The Dollar store sector continues its twelve year run of opening new units at a seemingly unstoppable rate. Legacy grocery stores appear undaunted, unwilling, and unable to do anything but capitulating market share to the Dollar store sector, let alone accept or understand what is driving consumers away from their units into Dollar stores. With more and more Dollar stores selling fresh prepared Ready-2-Eat and Heat-N-Eat food, can Kroger, Publix, and Safeway survive?
Foodservice Solutions® Grocerant Guru™ believes that in the short term (next five years) the Dollar store sector will garner an additional 2.5 % of sales from legacy grocery operators. In addition our Grocerant Guru™ believes that Amazon will within five years reach their goal of 2.5% sales from the grocery sector adding additional unwanted, unrecognized pressure on margins for the grocery sector. It must be noted that each of these companies has already said Amazon is no threat. Alone maybe not but combined with macro evolving Omni-channel retail environment they might need to take another look.
The first two competitive threats would only add up to a 5% loss. Foodservice Solutions® Grocerant Guru™ believes that an additional 1.25% will come from new non-traditional food retailers. The rapid success of Ready-2-Eat and Heat-N-Eat fresh prepared food will continue to propel success from new non-traditional fresh food retailers including Liquor stores (Pinkies), Department stores (Macy’s, Nordstrom’s, Saks, etc.), the restaurant sector from the ilk of Eataly, Eatzi’s Maggiano’s Little Italy, Boston Market.
What our Grocerant Guru™ anticipates could become the largest and fastest growing sectors of competition for legacy grocery retailers providing at minimum the other 1.25% sales capitulation over the next five years will come from the convenience store sector along with the retail drug store sector.
Walgreens Up-Market stores selling both fresh prepared Ready-2-Eat and Heat-N-Eat food is expanding from unban center to urban center they soon will begin leveraging existing unit metrics to extend into the suburbs. The C-store industry has grown its fresh food offerings. C-store same store sales fresh food sales have been up 7+% for the past four years with no signs of slowing down all the while opening more and more units are opening. Branded chain drug stores are in very neighborhood in the U.S. and will become the greatest threat to legacy grocery stores over time according to our Grocerant Guru™.
In the United States the improving economy will add additional pressure on the grocery retail sector according to Foodservice Solutions® Steven Johnson who stated recently “the SNAP program has been cut this year by 5%, there is an expected additional cut to the SNAP program to come next year, combined with reduced numbers of consumer eligible for the program due to the improved economy, legacy grocery retailers will capitulate market share to restaurants and non-traditional food retailers for several years.”
Andrej Busch, chief executive of DHL Paket Germany stated recently that “Online sales now made up 5 percent of the British grocery market, compared with less than 1 percent in Europe's biggest economy, ... "Why can't we get from 1 percent to 5 percent?". He went on to say he thinks that Germany can hit 5% by 2016. If success does leave clues new non-traditional avenues of fresh food distribution are a clue that grocery industry disruption is on the way. Don’t think that 5% can’t happen in the U.S. either. How much and how fast has Safeway shed stores? How long with that continue, will your company be next? Need help repositioning? The battle for share of stomach continues to intensify.www.FoodserviceSolutions.us Steven Johnson is Grocerant Guru at Tacoma, WA based Foodservice Solutions, with extensive experience as a multi-unit operator, consultant and brand/product positioning. Since 1991 Foodservice Solutions® of Tacoma, WA has been the global leader in the Grocerant niche