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FREQUENT SHOPPER & RETAILER ARTICLES

wpe4.gif (1222 bytes)      SN's Top 75 Retailers for 2009

 SUPERMARKET FACTS - INDUSTRY OVERVIEW 2004

  MARKETERS TARGET CONSUMERS THRU RETAILERS' FREQUENT-SHOPPER PROGRAM

DETERMINING HOW TO PROMOTE YOUR BRAND USING LOYALTY PROGRAM DATA

ONLY 15 PERCENT OF CUSTOMERS ARE LOYAL BUT REPRESENT 55 PERCENT OF SALES

SLOTTING ALLOWANCES IN THE SUPERMARKET INDUSTRY

FMI REPORTS ON CONSUMER ATTITUDES AND THE SUPERMARKET

FMI DISCUSSES BUILDING SHOPPER LOYALTY WITH STORE BRANDS

COMPETITION AMONG TRADITIONAL AND NEW CHANNELS IS INCREASING

 PRIVATE LABEL DIFFERENTIATES RETAILERS

CROSS-CHANNEL SHOPPING IS WIDESPREAD IN TODAY’S MARKETPLACE

WAL-MART ALTERS WAY GROCERY BUSINESS IS RUN

FREQUENT SHOPPER DATA IS UNDERUTILIZED ASSET IN THE CPG INDUSTRY 

 LOYALTY CARDS COMBINED WITH CHANNEL AND CONSUMER INSIGHTS BUILD LOYALTY & PROFITABLE GROWTH

SUPERMARKET NEWS TOP 75 US GROCERY STORES (SALES)

SUPERMARKET NEWS GLOBAL TOP 25

SUPERMARKET FACTS - INDUSTRY OVERVIEW 2002

DATA MINING LOYALTY PROGRAMS IS ESSENTIAL FOR ROI

TRADE DIMENSIONS REPORTS 2002 CHANNEL CHANGE STATISTICS

LATEST U.S. CONVENIENCE STORE COUNT AT 132,424 STORES

2001 SUPERMARKET SALES INCREASE 3.5 PERCENT TO $398.2 BILLION

WHOLESALE GROCERY COMPANIES MARKET SHARE

SHELF PRESENCE SHOWS INCREASE IN PRIVATE LABEL

THE TOP 50 SUPERMARKET COMPANIES FOR THE YEAR 2001

MANUFACTURERS PARTNER WITH RETAILERS TO EVALUATE FSP DATA

EXECUTION BELIEVED TO BE CRITICAL BARRIER TO TRADE PROMOTION SUCCESS

HOW TO DEVELOP A SMART CARD BASED LOYALTY PROGRAM

SUPERMARKET INDUSTRY WILL GROW THROUGH ACQUISITION

CREATING BRAND LOYALTY

FREQUENT SHOPPER/LOYALTY PROGRAMS SHOULD BE PLANNED CAREFULLY

SUPERCENTERS INCREASE MARKET SHARE

COUPONS KEEP BRAND LOYAL CUSTOMERS

PRIVATE-LABEL GROWTH EXCEEDS NATIONAL BRANDS

DATA MINING FREQUENT SHOPPER DATA

A.C. NIELSEN RELEASES FOURTH ANNUAL FREQUENT SHOPPER STUDY

EVALUATING TRADE SPENDING AND ITS EFFECT ON BRAND EQUITY USING FREQUENCY CARDS

ON-LINE RETAILERS AND SUCCESSFUL PROMOTIONS

DATA MINING FREQUENT SHOPPER PROGRAMS

FREQUENT SHOPPER & LOYALTY PROGRAMS

THE IMPORTANCE OF CUSTOMER LOYALTY

FREQUENT SHOPPER PROGRAMS CONTINUE TO GROW

MARKETING RELATED ARTICLES

COUPON RELATED ARTICLES

REBATE & PREMIUM FULFILLMENT ARTICLES

SWEEPSTAKES ARTICLES

wpe4.gif (1222 bytes)      SN's Top 75 Retailers for 2009

 

SN Top 75    SN's Top 75 Retailers for 2009

Wal-Mart Stores' stock shot up almost 18% in 2008, a period when the stock market plunged. This year the rankings don't convey the notable boost that will come to several wholesalers from pending or very recent acquisitions. Those wholesalers include C&S Wholesale Grocers, which just acquired the wholesale operations of Penn Traffic; Nash Finch Co., which will add three distribution centers from Grocers Supply Co.; Spartan Stores, which just acquired 17 VG Food & Pharmacy stores; and Central Grocers of Illinois, which is adding about 80% of the sales of Certified Grocers Midwest.

SN's Top 75 posted $893.08 billion in sales, up 7.6% over the year-ago total of $830.19 billion.

1.

Wal-Mart Stores

2.

Kroger Co.

3.

Costco Wholesale Corp.

4.

Supervalu

5.

Safeway

6.

Loblaw Cos.

7.

Publix Super Markets

8.

Ahold USA

9.

Delhaize America

10.

C&S Wholesale Grocers

11.

7-Eleven

12.

H.E. Butt Grocery Co.

13.

Sobeys

14.

Meijer

15.

Metro

16.

Wakefern Food Corp.

17.

BJ's Wholesale Club

18.

A&P

19.

Dollar General Corp.

20.

Giant Eagle

21.

Whole Foods Market

22.

Winn-Dixie Stores

23.

Trader Joe's Market

24.

Associated Wholesale Grocers

25.

Aldi

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SUPERMARKET FACTS - INDUSTRY OVERVIEW 2004

Number of employees- 2002

3.4 million

Total supermarket sales-2004

$457.4 billion

Number of supermarkets--2004 ($2 million or more in annual sales)

34,252

Net profit after taxes, 2003/2004

0.88%

Median Average Store Size in Square Feet

45,561

Weekly sales per supermarket 2003

$348,130

Percentage of disposable income spent on food--USDA figure for 2003
food-at-home
food away-from-home


6.1%
4.0

Weekly sales per square foot of selling area-2004

$8.68

Sales per customer transaction-2004

$24.64

Sales per labor hour-2004

$79.77

Average # of trips per week consumers make to the supermarket-2004

2.2

Source: Progressive Grocer 72nd Annual Report of the Grocery Industry - April 2005

KEY FACTS

Supermarket Sales

 

2004

2004

$ Sales Billions

% of Total

Supermarkets ($2,000,000 + )

457.4

100.0

Chain Supermarkets

386.4

84.5

Independent Supermarkets

71.1

15.5

Grocery (Under $2,000,000

17.5

N/A

Wholesale ClubStores*

32.6

N/A

Convenience**

114.0

N/A

Convenience/Gas Kiosk**

13.2

N/A

Number of Stores

 

2004

2004

 

Number

% of Total

Supermarkets ($2,000,000 + )

34,252

100.0

Chain Supermarkets

22,453

65.6

Independent Supermarkets

11,799

34.4

Grocery (under $2,000,000)

13,182

N/A

Wholesale Club Stores*

1,034

N/A

Convenience**

138,205

N/A

Convenience/Gas Kiosk**

25,205

N/A

Source: Progressive Grocer 72nd Annual Report of the Grocery Industry - April 2005

Median Average Store Size – Square Feet

2004

45,561

2003

44,000

2002

44,000

2001

44,000

2000

44,600

1999

44,843

1998

40,483

1997

39,260

1996

38,600

1995

37,200

1994

35,100

Source: Food Marketing Industry Speaks 1995 - 2005

Average Weekly Sales Per Supermarket

2003

$348,130

2002

$361,564

2001

$368,779

2000

$335,242

1999

$334,479

1998

$333,411

1997

$284,700

1996

$212,382

1995

$209,875

1994

$193,035

1993

$192,760

Source: Food Marketing Institute Industry Speaks 1993 - 2004

Weekly Household Grocery Expenses

Total

$ 92.50

Size of Household
One


$ 60.10

Two

$ 83.90

Three-Four

$110.50

Five or More

$136.40

Type of Household Children

$118.30

No Children

$82.30

Source: Food Marketing Institute, Trends in the United States: Consumer Attitudes and the Supermarket, 2005

Store Definitions

By Type of Store

Grocery Store — Any retail store selling a line of dry grocery, canned goods or nonfood items plus some perishable items.
Supermarket—Any full-line self-service grocery store generating a sales volume of $2 million or more annually
Convenience Store— Any full-line, self-service grocery store offering limited line of high-convenience items. Open long hours and provides easy access. The majority sell gasoline with an annual sales of $2 million or more.
Independent — An operator of fewer than 11 retail stores.
Chain — An operator of 11 or more retail stores.

By Store Format

Conventional Supermarket - The original supermarket format offering a full line of groceries, meat, and produce with at least $2 million in annual sales. Conventional stores will realize 9% of their sales in GM/HBC. These stores typically carry approximately 15,000 items, offer a service deli and frequently a service bakery.
Superstore - A larger version of the conventional supermarket with at least 40,000 square feet in total selling area and 25,000 items. Superstores offer an expanded selection of non-foods (at least 10% GM/HBC).
Food/Drug Combo - A combination of superstore and drug store under a single roof, with common checkouts. GM/HBC represents at least one-third of the selling area and approximately 15% of store sales. These stores also have a pharmacy.
Warehouse Store - A low-margin grocery store offering reduced variety, lower service levels, minimal decor, and a streamlined merchandising presentation, along with aggressive pricing. Generally, warehouse stores don't offer specialty departments, e.g., Xtra.
Super Warehouse - A high-volume, hybrid format of a superstore and a warehouse store. Super warehouse stores typically offer a full range of service departments, quality perishables, and reduced prices, e.g., Cub Foods.
Limited-Assortment Store - A "bare-bones," low-priced grocery store that provides very limited services and carries fewer than 2,000 items with limited-if any-perishables, e.g., Aldi and Sav-A-Lot.
Other - The small corner grocery store that carries a limited selection of staples and other convenience goods. These stores generate approximately $1 million in business annually.
Convenience Store (Traditional) - A small, higher-margin store that offers an edited selection of staple groceries, non-foods, and other convenience food items, i.e., ready-to-heat and ready-to-eat foods. The traditional format includes those stores that started out as strictly convenience stores but might also sell gasoline.
Convenience Store (Petroleum-Based) - The petroleum-based stores are primarily gas stations with a convenience store.

Non-Traditional Grocery

Hypermarket - A very large food and general merchandise store with approximately 180,000 square feet of selling space. While these stores typically devote as much as 75% of the selling area to general merchandise, the food-to-general merchandise sales ratio is typically 60/40, e.g., Bigg's.
Wholesale Club - A membership retail/wholesale hybrid with a varied selection and limited variety of products presented in a warehouse-type environment. These 120,000 square-foot stores have 60% to 70% GM/HBC and a grocery line dedicated to large sizes and bulk sales. Memberships include both business accounts and consumer groups, e.g., Sam's Club, Costco, and BJ's.
Mini-Club - A scaled-down version of the wholesale club. The mini-club is approximately one-fourth the size of a typical wholesale club and carries about 60% of the SKUs, including all of the major food and sundry departments and a limited line of merchandise (soft goods, office supplies, and opportunistic, one-time buys), e.g., Smart & Final. Some of these stores do not have membership fees and often operate as a "cash & carry."
Supercenters - A large food/drug combination store and mass merchandiser under a single roof. The supercenters offer a wide variety of food, as well as non-food merchandise. These stores average more than 170,000 square feet and typically devote as much as 40% of the space to grocery items, e.g., Wal-Mart, Kmart, Super Target, Meijer, and Fred Meyer.
Deep-Discount Drug Store - A low-margin, GM/HBC store with approximately 28,000 square feet of selling space and 25,000 SKUs. These stores typically carry fewer sizes but more GM/HBC brands than a supermarket. Food accounts for 20% of store sales, e.g., Phar-Mor and Drug Emporium.
Internet - An Internet-based grocery distribution operator. Included in this format are all Internet operators who use the Internet as the primary means of accepting grocery orders for home delivery or pickup. Also included are major food retailers that generate a portion of their sales through Internet-based sales. Internet suppliers typically offer 12,000 SKUs or more for home delivery, e.g. Peapod.

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        MARKETERS TARGET CONSUMERS THRU RETAILERS' FREQUENT-SHOPPER PROGRAM

Consumer Product Goods marketers are targeting consumer through retailers’ frequent-shopper programs to efficiently reach consumers at account-specific levels that can be effectively calculated.

Grocery chain retailers are under pressure from new formats and alternative retail channels (Wal-Mart) to maintain their market share. Their frequent-shopper programs provide consumer loyalty and valuable targeted marketing data that is their primary weapon against their competitors.

