Marketing Analysis : The Grocery Industry

The grocery industry has a relatively high market commonality; a lot of grocery stores are somewhat related in terms of technologies used, labor force and the products or services offered in the stores. Differentiation with other competitors is key for survival in this highly competitive industry.

Trader Joe’s is in the broad market of grocery retailers, a market where the top 10 revenue-generating companies accounted for over $360 billion in sales in 2011. This market is saturated with supermarkets (Publix and Kroger), large discount retailers (Wal-Mart and Target), premium retailers (Whole Foods and Fresh Market), warehouse clubs (Costco and Sam’s Club), and “hard discount” retailers (Dollar General). With this large variation in grocer strategies, the market is heavily penetrated and competition is fierce. Supermarkets are continually losing market share in grocery sales (51 percent in 2011 as opposed to 66 percent in 2001) as players like Wal-Mart and Costco continue to generate more revenue. Although the supermarket share is decreasing, the overall grocery market is steadily increasing as the population of the United States increases. People always need to eat, so there will always be a

1. The grocery industry is a commoditized industry, which makes it difficult for grocers to sustain through differentiation. Buyer power is high and thus, cost leadership and operational efficiencies are critical. There is fierce competition amongst various grocery stores, with the main players such as Loblaw and A&P holding multi-banner stores in various market segments. Traditional grocery stores also lose some of their market share to drug stores, convenience stores and other retailers who have entered the industry. Threat of substitutes from fast-food and take- away outlets is not as prevalent, since many grocery stores have started stocking ready-to-eat meals and have deli services available for consumers. Competitive

This results from the fact that it is a mature segment with many well established companies vying for market share. The industry is highly consolidated and very fragmented. To grow their businesses, companies rely heavily on mergers and acquisitions to capture additional market share. Historically, the grocery industry has been characterized by slow growth which results in strong price competition and the development of aggressive marketing campaigns between existing firms. Perceived product quality and strong brand recognition by consumers are the basis of competition among firms in the industry. The source of General Mills’ competitive advantage lies in its ability to develop innovative products and highly reputable brands. As a result, they hold cost leadership positions across a number of grocery categories. Exhibit 1 shows the top US companies according to their sale of packaged foods globally. Market leaders include Kraft Foods, PepsiCo, Nestle, Mars, Kellogg, and General Mills, however, neither company possess an overwhelming share of global sales. This is in part due to the large degree of product diversity throughout the industry and the strong brand rivalry of each competitor’s labels.

This essay will use the Porter’s five forces to analyse the supermarket industry in the US, and I will make a decision on whether the US supermarket industry is attractiveness based on its overall profitability level.

In the United States, the food retail industry is absolutely massive. According to Statista, this industry brings in nearly 5.27 trillion dollars annually and 594.4 billion of that is from grocery store sales. In this market, the 20-ton gorilla in the room is Walmart, racking in nearly 20% of the entire market at around 118 billion dollars in 2013 according to the Harvard Business School case study. Following Walmart, Kroger and Costco own the biggest next largest slices bringing in 76 billion and 71 billion respectively. In this highly competitive market that has some of the smallest margins of any industry it can be tough to get ahead and even tougher to grow. However, Trader Joe’s has managed to pierce what was once a very small world

Operating on very thin profit margins, players in the supermarket industry traditionally either focus on a premium segment or follow a discounter strategy at the low end. Premium players address educated and more price elastic consumers who value healthy, natural and organic food; the share of perishable items for these players is normally distinctly higher. Players that focus on a discounter strategy offer a higher share of simple necessity items and value price competitiveness over premium features like healthiness or organic origin. Independently of the focused customer group it is imperative for players in the supermarket industry to be cost efficient and optimize operations

Grocery shopping is more diversified and evolved than ever before. Individuals across the nation have access to everything from exotic products to unique delivery services. Often, specialty stores have limited locations whereas specialty services have a limited reach. However, two retailers have expanded to hundreds of locations while adhering to unexpected market positioning for previously untargeted market segments. Whole Foods Market and Trader Joe’s have become household names while also innovating beyond regional and national traditional chains. Despite comparable size in

In the current retail food industry there are numerous competitors fighting for the same dollar. It is important for each company to identify their target market, identify their competitors, and then build their marketing plan. The information below will detail Kudler Fine Foods marketing strategy which includes expanding its services, improving its efficiency of operations, and increasing the customer purchase cycle. The paper will also discuss areas where Kudler Fine Foods needs to further their market research.

