Supermarkets in the US

PROSPECTS

Competition erodes supermarkets’ value share of grocery retailers

Supermarkets posted stable current value growth in 2018 to remain the leading store-based retailing channel in the US by a comfortable margin. However, while a handful of individual supermarket operators realised healthy sales gains, the overall channel experienced increased competition from other channels.

Supermarkets experiment with smaller store formats

With the rise of discounters and internet retailing changing the way consumers across the US shop for groceries, supermarket operators have started to look for inspiration on how to retain customers, such as from convenience stores, which expanded its share of grocery retailers over the review period, due in part to noticeable improvements to their grocery offerings. Additionally, the high concentration of convenience stores in core urban areas means that they are often frequented by reasonably affluent, city-dwelling millennials.

Changing demographic composition of the US is a boon to Asian grocers

The growth in the Asian population of the US has been a boon for supermarkets that specialise in Asian foods, which continued to see sales surge in 2018. The success of US-based H Mart, a supermarket chain specialising in Korean foods, is emblematic of this trend.

COMPETITIVE LANDSCAPE

Whole Foods bounces back under Amazon’s stewardship

Prior to being purchased by Amazon.com Inc in 2017, Whole Foods was not performing well, with slow value sales growth in both 2016 and 2017, partially attributable to competitors improving their selections of natural or organic grocery products, while undercutting Whole Foods on price.

Sprouts Farmers Market thrives in the face of renewed Whole Foods threat

Many industry observers speculated that Amazon.com Inc’s acquisition of Whole Foods in 2017 would be felt most keenly by other supermarket chains that specialise in providing healthy grocery offerings – especially products marketed as being organic or natural.

New initiatives for Kroger as competition intensifies

Although Kroger retained its leadership of supermarkets in the US in 2018, the retailer felt competition from the likes of Walmart, which slowly gained value share in the channel. Therefore, Kroger rolled out a series of initiatives intended to maintain its relevance, including focussing on the omnichannel space; Kroger expanded its curbside pick-up service to a greater number of stores; it extended the reach of its partnership with same-day grocery delivery service Instacart to additional markets; and it launched its own proprietary delivery service, dubbed Kroger Ship (though the service initially offered delivery of shelf stable items only).

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