Marketers look for programs and retailers that will allow them to communicate to their target consumers directly rather than using more traditional 'mass' vehicles by providing a targeted offer based on the consumer's purchasing habits. Manufacturers have been proactive in card-based frequent-shopper programs including Coca-Cola, Kraft, Procter & Gamble, Pillsbury and Unilever. Retailers have data about individual consumers that manufacturers cannot gather on their own, including buying patterns, total basket purchases, predisposition to switch brands, and sensitivity to promotions.

Manufacturers typically fund basic co-branded promotions, including coupons, the cost of advertising, and in-store signage and may get involved with designing the program and assisting in the analysis of the data. Retailers are very protective of their customer data and many are very cautious in sharing that information with manufacturers for analysis and third-party analytic firms play an important role for theses trading partners. Retailers do not provide the identities of their consumers and the manufacturers analyze general purchase data, without identifying the individual consumers identity. Retailers and manufacturers should look for common goals and synergies from a customer perspective and focus on improving data analysis to evaluate the effectiveness of their marketing promotions.

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        DETERMINING HOW TO PROMOTE YOUR BRAND USING LOYALTY PROGRAM DATA

Retailers and manufacturers tend to look at the lift they get during promotions or they may get a little more complex and look at the incremental lift from the promotion. You can determine consumer lift by analyzing your loyalty programs customer card data to understand how many consumers purchased the product when it was promoted, whether or not they’re new consumers to the brand, new consumers to the category, and to look at their switching patterns to understand what they purchased before and if the promotion was truly incremental. If all the retailer did was switch people who were already purchasing in the category, then the retailer really didn’t gain any new consumers. You need to look at what happened after the promotion to the consumers who responded to the promotion. Did they stay with the brand, did they stay with the category, did they just switch to that brand during the promotion, or did they change and purchase that brand and become loyal to that brand long term?

That’s important to understand so you can really begin to understand the effect promotion has on consumers and what it has to do with loyalty. As a manufacturer, if you rewarded people who would have bought the product anyway and didn’t bring any new users to your brand, then you’ve really just sacrificed margin. The retailer needs to keep two years of data to really understand the effects of promotions on consumers in the future. You need a pre-period that is detailed enough to understand what consumers were doing before, and you need a post-period of some substance. Unfortunately, many retailers don’t keep data online for that long. So even if they wanted to do this analysis themselves, they do not have enough data online to be able to do it.

A good way to use promotion is to encourage people to come into that category even if the first purchase is on a discount. That’s what you want to do with targeted discounts because you leverage promotions to bring new consumers to your category, however, you want to bring new consumers into your category who will stay with it and also purchase your product at full revenue. Return-On-Investment (ROI) is a lot more than just gross margin. It’s understanding and building a loyal base of consumers who will shop your brand and your category and will shop it when it’s at full revenue as well as when it’s on discount. That’s where "margin blending" comes in because if you margin-blend a category, you look at all the brands and all the packages within the category to try and identify the brands that are not price sensitive, the brands that people will purchase anyway at full price. If they’re going to purchase it anyway, then there’s no point in discounting, because then all you’re doing is reducing profit out of the category.

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   ONLY 15 PERCENT OF CUSTOMERS ARE LOYAL BUT REPRESENT 55 PERCENT OF SALES

Retailers use their Frequent-Shopper Loyalty program sales data to tailor their product assortment to their most loyal shoppers.  Only 12 percent to 15 percent of customers are loyal to a single retailer, according to the Center for Retail Management at Northwestern University, but they represent between 55 percent and 70 percent of sales.  Nearly two-thirds of shopper (65 %) believe Frequent-Shopper Pogroms are important. More than 50 percent of retailers now offer Frequent-Shopper Programs and nearly two-thirds of program customers use their loyalty cards at least weekly and 84 percent at least once a month, according to the FMI, Trends in the United States: Consumer Attitudes & the Supermarket 2003.  Supercenters, warehouse-clubs, dollar stores and limited-assortment stores choose to offer everyday low prices.

A Frequent-Shopper or Loyalty-Marketing program is an electronic method of identifying customer purchases and translating that information on their shopping habits and preferences.  They identify the retailers’ most loyal customers, their buying habits and can offer the products and services that their best customers demand.  The retailer can analyze their shopping habits, refine marketing programs and fine-tune the product mix at the chain or individual store level. They can identify the promotions that appeal most to various customer groups and tell you when products were sold and whether they were sold on or off promotion, and the profit margin on each sale. Overall, shopper give food retailers high marks for their frequent-shopper programs as 41 percent rate them excellent and another 45 percent rate them as good.

A study by McKinsey & Company estimated that a Frequent-Shopper program’s first year can cost as much as $30 million, with annual maintenance and marketing costs reaching $5 million to $10 million.  Smaller retailers may be able to purchase of-the-shelf CRM (customer relationship management) software.

Retailers typically analyze data at the aggregate level, i.e. data from groups, not individuals. The key to the success of these programs is to interpret data from your loyalty program more quickly, cheaply and frequently.  Faced with intense price competition from Wal-Mart, food retailers must ensure that their programs offer both value and other customer benefits.

Retail loyalty cards have advanced as an aggressive marketing tool, with 82% of consumers participating in some form of loyalty program, according to a survey conducted by WSL Strategic Retail, New York City.  Supermarkets are the leader by a wide margin with 58% of consumers carrying a supermarket card and 82% trying to use the card every time they shop. About 17% will go out of their way to use the card. 

According to a Card-Based Marketing Report from Retail Systems Consulting and TDLinx, there are 12,849 supermarkets in the U.S. with card-based frequent shopper programs, representing 38% of supermarkets and 42% of the total ACV (estimated all commodity volume). CPG manufacturers are interested in frequent shopper programs due to targeting and measurability. Retailers have the ability to reach specific consumers based on past purchases, where manufacturers are limited mainly to customer self-reporting surveys that are often less than accurate. Retailers can also accurately measure consumer activity after a promotion. Retailers will not provide the names and addresses of their customers to manufacturers. Manufacturers need this information so they can evaluate whether or not they can move brand dollars from traditional vehicles, such as FSIs, into retailer frequent shopper programs.

Coverage is particularly strong in certain regions, for example, New England (48% of store count, 57% of ACV covered), Mid-Atlantic (42% of store count, 60% of ACV), and the Southwest (42% of store count and 48% of ACV). The other regions are Southeast (42% of stores, 38% of ACV), East Central (34% of stores, 38% of ACV), East Central (34% of stores, 43% of ACV), West Central (29% of stores, 39% of ACV), and Pacific (35% of stores, 37% of ACV.)  I estimate that an average of twenty percent of independents have frequent shopper programs.  Clearly the numbers prove 1) FS programs are growing, and 2) they have gained critical mass across the US. 

The growth is significant, especially when viewed over the last eight years.  In 1996 there were just over 4,000 U.S. stores with programs.  By 1999 there were 9,000 stores, or 29.6% of U.S. supermarkets, accounting for approximately 25% of the ACV.  In 2002, 30% of the stores (just over 10,000) had programs, with 44% of ACV covered.  The increase in the last few years came mainly from big chains rolling out their programs to all their stores, including Kroger, Albertson’s, and Winn-Dixie.  There need to be more cooperation between the manufacturers and retailers, and greater internal communication at retailers’ headquarters between marketing and category management. 

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    SLOTTING ALLOWANCES IN THE SUPERMARKET INDUSTRY

1.       What are slotting allowances?

Suppliers pay distributors slotting allowances for product placement on store shelves. Sometimes distributors request them, and sometimes suppliers offer them. Although common, these allowances are neither uniformly requested nor offered.

The most common allowances are for new products or new product introduction allowances. These may also cover premium product placements, such as on eye-level shelves or special displays; the cost to have products remain on shelves or pay-to-stay allowances; or the cost to retailers if a product fails.

2. How much are slotting allowances?

The amount varies depending on numerous factors, such as whether the supplier has a proven track record, whether consumer testing has been performed, whether the product is carried by competitors in the same market, and whether the supplier has a well-conceived advertising program. The amount can be as small as several hundred dollars to have a new product introduced in a single store to many thousands of dollars for a chain-wide promotion. In some instances, manufacturers provide free cases of new products to help retailers gauge consumer demand. Since each new product introduction is unique, these allowances are typically negotiated individually and no industry-wide numbers are available.

3. Why are slotting allowances used?

The principal reason is to cover the considerable costs to introduce a product, to remove the item that previously occupied the shelf space and to recover some of the investment in the likely event that the new product fails. Depending on how a new product is defined, the failure rate ranges up to 80 percent per year.

Each year, food retailers spend an average of $956,800 per store on new products that fail, according to a study of 1995 introductions by the market research firm Linton, Matysiak & Wilkes. The major reason cited for failures is a lack of market research. In many cases, manufacturers are using retailers to test-market new products. Through slotting allowances, manufacturers are, in effect, having the retailer conduct a live market trial instead of paying for test market research.

4. Why are new product introductions so costly?

About 100,000 grocery products are available on the market.  The typical supermarket has space for only 30,000 to 40,000 products, and the failure rate for new products is as high as 80 percent. With so many items competing for so little shelf space, new product introductions have become a high-cost, high-risk proposition. As many as 24 steps are needed to introduce a new item and another 10 to remove the one that occupied the space, according to a Deloitte & Touche study (Managing the Process of Introducing and Deleting Products in the Grocery and Drug Industry, 1990). Based on this study and current retail practices, these steps include:  

bullet

Evaluation by buyers or category managers.

bullet

Reprogramming computers for inventory management, category management, store deliveries, labor scheduling, shelf labels and scanners.

bullet

Providing space in the warehouse and back room and on the shelf. In many cases, the entire shelf must be reset (both physically and in computer plan-o-grams) to make room for the new product.

bullet

Verifying that the item has been set according to the plan-o-gram and that checkout registers scan it correctly.

bullet

Developing merchandising programs.

bullet

Changing accounting records, including bill-payment procedures for the new item.

bullet

Monitoring product performance.

bullet

Modifying advertising programs as needed.

bullet

Deleting existing items to create the necessary shelf space.

bullet

Many of these same activities are required for the product being removed, except in these cases the item must be deleted from all computer and financial records, merchandising efforts must be refocused and unsold products must be disposed of — often at a fraction of the original value.

5. Are slotting allowances offered for all products?

No. They are not offered for most established products or for new offerings that have a high likelihood of success.

Arguments for Slotting Allowances include:

bullet

Signal product quality and help retailers screen products.

bullet

Allocate the costs and risks associated with product introductions more equitably between trading partners.

bullet

Help retailers allocate shelf space more effectively.

bullet

Offer shelf space opportunities for valuable new products.

bullet

Facilitate lower retail prices.

Argument against Slotting Allowances include:

bullet

Enable retailers to exercise market power.

bullet

Undermine trading partner relationships.

bullet

Provide a mechanism for price discrimination.

bullet

Foreclose competitive opportunities for certain manufacturers and retailers.

bullet

Facilitate higher retail prices.

The true impact may depend on how the practice is applied. The Federal Trade Commission (FTC) takes the view that these issues need to be considered on a case-by-case basis as it reviews complaints.

8. Are slotting allowances legal?

According to Oct. 20, 1999, testimony by Willard K. Tom, deputy director of the FTC’s Bureau of Competition, before the House Judiciary Committee, the legality of slotting practices “can be determined only in light of all the surrounding facts and circumstances.” Even in cases where a small supplier cannot afford a high slotting fee, the practice can be deemed legal, he said, as long as the market remains competitive and consumers “receive the benefits of low prices and wide product selection.”

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    FMI REPORTS ON CONSUMER ATTITUDES AND THE SUPERMARKET

A study was presented at the 2003 FMI Conference called “Trends in the United States: Consumer Attitudes & the Supermarket, 2003” which revealed that alternative shopping channels continue to take value-driven consumers away from traditional grocery stores.

Resulting from the increased competition from supercenters and discount stores, only 79 percent of shoppers said a traditional supermarket was the primary grocery store, down from 81 percent in 2002, while 18 percent chose a discount store or a supercenter, up from 15 percent in 2002. There is a growing shopper base for supercenters, dollar stores and warehouse clubs.

Low prices gained in importance as 83 percent saying it was very important compared to 77 percent in 2001.  Shoppers who choose discount stores and supercenters instead of traditional supermarkets as their primary store generally have lower household incomes ($41,800 versus $49,500 for traditional grocery stores), are younger (median age 41.2 versus 44.8) and have larger households (3.3 percent versus 2.8 percent).  Discount and supercenter store shoppers are more price driven (92%) than traditional supermarket shoppers (82%).