Larger stores also offer people the convenience of additional services along with their shopping, for example post office, pharmacy and opticians. By addressing consumer’s expectations and using their buyer power they can offer a choice of products to reflect consumer’s diverse budgetary, dietary, ethical and environmental requirements. Furthermore their global buyer power enables consumers to benefit from choosing exotic produce all year round. With 30,000,000 customers (Bevan cited in Allen, 2009) choosing to use the big four supermarkets on a weekly basis it would suggest that they provide a format that consumers want.

The grocery industry is highly fragmented, with a multitude of strong regional players (Safeway, Publix, Kroeger, Wegmans, etc.). The largest grocery retailer in the United States is Wal-Mart, with an estimated 33% share. Other major retailers are targeting this segment of the industry, focused on a relatively narrow selection of key commodity foods at relatively low prices (Forbes, 2011). Whole Foods competes in a segment occupied by differentiated grocery players including Trader Joe's, Fresh Market and a highly fragmented selection of local and regional upscale and health-conscious grocery stores. The big players in the industry usually carry ranges of organic and natural products as well, siphoning off some business from Whole Foods. As Whole Foods grows, it comes into competition with mainstream grocery retailers more frequently (McLaughlin & Martin, 2009).

The grocery retail industry worldwide has grown in recent years to become one of the most intensely competitive industries due to the continuous amounts of new entrants. A grocery retailer is one that sells food and other general household items. Hypermarkets, supermarkets, discounters and small grocery retailers are all under the grocery retail umbrella. Between 2003 and 2008, the grocery retailing industry accounted for 45% of store-based retail values sales over the world. The figures

General Mills is a company that has strategically developed and growth through mergers and acquisitions. Mergers are the fusion of two companies that join forces to compete in the market. There are two types of merger: Horizontal merger on which the company acquires a competitor and vertical merger, on which the fusion is with a supplier. Acquisitions, on the other hand occurs when a company buys another company and become the property of the buyer. Thorough study of the market has made General Mills maintains a leader position on the food industry through more than 100 years in the market. According to a business encyclopedia, Strategy is a plan a company develops to reach a determine objective and reflects the company’s strength,

There are 92,796 grocery stores in the UK and the market value increase by 19.5% in the last 5 years and according to IGD forecast the UK grocery market should reach £203bn by 2019. But what we can see in the figure 1 that from 2009 to 2014 annual grow in the grocery market start decreasing from 4.9% in 2009 to 2.8% in 2014. One of the reason for this is difficult economic conditions which had an effect for consumer spending. Consumers choose to spend less money on food by buying less food or by looking for cheaper places. Retail market is diversified into three main sectors: Hypermarket and superstores which accounts for 42.3% of retail market, convenience stores 21.4% and small supermarkets 20.3% (Figure 3). So about 84% of sales are done in these three sectors. The biggest 4 retail chains in UK are: Tesco which takes 28.7% market share, Asda has 17.3%, Sainsbury’s 16.6% and Morrison’s 11%. (Figure 2) So, if we will sum up 4 biggest retail market chains we will have about ¾ of market share. Finally, a strong characteristic of this sector is competition with price wars and a

Inside the front doors of a grocery store, customers are presented with a diverse, vibrant display of fresh fruits and vegetables. With its inviting rainbow of bright colors, the produce section leads past the wafting, sweets smells of bread and pastries in the bakery and through winding aisles stocked with an assortment of goods. Linings the aisles and fillings shelves are rows and rows of boxes of pasta, pre-made meals, processed foods, and more snacks and sweets than one would know what to do with. Grocery stores present shoppers with a myriad of choices. The shelves and displays are filled with a variety of different brands and options to choose from, which offers customers a tough and potentially stressful decision when shopping. However, before a customer decides upon a specific brand or item, whether that happens to be a name-brand product, competitor, or store-brand, they are faced with an even more important choice; they must first make a decision on whether they want to buy whole foods and produce, such as fruits, vegetables, whole grains, and other healthy choices, or more processed “junk” foods like sugary drinks and snacks or enriched breads and pasta. Not only must costumers decide between specific brands and deals, but they must also choose which of these types of food is best for them and their interests. Consumers must constantly weigh the different factors that are presented when comparing foods; between price, ingredients, health, availability, and overall