Supers need to keep up with consumers

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Food is big business, and everyone wants a piece of it.

Food is big business, and everyone wants a piece of it.

With supermarket sales in the United States totaling $557.7 billion last year to account for 40% of mass market sales, it’s no wonder that a growing number of retailers in other trade classes, including drug chains and dollar stores, are staking a claim in the grocery category.

While supermarkets remain a prominent part of the retail landscape, the preeminence they once enjoyed is a thing of the past, as operators of traditional food stores look for ways to deal with the rising competitive wave. Two recent reports shed light on their predicament. Traditional grocers’ market share declined substantially during the last decade, according to a study by UBS, a global banking and financial services firm, from 66% in 2000 to 51% last year.

More alarming still is research conducted by the investment bank Jefferies and AlixPartners, a business advisory firm, that shows members of the rising generation of “Millennials” (those born between 1982 and 2001) are much less likely to shop traditional food stores than older consumers. Just 41% of Millennials’ food budget is spent at such outlets; among baby boomers the figure is 50%.

The substantial divergence between generations in food shopping patterns should serve as a wake-up call for traditional supermarket operators who think the business model doesn’t need to evolve with the changing needs of consumers. Convenience and price are paramount among Millennials, Jefferies and AlixPartners found, an emphasis that tends to erode loyalty to both retailers and CPG brands.

The good news is that the supermarket industry includes some companies that understand the importance of continuous reinvention. Whole Foods Market has led the way in the shift toward natural, organic food; H-E-B has developed a variety of innovative store formats, including H-E-B Plus, a viable challenger to the supercenters fielded by Walmart Stores and other discounters; and Publix has extended its commitment to outstanding customer service with an experimental system facilitating orders placed via the Internet and smartphones.

Those are the kinds of initiatives the supermarket industry needs if it is to remain relevant as a new generation emerges as a driving force in the market.



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