Traditional shoppers rate higher than discount stores and 67 percent of primary traditional supermarket shoppers would recommend their stores compared to 60 percent of primary discount shoppers. Consumers believe the economy will not recover soon and were concerned with unemployment, problems with business ethics, terrorism, war with Iraq and rising fuel costs.  This resulted in consumer confidence dropping in February 2003 to the lowest level in more than nine years.  The five most frequently practiced cost-savings measures have remained constant:

·        Look for grocery specials in the newspaper (36%).

·        Participate in frequent-Shopper Programs (30%).

·        Stock up on sale items (27%).

·        Use cents-off coupons (21%).

·        Price comparisons (21%).

While the percentage of shoppers reporting their primary store offers Internet grocery shopping increased from 9 percent in 2000 to 16 percent in 2002, it dropped to 14 percent in 2003 with only 3 percent of the shoppers purchasing groceries online in the last 12 months. Sixty-nine percent said that they have Internet access versus 62 percent in 2000.

In 2003, the average household weekly grocery bill ranges from $52 for one person to $138 for large households of five or more people. On average, grocery shoppers eat their evening meal away from home 1.4 time per week with younger consumers and smaller households eating away from home more frequently than older shoppers and larger households.

Gasoline and self-checkouts have been quickly adopted by shoppers as 60 percent purchase gasoline and 53 percent use self-checkouts where available. Warehouse clubs, supercenters, dollar stores and convenience stores continue to expand in offering gasoline.

The number of consumers interested in purchasing irradiated products has increased from only 38 percent in 2000 to 57 percent in 2003 due primarily to the high level of concern regarding bacteria as a health risk.  Almost all shoppers (92 percent) of shoppers are aware of sell by dates on packaging with 89 percent saying that they frequently look at this information.  Food items most frequently checked are most perishables, uncooked meats and dairy products.

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    FMI DISCUSSES BUILDING SHOPPER LOYALTY WITH STORE BRANDS

As competition continues to grow to gain market share for the consumers grocery dollar, from new channel options such as Warehouse Clubs, Supercenters and Dollar Stores, store brands or private label products have become more important as they provide a unique difference from their competitors.  They also have the ability to provide store loyalty, increase profitability and improve customer satisfaction.

An FMI study called “Building Shopper Loyalty with Store Brands” indicated that store brand shoppers are as demanding about high quality products, good selection, convenient location, product availability and customer service and not simply lower prices.  There appears to be a shift in demographics from lower-income households to more affluent households, especially among premium store brands.  Ethnic shoppers (African Americans, Hispanics and Asians) are less inclined to purchase private label products, however this may change with target marketing strategies.

There is a direct correlation between store brand loyalty and store loyalty as shoppers who believe that their stores private label is important are likely to be loyal to that retailer.  Premium private label can attract new users to private label, especially from more affluent shoppers who are less price-sensitive but require high quality and value.

Category management is the key to success as factors that influence product selection varies widely across categories.  When price is not the most important factor, retailers must manage store brand pricing to ensure that the pricing supports the overall categories as well as the store brand strategies.  Marketing and merchandising strategies must be developed to increase market share including improved packaging, in-store sampling and communicating the high quality of the brand.

Store brands represent an estimated 17 percent of the $729 billion dollar grocery industry and the growth of store brands have averaged almost double that of national brands.  Store brand market share can increase as evidenced in England where private label has reached 45 percent at Tesco Plc and 60 percent at J Sainsbury Plc.

With increased competition across several channels for the consumer’s grocery dollar, store brands represent value and approximately 70 percent of shoppers place high importance on store brands when selecting a grocery store. The increased number of channels has eroded market share for several grocery categories in traditional supermarkets, especially with nonfood items. 

Heavy private label shoppers purchase more than 30 percent store brand items when shopping.  They study reported that 36 percent of shoppers buy 10 percent or fewer private label items while 36 percent buy between 11 percent and 30 percent of store brand items and 28 percent buy more than 30 percent store brand items.  Heavy private label users are not as motivated by low prices as the price-oriented shopper, however pricing plays a role in communicating quality driving brand and retail image and enhancing margins.  One-third of heavy private label shoppers trust the store brand to of high quality and as good as national brands.  Price and value drive them while light private label purchasers focus on brand loyalty and family preferences.  Seventy-three percent think that store brands are produced by the same manufacturer as national brands with a different label.

Shoppers that are loyal to a retailer are more likely to purchase store brands and the reverse is true. While private label has traditionally been marketed as a lower-cost alternative to a national brand, retailers are now promoting quality and freshness. Simply carrying more store brands does not guarantee success as the study showed that stores that managed their categories better to maximize store brand performance were more successful.  Store brands play a critical role in driving overall retail and category strategy and should not be based solely on margins.  Price and quality were the leading factors for food items and while packaging was not as important, it reinforces the consumers’ attitudes about quality. Package design must clearly project a brand image and identity, attract attention at the shelf, promote value and quality and reinforce the brand message with the consumer at the point-of-purchase.

Traditionally, heavy private label users in terms of dollars tend to be larger, less affluent families, however premium private label items have attracted higher income professionals with smaller families. Price conscious private label consumers are generally women, age 35 to 54, with larger families and a median household income of $39,200.

Managing the store brands through tiered strategies, especially premium brand development, positively impacts the growth of store brand sales.  Premium private label shoppers have more positive attitudes toward store brand quality and trying new products.  The packaging should signify an upscale, high-quality product. Understanding the consumer is key to developing strategies to increase private label sales.  Brand segmentation and targeted marketing can bring new consumers to purchase private label products.

While ethnic shoppers tend to be more brand loyal, a targeted store brand program can succeed and an opportunity exists to market directly to ethnic groups.  There are opportunities for private label growth with ethnic shoppers as their combined buying power in the U.S. has reached $1trillion.  By 2030, 19 percent of the U.S. population will be Hispanic, 13 percent African American and 7 percent Asian American/Indian.  Language translation, in-store sampling, packaging and in-store marketing should be part of the retailers marketing strategy for ethnic shoppers.

Developing store brands with high quality and unique product attributes can build store loyalty and shopper satisfaction.  Retailers should be clear and consistent with the brand message, product quality and value. Effectively marketing store brands requires a combination of preferential merchandising, displays, advertising and promotions.  It is important for retailers to optimize store brand awareness at the point-of-purchase.  Utilize existing loyalty card data to develop a relationship between the retailers’ customers and store brands and target the customers with a combination of trial-generating promotions and brand messages.

Retail loyalty cards and programs have moved to the forefront as an aggressive marketing tool, with 82% of consumers participating in some form of loyalty program, according to a survey conducted by WSL Strategic Retail, New York City. Supermarkets lead the pack by a wide margin with 58% of consumers carrying a supermarket card and 82% trying to use the card every time they shop. About 17% will go out of their way to use the card.

Customer participation in loyalty reward programs for other market including: Credit cards (29%), drug stores (27%), entertainment stores (24%), travel programs (23%), bookstores (20%), restaurants (19%) and greeting card stores (16%).


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     COMPETITION AMONG TRADITIONAL AND NEW CHANNELS IS INCREASING

Competition among food retailers has never been more dynamic with more than a dozen types of retailers competing for market share. Food retailers today include conventional supermarkets, superstores, supercenters, membership clubs, combination (food and drug) stores, natural and organic outlets, limited assortment stores, convenience stores, dot-coms and gasoline stations. Consumers have never had more choice in variety, value and quality. The competition includes restaurants, especially fast food, which are near the milestone of controlling half the $850 billion market for food sales. Dual-income couples and generations X and the echo boomers are fueling steady sales growth in “food away from home.”

Families still eat most of their main meals at home, but a dramatically increasing number of those meals are fully or partially prepared by outside sources. Driving this trend is the increase individual-income families (and their overworked couples) and young adults who don’t like to cook or don’t know how. As a result, they buy an increasing portion of their food ready-to-eat or -heat. Many food retailers are expanding and upgrading the frozen meal selection. Their bakeries are selling breakfasts. Their delis are selling lunches and side dishes for dinner. Salad, pizza and coffee bars are spreading. For one-stop convenience, shoppers can go to superstores, supercenters, combos and super warehouse outlets. For value, they have limited assortment, warehouse and wholesale club stores.

The industry is consolidating while competition among traditional and new channels is increasing dramatically. The various food retailer formats include: 

Grocery Industry Market Share by Format

 

2001

2006

 

Store

 

Number

Dollar Share

 

Number

Dollar Share

Superstore

7,900

25.9%

9,200

25.9%

Conventional Supermarket

13,000

18.8%

12,500

15.1%

Food/Drug Combination

3,850

14.3%

4,300

15.2%

Supercenter

1,575

9.9%

2,020

15.3%

Wholesale Club

991

8.5%

1,200

8.5%

Convenience

42,99

6.0%

41,750

5.4%

Convenience with gasoline

40,800

4.6%

42,500

4.2%

Warehouse

800

2.6%

1,200

2.4%

Super Warehouse

480

3.0%

405

2.7%

Internet

80

0.1%

200

0.4%

Limited Assortment

1,871

1.6%

2,500

1.4%

Deep Discounter

190

0.3%

300

0.3%

Mini Club

174

0.3%

210

0.2%

Hypermarket

9

0.1%

9

0.1%

Other

33,000

4.3%

30,000

2.9%

TOTALS

147,620

 

148,294

 

Source: Willard Bishop Consulting, Ltd., Competitive Edge, June 2002

Conventional Supermarketcarries about 15,000 items, including a full line of groceries, meat and produce, with at least $2 million in annual sales.

Superstorelarger than a conventional supermarket with at least 25,000 items and more nonfoods, such as general merchandise and health and beauty care (GM/HBC) items.

Combination Storea superstore and full-line pharmacy with nonfoods accounting for at least 15 percent of sales.

Warehouse Storea low-margin outlet whose limited variety, service and décor allow it to charge low prices.

Super Warehouse Storea hybrid warehouse/superstore with 50,000-plus items and the full range of service departments, featuring high-quality perishables and reduced prices.

Limited Assortment Storea low-price outlet with minimal service and fewer than 2,000 items. It features numerous private label products and is popular among food stamp recipients seeking to stretch their limited dollars.

Convenience Storetraditional outlets offer a small selection of dry groceries, beverages, nonfoods and ready-to-heat and -eat foods. Many are now selling gasoline as well.

Independent Single Unit Storesthese include numerous small, family- owned bodegas and retailers, along with upscale and ethnic stores that serve specific demographic niches.

Hypermarketa large food and nonfood store with about 180,000 square feet of selling space; the food to nonfood ratio is typically 60/40 percent.

Supercenter a large food-drug combination store and mass merchandiser. These average more than 170,000 square feet and typically devote up to 40 percent of the store to grocery items, which are often sold at loss-leader prices.

Wholesale Cluba retail/wholesale hybrid that offers consumers and small businesses a limited and economical selection of food and nonfood products. These measure about 120,000 square feet; 60–70 percent of the space is devoted to bulk sizes of both grocery and GM/HBC products.

Drug Deep Discountera low-margin GM/HBC store with about 28,000 feet of selling space and 25,000 items. Food accounts for about 20 percent of store sales.

Internet Food Retailertypically offers 12,000 items for home delivery triggered by online orders. After the failures of dot-com pioneers in the 1990s, online retailers are now joining traditional companies in so-called brick-and-click ventures.

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       PRIVATE LABEL DIFFERENTIATES RETAILERS

As food-retailing competition intensifies across the nation, private label store brands have become an increasingly important element of differentiation among U.S. food retailers and a key driver in total store sales and shopper store loyalty, according to a new report from the Food Marketing Institute (FMI), Building Shopper Loyalty With Store Brands. With increased competition across many channels for the consumer’s grocery dollar, store brands not only represent value, but they are also products that shoppers cannot obtain elsewhere else. Loyalty to your store brand can foster loyalty to your store. Today’s shoppers have more choices than ever before, and store brands are an increasingly important driver of product variety, selection and retail differentiation.

