumption by Low-Income
Americans: Would a Price Reduction Make a Difference?—ERS
researchers also investigated the
effects of prices on fruit and vegetable consumption
by determining whether a price subsidy would encourage
low-income Americans to consume more of fruits and vegetables.
They estimated that a 10-percent subsidy would encourage
low-income Americans to increase their consumption of
fruits and vegetables by 2.1 to 5.2 percent, depending
on consumer sensitivity to prices.
Promoting Fruit and Vegetable Consumption: Are Coupons More Effective Than Pure Price Discounts?—Promotions can also increase fruit and vegetable consumption. ERS compared the effects on expenditures of coupons and price discounts, two methods of lowering the cost of fruits and vegetables. Researchers found that coupons influence consumer behavior through a price-discount effect and an informational/advertising effect. Lowering prices through a “10 percent off” coupon would increase average weekly quantities purchased of fruits and vegetables by 2 to 11 percent, compared with 5 to 6 percent for a pure price discount.
 Can Low-Income Americans Afford a Healthy Diet?—ERS researchers also examined whether households that receive food and nutrition assistance benefits can afford a healthy diet. They found those participants that qualify for the maximum benefit based on household composition can afford a healthy diet, while those that receive partial benefits may have more difficulty. For many Americans, achieving an affordable healthy diet will require reducing their expenditures on less nutritious foods.
Local Food Systems: Concepts, Impacts, and Issues—Consumer interest in the availability of food that is produced, marketed, and consumed locally is rising throughout the United States. ERS research on local food systems explored the distinguishing traits of local food products and the characteristics of local food production and distribution systems. The study provides a comprehensive overview of local food systems, including alternative definitions, estimates of market size and reach, the characteristics of local food consumers and producers, and an examination of early evidence on the economic and health impacts of such systems.
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