Private-label products have become premium, high quality items that compete with national brands on image, not just because of lower prices. Consumers perceive them to be good values and encourage loyalty to the store as well as provide a way to differentiate the store from the competition.  The report, Building Shopper Loyalty With Store Brands, indicates private-label products account for 15.1 percent of the retailer’s sales and totals $44.4 billion a year. Private label brands have increased market share in nine of the past 10 years and now represent approximately 17 percent of the $729 billion grocery industry, according to the report. Even though customers do not choose a store based on store brands, The report finds that the availability of private label store brands is extremely important to today’s consumers: nearly 70 percent say they place a high importance on store brands when selecting a primary grocery store. Furthermore, shoppers who are loyal to a store’s private label brand are much more loyal to the store. Eight in 10 of these shoppers visited the store frequently. Store-loyal shoppers are also less likely to buy another store’s own brand. Among shoppers who were more likely to buy another store’s private label, the top reasons include better price, more selection and higher quality.

They are as much or more demanding than other shoppers regarding good selection, high-quality products, convenient location, good customer service and especially the availability of trusted store brands. Traditionally, the heaviest store brand shoppers tend to be from larger and less affluent households. The report finds, however, more affluent shoppers are now purchasing store brands. This is especially noticeable among premium store brand shoppers.

Ethnic shoppers, notably Hispanics, African Americans and Asians, are less likely to purchase private-label products overall, even though they recognize the value of store brands. Although ethnic shoppers may agree with some of the value propositions of store brands, they are generally less inclined to purchase private label products overall and have yet to demonstrate strong store brand loyalty. This could be due to a lack of familiarity with the brands, particularly among recent immigrants. The study finds, however, that retailers can find success with ethnic customers by targeting marketing campaigns to reach them.

A study by Daymon & Associates indicated that heavy private label users are price-oriented, younger shoppers with lower incomes and larger households.  Price and value dictate their shopping behavior, whereas light users focus on brand loyalty and family preference. Even price-conscious shoppers consider quality, family preferences and attractive packaging when making their purchases.  One-third of heavy private-label shoppers trust the store brand to be as good in quality as the national brand and are very loyal to the store. Value-tier shoppers tend to be middle-aged, middle-income women with children (the same shoppers, who go to Supercenters, warehouse clubs and discount stores for low prices).

Private label can continue to grow in the United States as sales average about nine percent higher in Europe.  Store-brand shoppers value good selection, high quality products, convenient location and good customer service and above all, product availability. Store-brands perform differently between food and non-food categories.  Retailers should focus on food categories because non-food items are increasingly purchased at mass merchandisers and club stores.  Retailers should add premium or value tier private label to expand the market shares by reaching their upscale shoppers and increase sampling of store brands.  One way to reach multiple consumers’ needs is to carry a tiered private-label program, but make sure the customer understands your message by communicating not only price but value. Providing product lines with store brand value tiers can be effective in promoting value pricing and minimizing shopper visits to alternative format stores for lower-priced products, according to the report. While value seekers are often price-oriented, they also place a high importance on selection and variety.

Traditional merchandising strategies can be just as effective in promoting store brands as they are with national brands, according to the report. Tactics such as in-store sampling, attractive signage, advertising and direct mail can be used to educate the consumers on the attributes of store brands and to encourage purchases. This is especially true with premium store brand shoppers as over 75 percent of shoppers indicated that they would purchase more store brands if they could try them in the store. Although the report finds that lower prices are major driver of store brand sales, product quality is just as important to consumers. Accordingly, the ways in which store brand products are packaged and marketed can directly affect consumer impressions of the products. Packaging plays a significant role in quality perception. Nearly half (46 percent) of all shoppers think that the packaging of a store brand makes it appear to be of a lesser quality than the national brand.

Retailers should understand that having a great private label and spreading it across several categories would not deliver the optimal results. Carrying more store brands does not guarantee success. They need to look at each category individually and understand what factors drive purchase. Pricing, promotion and selection are important. Private label consumer packaged goods (CPG) sales are growing much faster than branded products, according AC Nielsen’s U.S. Trends in Private Label report. Branded products still represent the majority of all CPG sales, private label products have increased sales growth and are increasing in the number of categories, becoming the share leader in more categories, and gaining an increased presence in more retail channels.

Since 1997, private label products have grown from having a presence in 69 percent of the categories to 75 percent, entering 88 new categories in that time. In 2002, private label had the dollar volume share lead in 25 percent of the categories in which it competed, up from 21 percent in 1997. The vast majority of private label's overall growth is coming from expanded sales in established categories. Private label manufacturers are introducing different package sizes and types, new flavors, and adding new, higher-priced premium private label products. In addition, several retailers are increasing their focus on providing in-store samples of their products and using other promotions to increase sales.

The grocery channel owns the largest share of total private label consumer packaged goods sales. However, its lead is decreasing as other retail channels add private label products to their shelves. The dollar store, warehouse club store and supercenter channels are generating the strongest growth in private label sales, albeit off of sales bases that are still relatively small.
Between 1997 and 2002, sales of private label items across all channels grew 38 percent compared to 19 percent for brands.

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     CROSS-CHANNEL SHOPPING IS WIDESPREAD IN TODAY’S MARKETPLACE

Cross-Channel shopping is widespread in today’s marketplace. Grocery store lead the way with a penetration rate of 100% followed closely by mass merchandisers at 95% and drug stores at 88%. Discount channels follow at a distant 50% and convenience stores/gas marts have a 44% penetration rate.

Discounters, however, are capturing an increased share of dollar expenditures. Wal-Mart Supercenters enjoyed a 19.3% growth in shopper expenditures with 59% of this growth stems from consumers crossing channels as follows:

Grocery    28%
All Other Outlets   12%
AO Mass Merchandisers  8%
Drug Store       4%
AO Super Center    4%
Club  2%
Dollar Stores   1%

Half of Americans have shopped at a Dollar Store in the last year and that is taking profits away from other channels. Seventy-one percent of the heaviest Convenience Stores shoppers also shop at Dollar Stores. One-third of Dollar Store shoppers make 72 percent of the total Dollar Store trips and represent 84 percent of all their sales.  The top 1000 items carried in Dollars by category include household cleaners, candy, trash bags, snack foods, laundry and dish detergent, soap, cookies and pet food products.   

Grocery stores are losing sales to Wal-Mart primarily due to cross over shopping to discounters and their expansion, which included:

185 Supercenters (110 are expansions or relocations, 85 are new locations);
  40 Discount stores (500 food centers in discount stores by 2003);
   25 SAM’S Clubs;
   20 Neighborhood Markets (Testing);
      2 regional merchandise centers, 3 food distribution centers and 2 fresh food distribution centers.

This shift is prevalent among white-collar versus blue-collar workers. Convenience stores and gas marts are becoming food to go experts. Success in product retailing lies in understanding the consumer.

Retailers and Manufacturers need each other as the retailer is merchandising the Manufacturer’s products and the manufacturer is marketing the brand.

 

   

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    WAL-MART ALTERS WAY GROCERY BUSINESS IS RUN

Wal-Mart is altering the way the grocery business is run just as it did in discount retailing over the past decade.  Wal-Mart began selling groceries in 1998 and it only took them five years to become the nation’s largest grocer in 2002 with more than $54 billion in grocery sales.  Wal-Mart operates from 1,258 supercenters (180,000 square foot grocery and discount store combination), and 49 small Neighborhood Markets (40,000 square feet), most in the South and Southwest.  In the last ten years, 29 chains have filed for bankruptcy protection of which as many as 25 Wal-Mart was the catalyst.

Grocery consolidations from 1987 to 1997 caused food prices to increase and raising profits.  That allowed Wal-Mart to enter the grocery business and cut prices up to 15 percent while still making a profit. Studies indicate that Wal-Mart charges 8% to 27% less than Kroger, Albertsons or Safeway, the next three largest grocery retailers.  Kroger, Albertsons and Safeway has expanded their private label store brands which provide larger margins and develop loyalty to the retailer as the store brands are unique to that retailer.  Approximately 24 percent of Kroger’s total grocery sales come from its 7,500 store brand products.  All three chains are trying to take advantage of Wal-Marts biggest weaknesses of meat and selection.

Labor costs which total as much as 70 percent of these grocers overhead because they are unionized, where Wal-Mart’s one million employees do not belong to a union, thus reducing their labor costs by about 20 percent.

Supply chain efficiency in the grocery industry has increased significantly in the last five years due primarily to Wal-Mart as they influence the economy in the U.S.  According to McKinsey & Company, a large part of the U.S. productivity growth between 1995 and 1999 can be attributed to Wal-Mart.  The innovations that Wal-Mart has caused their retail competitors to improve their supply chain efficiency or fail.  Wal-Mart has utilized productivity-enhancing technologies and established supply management practices that have reduced their supply chain costs significantly, affecting the entire supply chain industry.

By automating their facilities, retailers have lowered the costs of store-specific distribution. Retailers are reducing costs from the supply chain by focusing on suppliers. Retailers require suppliers to reduce the amount of time and costs to them and levy penalties or chargebacks for errors in distribution.  This has become a standard in the industry and is very expensive, reducing margins for suppliers.  Another common practice is that suppliers distribute goods ready to be displayed on store shelves, reducing labor costs for the retailer such as bar codes, security devices, special packaging and price tags.   

Wal-Mart is the now the largest supermarket operator in the United States according to TD Linx rising from fourth last year due to its expanding supercenter and Neighborhood Market business. Kroger dropped to second with Safeway and Albertsons at third and fourth place, respectively. The top 10 grocers remain the same, although A&P dropped behind Supervalu to 10th place and is less than $100 million in supermarket sales ahead of No. 11 H.E. Butt. Among wholesalers that operate supermarkets, only Supervalu moved up.  Discount store operator Target has increased its grocery business coming in at number 27.

Wal-Mart continues to expand across the United States and has plans to open 200 supercenters, 55 conventional discount stores, 40 to 45 Sam’s Clubs, and up to 25 Neighborhood Markets in 2003. Wal-Mart is now the leading retailer in Canada and Mexico. In addition, it owns Asda, a leading retailer in the United Kingdom, and operates stores in South America, Asia, and Europe.

Kroger held the No. 1 or No. 2 share in 41 of its 48 major markets in 2002, increasing its share in 27 of them—and it accomplished this while competing against a total of 849 supercenters, 603 of them Wal-Mart’s. Safeway operates approximately 1,700 stores, in the U.S. and Canada, and it holds a 49 percent interest in Casa Ley, S.A. de C.V., a food and general merchandise retailer in western Mexico. Ahold, the world’s third-largest supermarket company said it would restate earnings for 2000, 2001, and 2002 because of accounting irregularities related to how U.S. Foodservice used manufacturer promotions and rebates to inflate its profits.

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     FREQUENT SHOPPER DATA IS UNDERUTILIZED ASSET IN THE CPG INDUSTRY

Frequent shopper data is the most underutilized asset in the CPG industry today. The first step is to understand the value and habits of key shopper groups, which must be standardized. You should identify problems and opportunities as early as possible and define a finite set of shopper segments. Frequent Shopper Program data provides powerful insights to drive category tactics Next, evaluate the program effectiveness.

The objectives of an effective frequent shopper program include:

bullet

Targeting

bullet

Focus on your best customers

bullet

Eliminate Waste

bullet

Eliminate the wrong shoppers, products and offers

bullet

Better understand shopping behaviors

bullet

Integrate insight with everyday decision-making

You should utilize the data from your Frequent Shopper Program to answer the following questions:

bullet

Who responds to trade promotion?

bullet

Who are the new brand or category buyers?

bullet

Who are the heavy/medium/light buyers?

bullet

Who are Brand loyals, competitive loyals, switchers, infrequents?

bullet

How trade promotion affects buying behavior?

bullet

How much pantry loading occurs?
bullet

Among which groups?

bullet

Do deals increase brand/category purchase frequency?
bullet

Among which groups?

bullet

What are the long-term effects of trade promotion?

bullet

Does loading or cycle compression lead to expandable consumption?

bullet

Does current promotion strategy “train” shopper to buy on deal?

bullet

Which tactics (display, TPR, etc.) affect which groups/ behaviors? 

How retailers and manufacturers are collaborating to build brand equity by developing an effective Frequent Shopper/Loyalty Program.

bulletMaximize retailer category profits and sales
bulletCombining consumer insight and market intelligence
bulletMore effective and consistent retail pricing practices
bulletRetailer and manufacturer collaboration is necessary

What questions do retailers have about a Frequent Shopper/Loyalty Program?

bullet

Improve sales/margin

bullet

Impact of my pricing strategy?

bullet

Role of category in my business?

bullet

Price/promo mix?

bullet

Competitive response?

What questions do manufacturers have about a Frequent Shopper/Loyalty Program?

bullet

Trade funds used effectively?

bullet

Consistent brand image?

bullet

Impact of promotions?

bullet

Competitive positioning?

bullet

Category dynamics?

The goal of your Frequent Shopper/Loyalty Program

bullet

Optimize SKU level profit and sales

bullet

Optimize Category level profits and sales

bullet

Improved Category Performance: Higher profitability across categories

bullet

Competitive Better Positioning: Competitive advantage

bullet

Enhanced Consumer Perception: Consistent pricing

bullet

Improved Customer Loyalty: Better return on customer investment

Manufacturer Benefits

bulletStronger Category Performance: Enhanced recognition of brands and positioning
bulletMore Efficient Promotions: More effective use of trade funds
bulletMore Informed Brand Management: Extension vs. new product introduction
bulletImproved Retail Collaboration Better informed retail partners

Summary

bulletSuccess begins with the data
bulletCanned approaches will not work
bulletProcesses must be reviewed
bulletRules must be applied consistently
bulletSimple user interface is a must

Maximizing use of consumer data is vital for retailers battling supercenters and grappling with the difficult economy. Retailers battling supercenters need to focus on what they do best instead of reacting to competitive prices. You should go into an offensive strategy rather than a defensive one.

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    LOYALTY CARDS COMBINED WITH CHANNEL AND CONSUMER INSIGHTS BUILD LOYALTY AND PROFITABLE GROWTH

Loyalty cards have been around since 1988 and supermarket and drugstore chains are starting to collect the massive amount of data on shoppers, from the types of products they buy to when they like to shop. Retailers are starting to track consumer trends and they're changing their merchandise, store layout and advertising accordingly to keep their most loyal customers spending.

Loyalty card programs can measure the impact of ads on top customers and for example identify the 25 items that attract the most loyal shoppers. Loyalty card programs are in over 30% of grocery stores (44% ACV) including two major holdouts Albertson’s and Winn-Dixie. Grocery retailers are still not quite sure how to manage the data. In many cases, the internal loyalty data is skewed because 62% of Loyalty card shoppers have multiple loyalty cards and many retailers offer a GHOST card for non-card holders. In addition, retailer’s best shoppers buy 50% of their groceries in other grocery stores or channels. However, information from Loyalty cards, combined with channel and consumer insights can help retailers market in a manner that builds loyalty and profitable growth.

The supermarket industry benefit the most from loyalty cards because consumers shop there an average of 2.2 times a week. Helping Retailers compete in a changing competitive environment promotes long-term partnership and mutual growth. By swiping these cards at the register, consumers are able to get the weekly discounts advertised on certain products. In many cases, customers can get a card without giving their names or addresses, but they won't be mailed coupons for extra discounts, customized according to their buying habits. For example, shoppers who buy a lot of baby products may get extra discounts on diapers.

Retailers estimate that 20 percent of their shoppers account for 80 percent of store sales, so finding out what their best customers want is essential. By scanning purchases, stores track what's selling, but when that data is tied to loyalty cards, merchants obtain richer information on who is buying what. Services that may seem helpful to consumers could be a way to get them to spend more.
The latest N.G.A. survey of 250 independent retailers showed that only 30% said they were engaged in frequent-shopper programs, down about 8% from last years survey.

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Total U.S. sales in grocery stores are $682.3 billion, according to U.S. Department of Commerce figures and industry estimates. Canadian companies aren't assigned a share since the calculation is based on the U.S. market.

Rank

Company

Top Executive

Stores
Owned

Sales in $ Billions
Date Fiscal Year Ends

1

Wal-Mart Supercenters
Bentonville, Ark.

Doug Degn
executive VP, food and consumables

1243

95.0 (est.)
1/31/03

Note: Groceries at Wal-Mart Supercenters account for approximately 30% of total sales, or $31 billion. Supercenter sales represent nearly 40% of total corporate sales, which are estimated at $243.6 billion for 2002.

2

Kroger Co.
Cincinnati

Joseph A. Pichler
chairman, CEO

3685

52.1 (est.)
2/1/03

Note: Kroger store totals include 2,461 supermarkets, 783 convenience stores and 441 fine jewelry stores.

3

Costco Wholesale Corp.
Issaquah, Wash.

Jim Sinegal
president, CEO

299

38.0 (actual)
9/1/02

Note: Groceries, encompassing food and sundries, account for approximately 60% of Costco's total sales, or $22.8 billion.

4

Albertsons
Boise, Idaho

Larry Johnston
chairman, CEO

2290

35.7 (est.)
1/30/03

Note: Albertsons store totals include 1,346 supermarkets, 741 freestanding drug stores and 203 fuel centers.

5

Safeway
Pleasanton, Calif.

Steve Burd
chairman, president, CEO

1793

35.0 (est.)
12/28/02

6

Sam's Club
Bentonville, Ark.

Kevin Turner
president, CEO

522

31.7 (est.)
1/31/03

Note: Groceries, encompassing food and sundries, account for approximately 62% of Sam's total sales, or $19.7 billion. Sam's Clubs account for approximately 13% of Wal-Mart sales, estimated at $243.6 billion for 2002. Sam's also operates 69 units overseas.

7

Ahold USA Retail
Chantilly, Va.

Bill Grize
president, CEO

1633

25.1 (est.)
12/31/02

Note: Ahold USA Retail accounts for approximately 59% of Ahold USA sales, estimated to be $42.6 billion for 2002; the balance of U.S. sales -- an estimated $17.5 billion -- comes from Ahold USA Foodservice. Ahold USA accounts for approximately 57% of the parent company's 2002 estimated sales of $74.3 billion.

8

Supervalu
Minneapolis

Jeff Noddle
president, CEO

1391

19.5 (est.)
2/22/03

Note: Sales from 613 corporate stores and sales to 778 licensed Save-A-Lot stores combine to account for approximately 50% of total sales. Corporate stores encompass 268 supermarkets, 262 Save-A-Lot limited assortment stores and 83 Deal$ general merchandise stores.

9

Publix Super Markets
Lakeland, Fla.

Howard Jenkins
chairman, CEO

739

15.8 (est.)
12/28/02

10

Fleming
Dallas

Mark S. Hansen
chairman, CEO

17

15.5 (est.)
12/28/02

Note: Fleming is a major supplier of Super Kmart and Super Target stores, and volume from those companies is reflected in the sales totals for Fleming and for each retailer individually. Fleming's sales total excludes volume from 110 retail stores, which the company is attempting to sell; however, it plans to retain 17 Yes! Less limited assortment stores.

11

Delhaize America
Salisbury, N.C.

Pierre-Olivier Beckers
chairman

1485

15.1 (est.)
12/28/02

Note: Delhaize America, the U.S. division of Brussells-based Delhaize Group, encompasses 1,228 Food Lion stores, 138 Kash 'n Karry units and 119 Hannaford Bros. stores. Delhaize America accounts for approximately 70% of Delhaize Group's sales, which are estimated at $21.9 billion (U.S.) for 2002.

12

Loblaw Cos.
Toronto

Galen Weston
chairman

1027

14.8 (est.) ($U.S.)
12/28/02

Note: Loblaw operates 626 corporate stores that account for approximately 75% of total sales and supplies 400 franchised stores that account for approximately 25% of sales.

13

Winn-Dixie Stores
Jacksonville, Fla.

A. Dano Davis
chairman

1073

12.2 (est.)
6/25/03

14

Meijer
Grand Rapids, Mich.

Doug Meijer and Hank Meijer
co-chairmen

156

10.9 (est.)
2/1/03

15

A&P
Montvale, N.J.

Christian Haub
chairman, president, CEO

692

10.8 (est.)
2/22/03

Note: Volume total encompasses sales from 626 corporate stores in the U.S. and sales to 66 franchised units in Canada. Sales in Canada account for approximately 23% of the company's total sales.

16

7-Eleven
Dallas

Jim Keyes
president, CEO

5805

10.1 (est.)
12/31/02

Note: Volume includes $2.8 billion from gasoline sales. 7-Eleven operates 5,306 stores in the U.S. and 499 in Canada. All stores in Canada and 48% of those in the U.S. are corporate-owned; 52% of the stores in the U.S. are franchised. U.S. sales account for 90% of the company's total sales.

17

H.E. Butt Grocery Co.
San Antonio

Charles C. Butt
chairman, CEO

304

9.8 (est.)
10/27/02

Note: H-E-B sales include volume from 20 stores in Mexico.

18

C&S Wholesale Grocers
Brattleboro, Vt.

Rick Cohen
chairman, CEO

0

9.7 (est.)
9/28/02

Note: C&S supplies products to a variety of Top 75 retailers, and volume from those companies is reflected in the sales totals for C&S and for each of the individual retailers. C&S volume does not include sales from GU Markets, an affiliate of C&S that operates 26 former Grand Union locations.

19

Sobeys
Stellarton, Nova Scotia

Bill McEwan
president, CEO

1323

6.7 (est.) ($U.S.)
5/2/03

Note: Sobeys operates 392 corporate stores (including 206 supermarkets, 123 convenience stores and 63 drug stores) that account for approximately 25% of total sales and supplies 931 franchised stores that account for approximately 75% of sales.

20

Wakefern Food Corp.
Elizabeth, N.J.

Thomas Infusino
chairman

48

6.2 (est.)
9/28/02

Note: Wakefern supplies products to two other Top 75 companies -- Village Super Markets and Inserra Supermarkets -- and volume from those companies is reflected in the sales totals for Wakefern and for each of the individual retailers. Wakefern declined to indicate what percent of total sales are done by corporate stores.

21

BJ's Wholesale Club
Natick, Mass.

Michael T. Wedge
president, CEO

140

5.8 (est.)
1/31/03

Note: Groceries, encompassing food and sundries, account for approximately $4.1 billion, or 70% of BJ's total sales.

22

Super Target
Minneapolis

Robert J. Ulrich
chairman, CEO

94

4.5 (est.)
1/2/03

Note: Super Target sales represent approximately 10% of Target Corp.'s total sales, which are estimated at $43 billion for 2002.

23

Shaw's Supermarkets
East Bridgewater, Mass.

Paul Gannon
president, CEO

185

4.5 (est.)
3/1/03

Note: Shaw's is a division of Sainsbury plc, London.

24

Giant Eagle
Pittsburgh

David Shapira
chairman, CEO

213

4.4 (est.)
6/30/03

Note: Volume total encompasses sales from 124 corporate stores and sales to 89 franchised independent stores.

25

Hy-Vee Food Stores
Des Moines, Iowa

Ron Pearson
chairman, CEO, COO

216

4.2 (actual)
9/30/02

Note: Hy-Vee operates 188 supermarkets and 28 drug stores.

26

Pathmark Stores
Carteret, N.J.

Eileen Scott
CEO

144

4.0 (est.)
2/1/03

27

Nash Finch Co.
Minneapolis

Ron Marshall
CEO

112

4.0 (est.)
12/28/02

Note: Corporate stores at Nash Finch account for 25% of total sales.

28

Super Kmart
Troy, Mich.

James Adamson
corporate chairman, CEO

117

3.8 (est.)
1/29/03

Note: Food sales at Super Kmart, encompassing groceries, consumables and restaurants, account for approximately 32% of total Super Kmart sales, or $1.4 billion. Super Kmart volume represents approximately 12% of the company's total sales, which are estimated at $31.5 billion for 2002.

29

Roundy's
Pewaukee, Wis.

Robert A. Mariano
chairman, CEO

64

3.7 (est.)
12/28/02

Note: Corporate stores at Roundy's account for 43% of total sales.

30

Spartan Stores
Grand Rapids, Mich.

James B. Meyer
chairman, president, CEO

115

3.4 (est.)
3/30/03

Note: Corporate stores, encompassing 94 supermarkets and 21 deep-discount drug stores, account for 40% of total sales.

31

Metro
Montreal

Pierre Lessard
president, CEO

543

3.3 (actual) ($U.S.)
9/28/02

Note: Metro operates 140 corporate stores that account for approximately 33% of sales and supplies 403 franchised stores that account for approximately 67% of sales.

32

Aldi
Batavia, Ill.

Charles Youngstrom
president

625

3.2 (est.)
12/31/02

33

Raley's Supermarkets
Sacramento, Calif.

William Coyne
president, COO

134

3.2 (est.)
6/28/03

34

Associated Wholesale Grocers
Kansas City, Kan.

Gary A. Phillips
president, CEO

74

3.1 (est.)
12/28/02

Note: Corporate stores at AWG account for 15.5% of sales.

35

Wegmans Food Markets
Rochester, N.Y.

Danny Wegman
president

64

3.0 (est.)
12/31/02

36

Unified Western Grocers
Los Angeles

Al Plamann
president, CEO

5

2.8 (est.)
9/28/02

Note: Corporate stores at UWG account for 2.5% of sales. It announced plans early in the year to sell the five corporate stores, as well as seven others that were closed in 2001.

37

Stater Bros. Markets
Colton, Calif.

Jack Brown
chairman, president, CEO

156

2.7 (actual)
9/29/02

38

Whole Foods Market
Austin, Texas

John Mackey
chairman, president, CEO

135

2.7 (actual)
9/29/02

39

Harris Teeter
Matthews, N.C.

Fred Morganthall
president

143

2.4 (actual)
9/29/02

Note: Harris Teeter is a division of Ruddick Corp., Charlotte, N.C.

40

Penn Traffic Co.
Syracuse, N.Y.

Joseph V. Fisher
president, CEO

215

2.3 (est.)
2/1/03

Note: Penn Traffic also serves as a wholesaler to 82 licensed units and 66 independent operators.

41

Schnuck Markets
St. Louis

Craig Schnuck
chairman, CEO

90

2.1 (est.)
9/30/02

42

Weis Markets
Sunbury, Pa.

Robert F. Weis
chairman

161

2.1 (est.)
12/28/02

43

Price Chopper
Schenectady, N.Y.

Lewis Golub
chairman

102

2.1 (est.)
4/27/03

44

Ingles Markets
Black Mountain, N.C.

Robert P. Ingle
chairman, CEO

199

2.0 (actual)
9/28/02

45

Demoulas Market Basket
Tewksbury, Mass.

William J. Shea
chairman

58

1.9 (est.)
12/28/02

46

Overwaitea Food Group
Langley, British Columbia

Steve Vanderleest
president

95

1.8 (est.) ($U.S.)
12/31/02

47

WinCo Foods
Boise, Idaho

William D. Long
chairman, CEO

38

1.8 (est.)
3/29/03

48

Alex Lee Inc.
Hickory, N.C.

Boyd George
chairman, CEO

108

1.7 (actual)
9/28/02

Note: Sales at Alex Lee Inc. include $1 billion from Lowes Food Stores, Winston-Salem, N.C., and $1.4 billion from Merchants Distributors, Hickory, N.C., a wholesaler (approximately 48% of whose sales go to Lowes). Volume total excludes $270 million in sales from Institution Food House, Hickory, a food-service distributor.

49

Purity Wholesale Grocers
Boca Raton, Fla.

Sal Ricciardi
president, CEO

0

1.7 (est.)
6/30/03

50

Brookshire Grocery Co.
Tyler, Texas

Bruce Brookshire
chairman

152

1.7 (est.)
9/30/02

51

Bashas'
Chandler, Ariz.

Eddie N. Basha Jr.
chairman, CEO

133

1.6 (est.)
12/31/02

52

Save Mart Supermarkets
Modesto, Calif.

Robert M. Piccinini
chairman, president, CEO

97

1.6 (est.)
12/31/02

Note: Save Mart was anticipating a store count of 125 as it entered 2003, pending the close of its acquisition from Fleming of 26 Food 4 Less Stores, plus two under construction.

53

Smart & Final
Los Angeles

Ross Roeder
chairman, CEO

240

1.6 (est.)
12/29/02

Note: Smart & Final operates 195 warehouse stores and 45 cash-and-carry stores. Volume total excludes food-service sales of approximately $380 million, or 19% of the company's total volume.

54

White Rose Foods
Somerset, N.J.

Stephen Bokser and Richard Neff
co-CEOs

0

1.5 (est.)
12/28/02

55

Grocers Supply Co.
Houston

Max Levit and Milton Levit
co-CEOs

0

1.5 (est.)
12/31/02

56

Marsh Supermarkets
Indianapolis

Donald W. Marsh
chairman, CEO

281

1.5 (est.)
3/31/03

Note: Marsh store totals include 112 supermarkets and 169 convenience stores.

57

Fiesta Mart
Houston

Louis Katipodis
president, CEO

50

1.5 (est.)
5/31/03

58

Associated Food Stores
Salt Lake City

Richard Parkinson
president, CEO

24

1.3 (est.)
3/30/03

Note: Corporate stores at Associated account for 28% of sales.

59

Big Y Markets
Springfield, Mass.

Donald D'Amour
chairman, CEO

49

1.2 (est.)
6/29/03

60

Associated Wholesalers Inc.
Robesonia, Pa.

J. Chris Michael
president, CEO

10

1.1 (est.)
7/31/03

Note: Corporate stores at AWI account for 7% of total sales.

61

K-VA-T Food Stores
Abingdon, Va.

Jack Smith
chairman

86

1.0 (est.)
12/31/02

62

Foodarama
Freehold, N.J.

Joseph Saker
chairman, CEO

22

0.96 (est.)
11/2/02

63

Minyard Food Stores
Coppell, Texas

Gretchen Minyard Williams and Liz Minyard
co-chairs, co-CEOs

74

0.93 (est.)
6/30/03

64

Federated Cooperatives
Saskatoon, Saskatchewan

Dennis Banda
chairman, president

11

0.93 (actual) ($U.S.)
10/31/02

Note: Corporate stores at Federated account for 3.5% of sales. Food sales at Federated account for 44% of total sales, or $2.1 billion (U.S.).

65

Inserra Supermarkets
Mahwah, N.J.

Lawrence R. Inserra
chairman, CEO

21

0.90 (est.)
12/28/02

66

Village Super Market
Springfield, N.J.

James Sumas
chairman

23

0.90 (est.)
7/26/03

67

Bozzuto's
Cheshire, Conn.

Michael Bozzuto
chairman

10

0.90 (actual)
9/28/02

Note: Corporate stores at Bozzuto's account for 3% of total sales.

68

Wild Oats Markets
Boulder, Colo.

Perry Odak
president, CEO

99

0.90 (est.)
12/27/02

69

Associated Grocers
Seattle

Robert Hermanns
president, CEO

1

0.90 (actual)
9/30/02

70

United Supermarkets
Lubbock, Texas

Gantt Bumstead
president

44

0.80 (est.)
1/25/03

71

Brookshire Brothers
Lufkin, Texas

Tim Hale
president, CEO

72

0.77 (est.)
4/26/03

72

King Kullen Grocery Co.
Bethpage, N.Y.

John B. Cullum and Bernard D. Kennedy
co-chairmen, co-CEOs

48

0.77 (est.)
9/28/02

73

Haggen Inc.
Bellingham, Wash.

Dale C. Henley
president, CEO

29

0.76 (est.)
12/28/02

74

Eagle Food Centers
Milan, Ill.

Robert Kelly
chairman, president, CEO

63

0.69 (est.)
2/1/03

75

Redner's Markets
Baldon, Pa.

Richard Redner
president, CEO

45

0.68 (est.)
12/31/02

Note: Redner's store totals include 34 supermarkets and 11 convenience stores.

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      SUPERMARKET NEWS GLOBAL TOP 25

Following is a chart of the largest global food retailers. Sales figures are for the latest financial year unless otherwise stated. Companies included on the list must have a significant portion of their sales in food. The foreign currency results were translated into dollars at current exchange rates. The information came from company documents unless otherwise stated. 

Rank

Company

Top Executive

Stores
Owned

Sales

Countries of Operation

1

Wal-Mart Stores
United States

H. Lee Scott

4,190

$195.27 billion (53 weeks)

United States, Canada, Mexico, United Kingdom,
Germany, Argentina, Brazil, China, South Korea, Puerto Rico

2

Carrefour
France

Daniel Bernard

8,926

$55.3 billion (64.791 billion Euros)

France, Belgium, Czech Republic, Slovakia, Switzerland, Spain, Greece, Portugal, Turkey, Italy, Poland, Brazil, Argentina, Mexico, Colombia, Chile, Singapore, Indonesia, Japan, Taiwan, Malaysia, China, Thailand, South Korea

3

Kroger Co.
United States

Joseph A. Pichler

2,354

$49 billion

United States

4

Ahold
The Netherlands

Cees van der Hoeven

8,062

$44.8 billion
(52.47 billion Euro)

United States, The Netherlands, Sweden, Norway, Denmark, Latvia, Lithuania, Estonia, Portugal, Spain, Czech Republic, Poland, Brazil, Argentina, Chile,
Guatemala, Thailand, Malaysia

5

Metro
Germany

Jan von Haeften

2,169

$40.09 billion (46.93 billion Euro)

Germany, Austria, Belgium, Bulgaria, China, Czech Republic, Denmark, France, United Kingdom, Greece, Hungary, Italy, Luxembourg, Morocco, The Netherlands, Poland, Portugal, Romania, Slovakia, Spain, Switzerland, Turkey

6

Albertson’s
United States

Peter Lynch

2,533

$36.8 billion

United States

7

Tesco
United Kingd
om

Terry Leahy

907

$32.38 billion (22.8 billion pounds)

United Kingdom, Ireland, Hungary, Poland, Czech Republic, Slovakia, Thailand, South Korea, Taiwan

8

Safeway
United States

Steven A. Burd

1,688

$31.98 billion

United States, Canada

9

Rewe Zentrale
Germany

Hans Reischl

11,788

$31.88 billion (73.65 billion Deutschmarks)

Germany, Austria, Italy, France, Poland, Hungary, Czech Republic, Slovakia, Croatia, Romania, Ukraine, Bulgaria

10

Aldi
Germany

Theo Albrecht

4,388

$26.48 billion (31 billion Euro; M+M Eurodata estimate)

Germany, France, United States, United Kingdom, Ireland, Belgium, Australia, Austria, Luxembourg, Denmark, The Netherlands

11

Edeka/AVA
Germany

Hermann J. Ruetz

12,000

$26.45 billion (61.1 billion deutschmarks)

Germany, Denmark, Austria, Czech Republic, Poland, France

12

ITM Enterprises
France

Pierre Gourgeon

8,545

$26.14 billion (30.6 billion Euro, M+M Eurodata estimate)

France, Spain, Portugal, Italy, Belgium, Germany, Poland, Canada

13

J. Sainsbury
United Kingdom

Sir Peter Davis

626

$26.13 billion (18.4 billion pounds)

United Kingdom, United States

14

Ito-Yokado
Japan

Toshifumi Suzuki

35,600

$25.85 billion (3.1 trillion yen)

Japan, Taiwan, United States, Thailand, Mexico, Australia, South Korea, Canada, Malaysia, Philippines, Singapore, China, Sweden, Norway, Denmark, Spain, Puerto Rico, Guam, Turkey

15

Groupe Casino
France

Christian Couvreux

6,650

$24.94 billion (29.2 billion Euros)

France, Mexico, Venezuela, Colombia, Uruguay, Argentina, Poland, Thailand, Taiwan

16

Daiei
Japan

Isao Nakaouchi

7,800

$23.74 billion

Japan, China, United States

17

Supervalu
United States

Mike Wright

1,194

$23.2 billion

United States

18

Tengelmann
Germany

Karl-Erivan W. Haub

6,689

$23.12 billion

Germany, Austria, Czech Republic, Slovenia, Poland, Hungary, Italy, Spain, Portugal, Denmark, Switzerland, United States, Canada, China

19

Jusco
Japan

Toshiji Tokiwa

1,780

$21.02 billion (2.525 trillion yen;
year ended Feb. 20, 2000)

Japan

20

Auchan
France

Christophe Dubrulle

243

$20.13 billion (154 billion French francs)

United States, Mexico, Argentina, Luxembourg, France, Spain, Portugal, Morocco, Poland, Hungary, Italy, China, Taiwan

21

E. Leclerc
France

Michel and Edouard Leclerc

555

$17.94 billion (21 billion Euro; M+M Eurodata estimate)

France, Spain, Portugal, Poland, Slovenia

22

Delhaize “Le Lion” Group
Belgium

Pierre-Olivier Beckers

2,310

$15.55 billion

United States, Belgium, Luxembourg, Greece, Czech Republic, Slovakia, Romania, Thailand, Indonesia, Singapore

23

Fleming Cos.
United States

Mark Hansen

250

$14.44 billion

United States

24

Winn-Dixie Stores
United States

Allen R. Rowland

1,079

$13.7 billion

United States, Bahamas

25

Loblaw Cos.
Canada

John A. Lederer

606

$13 billion

Canada

    SUPERMARKET FACTS - INDUSTRY OVERVIEW 2002

Number of employees- 2002

3.4 million

Number of grocery stores-2002

166,135

Total grocery store sales-2002

$535.4 billion

Total supermarket sales-2002

$411.8 billion

Number of supermarkets--2002 ($2 million or more in annual sales)

32,981

Net profit after taxes, 2001/2002

1.36%

Typical supermarket size-2001

44,000 sq. ft.

Average Number of Items (SKUs) Carried in a Typical Supermarket-2001

30,580

Labor as a % of operating expense-2000

*53.1%

Average effective income tax rate (fed, state, local) 2001/2002

35%

Percentage of disposable income spent on food--USDA figure for 2001
food-at-home
food away-from-home


5.9%
4.0%

Weekly sales per supermarket<-2002/TD>

$361,564

Weekly sales per square foot of selling area-2002

$11.13

Sales per customer transaction-2001

$25.66

Sales per labor hour-2001

$130.00

Average # of trips per week consumers make to the supermarket-2002

2.2

Sources: U.S. Department of Labor, U.S. Department of Agriculture, Progressive Grocer magazine, U.S. Census Bureau, and Food Marketing Institute

Store Definitions

By Type of Store

Grocery Store — Any retail store selling a line of dry grocery, canned goods or nonfood items plus some perishable items.

Supermarket—Any full-line self-service grocery store generating a sales volume of $2 million or more annually

Convenience Store
— Any full-line, self-service grocery store offering limited line of high-convenience items. Open long hours and provides easy access. The majority sell gasoline with an annual sales of $2 million or more.

Independent
— An operator of fewer than 11 retail stores.

Chain
— An operator of 11 or more retail stores.

By Store Format

Conventional Supermarket - The original supermarket format offering a full line of groceries, meat, and produce with at least $2 million in annual sales. Conventional stores will realize 9% of their sales in GM/HBC. These stores typically carry approximately 15,000 items, offer a service deli and frequently a service bakery.

Superstore
- A larger version of the conventional supermarket with at least 40,000 square feet in total selling area and 25,000 items. Superstores offer an expanded selection of non-foods (at least 10% GM/HBC).

Food/Drug Combo
- A combination of superstore and drug store under a single roof, with common checkouts. GM/HBC represents at least one-third of the selling area and approximately 15% of store sales. These stores also have a pharmacy.

Warehouse Store
- A low-margin grocery store offering reduced variety, lower service levels, minimal decor, and a streamlined merchandising presentation, along with aggressive pricing. Generally, warehouse stores don't offer specialty departments, e.g., Xtra.

Super Warehouse
- A high-volume, hybrid format of a superstore and a warehouse store. Super warehouse stores typically offer a full range of service departments, quality perishables, and reduced prices, e.g., Cub Foods.

Limited-Assortment Store
- A "bare-bones," low-priced grocery store that provides very limited services and carries fewer than 2,000 items with limited-if any-perishables, e.g., Aldi and Sav-A-Lot.

Other
- The small corner grocery store that carries a limited selection of staples and other convenience goods. These stores generate approximately $1 million in business annually.

Convenience Store (Traditional)
- A small, higher-margin store that offers an edited selection of staple groceries, non-foods, and other convenience food items, i.e., ready-to-heat and ready-to-eat foods. The traditional format includes those stores that started out as strictly convenience stores but might also sell gasoline.

Convenience Store (Petroleum-Based)
- The petroleum-based stores are primarily gas stations with a convenience store.

Non-Traditional Grocery

Hypermarket - A very large food and general merchandise store with approximately 180,000 square feet of selling space. While these stores typically devote as much as 75% of the selling area to general merchandise, the food-to-general merchandise sales ratio is typically 60/40, e.g., Bigg's.

Wholesale Club
- A membership retail/wholesale hybrid with a varied selection and limited variety of products presented in a warehouse-type environment. These 120,000 square-foot stores have 60% to 70% GM/HBC and a grocery line dedicated to large sizes and bulk sales. Memberships include both business accounts and consumer groups, e.g., Sam's Club, Costco, and BJ's.

Mini-Club
- A scaled-down version of the wholesale club. The mini-club is approximately one-fourth the size of a typical wholesale club and carries about 60% of the SKUs, including all of the major food and sundry departments and a limited line of merchandise (soft goods, office supplies, and opportunistic, one-time buys), e.g., Smart & Final. Some of these stores do not have membership fees and often operate as a "cash & carry."

Supercenters
- A large food/drug combination store and mass merchandiser under a single roof. The supercenters offer a wide variety of food, as well as non-food merchandise. These stores average more than 170,000 square feet and typically devote as much as 40% of the space to grocery items, e.g., Wal-Mart, Kmart, Super Target, Meijer, and Fred Meyer.

Deep-Discount Drug Store
- A low-margin, GM/HBC store with approximately 28,000 square feet of selling space and 25,000 SKUs. These stores typically carry fewer sizes but more GM/HBC brands than a supermarket. Food accounts for 20% of store sales, e.g., Phar-Mor and Drug Emporium.

Internet
- An Internet-based grocery distribution operator. Included in this format are all Internet operators who use the Internet as the primary means of accepting grocery orders for home delivery or pickup. Also included are major food retailers that generate a portion of their sales through Internet-based sales. Internet suppliers typically offer 12,000 SKUs or more for home delivery, e.g. Peapod.

Sources: Progressive Grocer's 2002 Marketing Guidebook and Bishop Consulting, 2002 .

Food Retailers' Net Profit – Percent Of Sales

Grocery Store Chains Net Profit – Percent Of Sales

All Firms

 

Year

Income Before Taxes

Net Profit After Taxes

Year

Income Before Taxes

Net Profit After Taxes

1980

1.56

0.97

1991/1992

1.39

0.77

1981

1.42

0.89

1992/1993

1.31

0.49

1982

1.62

1.06

1993/1994

1.70

0.93

1983/1984

1.70

1.01

1994/1995

1.81

1.14

1984/1985

1.79

1.15

1995/1996

1.99

1.20

1985/1986

1.84

1.19

1996/1997

1.86

1.08

1986/1987

1.73

1.12

1997/1998

2.11

1.22

1987/1988

1.50

0.77

1998/1999

1.83

1.03

1988/1989

1.11

0.71

1999/2000

2.07

1.18

1989/1990

1.43

0.86

2000/2001

1.96

1.25

1990/1991

1.56

0.96

2001/2002

2.23

1.36

Source: Food Marketing Institute Annual Financial Review

Median Average Store Size
      (Square Feet)

2001

44,000

2000

44,600

1999

44,843

1998

40,483

1997

39,260

1996

38,600

1995

37,200

1994

35,100

1993

33,000

1992

32,400

1991

31,500

1990

31,000

Source: Food Marketing Industry Speaks 1992 – 2002

Key Industry Facts – Prepared by FMI Information Service May 2002

                                        Number of Stores

 

2002

2002

 

 

Number

% of Total

 

Supermarkets ($2,000,000 + )

32,981

100.0

 

Chain Supermarkets

21,560

65.4

 

Independent Supermarkets

11,421

34.6

Grocery/convenience/gas stores

132,000

N/A

Wholesale Club Stores

972

N/A

Military Commissary

182

N/A

  Grocery Store Sales

2002

2002

 

$ Sales Billions

% of Total

Supermarkets ($2,000,000 + )

411.8

100.0

Chain Supermarkets

340.5

82.7

Independent Supermarkets

71.3

17.3

Grocery/Convenience/Gas Stores

92.5*

N/A

Wholesale Club Stores

27.4*

N/A

Military Commissary

3.7*

N/A

Source: Progressive Grocer 70th Annual Report of the Grocery Industry – May 2003

                                                                       Supermarket Operating Costs 2001


% of Sales

% of 
Gross Margin

Gross Margin

27.7 %

100 %

Expenses

 

 

Payroll

11.0

39.71

Employee Benefits

3.2

11.55

Utilities

1.2

4.33

Property Rentals

1.7

6.14

Taxes & Licenses

0.4

1.44

Insurance

0.3

1.08

Depreciation & Amortization

1.5

5.41

Maintenance & Repairs

0.7

2.52

Supplies

1.1

3.97

Other Operating Costs &
Allowances NOT included above


4.4


15.88

Total Expenses

25.5

92.05

Net Operating Profit (Loss)

3.1

11.19

Net Other Income (Expense)

0.2

.72

Net Income Before Tax & Extraordinary Items


3.3


11.91

                                                  Source: FMI Speaks 2002

Key Industry Facts – Prepared by FMI Information Service June 2002

Average Weekly Sales Per Supermarket

2002

$361,564

2001

$368,779

2000

$335,242

1999

$334,479

1998

$333,411

1997

$284,700

1996

$212,382

1995

$209,875

1994

$193,035

1993

$192,760

1992

$183,200

1991

$183,775

Source: Food Marketing Institute Industry Speaks 1992 - 2002

 

1998

1999

2000

2001

2002

Median Company Sales Growth

4.2%

5.1%

4.2%

3.7%

3.4%

Median Company Identical Store Sales Growth

2.6%

2.7%

1.8%

2.2%

2.4%

Median Weekly Sales per Square Foot (Selling Area)

$10.16

$11.17

$10.29

410.83

$11.13

Median Price per item

$1.83

41.91

$1.94

$2.09

$2.13

Median Customer Transaction

$21.50

$23.04

$23.03

$25.66

$24.63

 

One Store

2-10 Stores

11-100 Stores

100+ Stores

 

Median Store Sales Growth by Number of Stores

3.3%

3.7%

3.4%

3.5%

 

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    DATA MINING LOYALTY PROGRAMS IS ESSENTIAL FOR ROI

Even though twenty-seven of the top fifty retailers have frequent shopper card loyalty programs, the majority do not utilize the data to expand their customer base and increase sales.  Most retailers only use the programs to offer promotional discounts and there is very little targeting of the promotions, if any.  This has resulted in few retailers getting a positive return on investment.

A retailer’s first priority should be to identify the top twenty percent of their customers who can represent seventy percent of the retailers profit. After you identify this group, the retailer can provide marketing incentives (especially for high profit margin items) that will increase the shopper’s market basket, sales and profitability for the retailer.

By developing purchase data and the transaction history of their customers, retailers can determine price and promotion sensitivity by category in order to effectively and efficiently market to their customers.  According to Carlene Thissen, managing partner of Retail Systems Consulting, 10,821 supermarkets offer loyalty card programs today compared with 8,999 in 1999. If the retailer develops their customer purchase data, they can increase customer loyalty as well as efficiently utilizing their promotional dollars.

TOP U.S. FREQUENT SHOPPER MARKETS

2001
Rank

 

Percent
Participation

% Participation
Change vs. 2001

1

Baltimore/Washington

96%

+ 2%

Tie

Chicago

96%

0%

2

Buffalo/Rochester, N.Y.

95%

+ 5%

Tie

Denver

95%

+ 4%

3

Philadelphia

94%

NA

4

Columbus, Ohio

90%

+ 47%

5

Los Angeles

89%

+ 1%

Tie

New York

89%

+ 7%

Tie

San Francisco

89%

NA

6

Boston

88%

+ 4%

7

Seattle

85%

+ 4%

8

Atlanta

84%

+ 30%

9

Houston

815

05

10

Sacramento

68%

+ 12%

11

Tampa

65%

+ 4%

12

Minneapolis

62%

+ 35

13

St. Louis

23%

0%

14

San Antonio

22%

+ 3%

15

Miami

12%

+ 5%

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    TRADE DIMENSIONS REPORTS 2002 CHANNEL CHANGE STATISTICS

                                                      2002 CHANNEL CHANGE STATISTIC

Trade Channel

Total Store Openings

Closed
Stores

Ownership Change

Total Openings, Closings & Changes

All Trade Channels

38,269

17,871

30,395

86,535

Average

3,272

1,409

2,532

7,211

Category Killer

4,443

3,002

1,603

9,048

Cigarette Outlet

2,485

375

1,113

3,973

Convenience Store

16,973

4,876

17,737

39,586

Drug

2,824

3,030

5,492

11,346

Grocery

3,744

2,383

2,679

8,806

Liquor

3,777

2,694

1,638

8,109

Mass Merchandiser

3,930

1,489

131

5,550

Wholesale Club

93

22

2

117

                                                    2002 MONTHLY CHANGE STATISTICS

Month

Total Store Openings

Closed
Stores

Ownership Change

Total Openings, Closings & Changes

12 Month Total

38,269

17,871

30,395

86,535

January 2002

1,504

943

2,301

4,748

February 2002

2,851

514

1,444

4,809

March 2002

5,232

1,566

1,102

7,900

April 2002

5,121

765

6,002

11,888

May 2002

4,130

1,538

1,529

7,197

June 2002

2,060

1,703

6,369

10,132

July 2002

3,308

1,021

603

4,932

August 2002

3,250

2,239

2,943

8,432

September 2002

3,010

2,267

2,282

7,559

October 2002

2,507

1,192

730

4,429

November 2002

1,931

2,903

3,809

8,643

December 2002

3,365

1,220

1,281

5,866

Source: Trade Dimensions

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    LATEST U.S. CONVENIENCE STORE COUNT AT 132,424 STORES

The total number of convenience stores in the U.S. stands at 132,424 stores, according to the new National Association of Convenience Stores (NACS)/TDLinx Official Industry Store Count, as of December 31, 2002. The count is based on TDLinx data that tracks convenience stores as defined by TDLinx and endorsed by NACS.

Last year, the official store count was 124,516 stores. Ten years ago, the official industry store count stood at 100,800; 20 years ago there were 76,200 stores; and 30 years ago there were 24,300. The increase in the number of U.S. convenience stores at year-end 2002 over 2001 reflects new store openings compared to closings. Importantly, the count also incorporates existing non-convenience stores that were classified or remodeled and now meet the NACS’ definition of a convenience store, which includes a broad merchandise mix and a minimum of 500 stock-keeping units (SKUs).

The industry continues to be composed by a majority of small, "independent" operators – stores that are owned and operated as a one-store business or franchise. According to the report, Nearly three-fifths (59.2 percent) of the country’s convenience stores (78,353 stores total) are categorized as single-store companies in the latest store count. Meanwhile, 14.6 percent (19,392 stores) are owned an operated by companies having more than 500 stores. Texas has the most single-store operators or franchisees (7,281), followed closely by California (7,061). However, California has a significantly higher percentage of single-store operators, 77.2 percent vs. 57.4 percent. Meanwhile, Florida has the most stores operated by companies of 500-plus stores (2,551 stores, or 28.4 percent of all stores in the state). More than 100,000 convenience stores (101,823), or 76.9 percent of all stores, sell motor fuels. Overall, convenience store retailers sell nearly four-fifths of the gasoline purchased in the U.S.

"The convenience store channel’s continuing evolution demonstrates that retailers can adapt to find new business opportunities and models to serve today’s – and tomorrow’s – convenience customers," said Scott Taylor, executive vice president and general manager for TDLinx. "Convenience store retailers are not just changing their store mix of products and services – they are changing their business model, both physically and culturally," said Taylor.

 Source: Trade Dimensions

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   2001 SUPERMARKET SALES INCREASE 3.5 PERCENT TO $398.2 BILLION

Supermarket sales increased 3.5 percent in 2001 to $398.2 billion from $384.8 billion in 2000 and $365.4 billion in 1999.  There was an increase growth of 465 supermarkets (152 independents and 283 chain stores). Sales increased 3.6 percent for chains and 2.2 percent for independents and the average supermarket has sales of $12.3 million with 28,400 square feet of selling space.  Weekly sales are $8.33 per square foot. The primary shoppers visit grocery stores twice a week and spend $73.

2001 Supermarket Sales

 

                 Number
of Stores

       Percentage
of Total

                      $ Sales
(Billions)

         Percentage
of Total

ALL SUPERMARKETS ($2 Million or more)

32,265

100.0%

$398.2

100.0%

CHAINS (Eleven or more stores)

21,108

65.4%

$326.2

81.9%

$2 to $4 Million

1,398

4.4%

4.0

1.0%

$4 to $8 Million

3,566

11.1%

21.3

5.3%

$8 to $12 Million

3,593

11.1%

34.9

8.8%

$12 to $20 Million

5,748

17.8%

86.9

21.8%

$20 to $30 Million

4,850

15.0%

113.1

28.4%

$30 Million and Over

1,955

6.1%

66.1

16.6%

 

 

 

 

 

INDEPENDENTS (Ten or fewer stores)

11,157

34.6%

$72.0

18.1%

$2 to $4 Million

4,330

13.4%

12.6

3.2 %

$4 to $8 Million

4,463

13.8%

25.2

6.3%

$8 to $12 Million

1,182

3.7%

11.5

2.9%

$12 to $20 Million

768

2.4%

11.1

2.8%

$20 to $30 Million

258

0.8%

5.9

1.8%

$30 Million and Over

156

0.5%

5.7

1.4%

 

 

 

 

 

BY SUPERMARKET FORMAT

 

 

 

 

Conventional

17,210

53.5%

$142.4

35.8%

Limited Assortment (Under 1,500 Items)

2,000

6.2%

9.1

2.3%

Warehouse (Low price/Service)

800

2.5%

9.5

2.4%

Supercenter (75,000 square ft. minimum)

1,555

4.8%

39.2

9.8%

Superstore/Combo (30,000 square ft. minimum)

10,700

33.2%

198.0

49.7%

 

 

 

 

 

OTHER FOOD FORMATS

 

 

 

 

Wholesale Club Stores*

910

N/A

$25.7

N/A

Military Commissary*

196

N/A

3.6

N/A

Grocery/Convenience/Gas*

125,000

N/A

90.0

N/A

Supermarket items only

 

 

 

 

Source: Progressive Grocer’s 69th Annual Report of the Grocery Industry

Manufacturer’s are displeased with the results from their trade promotional spending as indicated by a retail consultant from Accenture who stated that “consumer packaged goods companies allocate 13 percent of their sales to trade promotions and after adding in consumer promotions, the total spent is approximately $31 billion a year.  The incremental sales from those expenditures total only $28 billion, resulting in a $3 billion cost of doing business.”

The market share for the top five retailers has increased from 26.5 percent in 1980 to 40.3 percent in 2001.  

The Top Five Retailers Market Share

Year

1980

1990

1995

2000

2001

Percentage

26.5%

28.7%

26.3%

38.2%

40.3%

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      WHOLESALE GROCERY COMPANIES MARKET SHARE

  In April 1996, wholesale supplied supermarkets comprised 36.6% of the Total All Commodity Volume (ACV) of the US. In January 2002, the total ACV of wholesale supplied supermarkets had grown by $57 billion, but the share of the total ACV had shrunk to 29.5%.
The total number of supermarkets, the core of the packaged goods go-to-market structure, is 31,500 today. That includes supercenters like Wal-Mart, Kmart, and Target. In 1987, there were 30,400 outlets. While the number of stores hasn’t changed that much, chain stores have increased their dominance, increasing from 16,700 stores to 20,300. And the average chain store sales area expanded 45 percent.

The top accounts today are:

Kroger

2,249 Stores

$46.7 Billion

Safeway

1,568 Stores

$31.5 Billion

Albertson’s

1,713 Stores

$30.2 Billion

Wal-Mart

1,103 Stores

$28.2 Billion

Ahold

1,245 Stores

$24.1 Billion

Delhaize

1,464 Stores

$15.2 Billion

Publix

   687 Stores

$14.6 Billion

Winn-Dixie

1,141 Stores

$13.0 Billion

A&P

   519 Stores

$  8.5 Billion

SuperValu

   550 Stores

$  7.4 Billion

That represents $219 billion and accounts for 51 percent of the supermarket all-commodity volume (ACV).
Most of the retailers had some presence in 1987’s top 10. The largest chain then, Safeway, had just 1,568 sores and $18.3 billion in sales. No. 3 American Stores is now part of Albertson’s; No. 6 Lucky Stores also is now mostly part of Albertson’s except for pieces that were sold off; No. 8 Supermarkets General Corp. is now Pathmark (and bankrupt); and No. 9 Stop & Shop is part of Ahold.

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           SHELF PRESENCE SHOWS INCREASE IN PRIVATE LABEL

Supermarkets have significantly increased the number of Private Label products on their shelves even as unit sales are declining in an effort to recapture sales that value-conscious consumers have shifted to other channels. Sales trends, however, suggest that this strategy has not been effective. Unit sales of Private Label products (as well as manufacturer brands) within supermarkets have declined over the same time period. Despite a soft economy and consumer belt-tightening, consumers have not broadly gravitated to Private Label products. Instead, consumers have shifted channels to find the best deals and prices on manufacturer brands they know and trust.

Private label sales accounts for approximately 25% of the supermarkets items and 16% of retail sales.

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PRIVATE LABEL CONSOLIDATION EXPECTED IN THE NEAR FUTURE

In less then 10 years, America's 1,500 private label food manufacturers could consolidate to a field of no more than 20 as they respond to the demands of large-scale food retailers who wish to leverage their purchasing power and merchandising programs and reduce costs through streamlined transactions, according to a new report by Deloitte & Touche Corporate Finance LLC.

"From our observations of food retailing mega-chains like Wal-Mart, the message is clear: Expand through consolidation to keep pace with upsized retail mega-chains or risk perishing," said Dan Ruhl, managing director of Deloitte & Touche Corporate Finance LLC, and co-author of the report entitled "Consolidation is Changing the Face of the PL Industry."

The report notes that as food retailers become national chains, they want private-label vendors to broaden their reach to provide economies of scale. "National food retailers want vendors that can service their entire geographic region, and provide a greater variety of products. The goal is for more consistent products, packaging, and pricing, as well an efficient way to provide many product categories to each store," said Ruhl.

Brad Akason, also a managing director at Deloitte & Touche Corporate Finance LLC and a co-author of the report, noted four other factors that are driving the private-label manufacturing consolidation trend:

bullet

Private-label brands are a highly effective way for retailers to differentiate their value in markets crowded with "same-as" stores.

bullet

Name brand preference among consumers is declining.

bullet

Mega-chain retailers want to allot more shelf space for private-label goods because of larger profit margins and growing consumer satisfaction.

bullet

Consolidation among private-label manufacturers is already resulting in larger product offerings, increased capacity, greater supply-chain leverage, faster speed to more markets, and more capital to invest in product improvement and innovation.

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    THE TOP 50 SUPERMARKET COMPANIES FOR THE YEAR 2001

THE TOP 50 SUPERMARKET COMPANIES FOR THE YEAR 2001

 

2001
Rank

 

  2000
Rank



  Company

 

 

Estimated
Sales
(Millions)

 

Number of Supermarkets

 Average Per Store

Weekly Sales
per Sq. Ft.
Selling Area

 

 Sales       (Millions)  Sales Area
Sq. Ft. (000)

1

1

The Kroger Company

$46,726

2,429

$19.2

36.3

$10.18

2

3

Safeway, Inc.

31,451

1,568

20.1

36.1

10.69

3

2

Albertson’s Inc.

30,207

1,713

17.6

34.9

9.72

4

4

Wal-Mart Supercenters

28,247

1,103

25.6

61.1

8.06

5 5 Ahold USA 24,104 1,245 19.4 39.7 9.38

6

6

Delhaize America

15,231

1,464

10.4

29.0

6.90

7

8

Publix Super Markets

14,624

687

21.3

39.8

10.28

8

7

Winn-Dixie Stores

13,012

1,141

11.4

38.9

5.64

9

9

A & P

8,540

519

16.5

31.6

10.02

10

10

SuperValu, Inc.

7,396

550

13.4

29.8

8.67

11

11

H-E-B Grocery

7,057

278

25.4

37.8

12.92

12

12

Shaw’s Supermarkets

4,320

187

23.1

40.2

11.04

13

15

Meijer, Inc.

3,939

153

25.7

51.1

9.69

14

13

Pathmark Stores

3,906

142

27.5

41.8

12.64

15

14

Defense Commissary Agency

3,616

196

18.5

28.2

12.59

16

16

Hy-Vee Food Stores

3,536

187

18.9

40.7

8.95

17

20

Aldi USA, Inc.

3,197

755

4.2

13.1

6.21

18

18

Raley’s Supermarkets

3,069

149

20.6

43.9

9.03

19

19

Giant Eagle, Inc.

2,965

120

24.7

45.2

10.51

20

21

Wegmans Food Market

2,678

62

43.2

72.0

11.54

21

23

Stater Brothers Markets

2,671

155

17.2

26.6

12.46

22

29

Price Chopper/Golub Corp.

2,399

100

24.0

41.1

11.23

23

28

Penn Traffic Company

2,304

221

10.4

32.4

6.19

24

30

Super Kmart Corporation

2,264

123

18.4

52.2

6.79

25

28

Ingles Markets, Inc.

2,247

205

11.0

38.0

5.54

26

22

Harris Teeter, Inc.

2,219

143

15.5

32.4

9.21

27

45