Summary profile of the dominant economic characteristics of the Grocery Stores Industry. For example: Market Size ($ and volume), Growth Rate (past and future forecasts), Major Competitors (compare relevant financial data and trends such as sales, profit, market share, etc.; conclusions about competitive positions and/or strengths and weaknesses; which competitors are in the strongest and weakest competitive positions), Strategic Group Mapping, etc.
The United States grocery industry consists of approximately 65,000 supermarkets and other grocery stores with combined annual revenue of $465 billion. Major companies within this industry include Kroger, Safeway, and SUPERVALU as well as Ahold, the US division of Netherlands-based Royal Ahold. The 50 largest companies generate about 70 percent of total revenue, whereas the convenience and discount stores, the warehouse clubs and superstores have their own separate industry profiles.
The grocery store industry operates in a highly competitive external environment with the industry margins are low; the individual firms profitability depends on high sales volumes and efficient operational strategies. The keys that fosters and drives demand is population growth and consumer preferences. To achieve customer preferences big companies within this industry offer the convenience of offering a wide collection of quality products under one roof since they enjoy the economies of purchasing, distribution, marketing and finance. The smaller companies on the other hand cater a local market providing specialty products with superior customer service. Wal-mart and Sams Club are examples of discount stores and warehouse clubs that have also aggressively pursued the retail grocery market, with Wal-Mart being the largest seller of groceries in the US. Other competition includes specialty food stores, convenience stores, drugstores and dollar stores.
Leaders in Long-Term Growth Rate (5 yr)
|
|
Companhia Brasileira de Distrib
|
27.50%
|
Great Atlantic & Pacific Tea Co
|
20.00%
|
Whole Foods Market, Inc.
|
7.70%___The_Pantry,_Inc.__15.00%'>17.70%
|
The Pantry, Inc.
|
15.00%
|
Susser Holdings Corporation
|
15.00%
|
Ingles Markets, Incorporated
|
13.30%
|
Ruddick Corporation Common Stock
|
12.00%___Caseys_General_Stores,_Inc.__10.23%'>12.00%
|
Caseys General Stores, Inc.
|
10.23%
|
Kroger Company (The) Common Stock
|
9.65%___Safeway_Inc._Common_Stock__8.95%'>9.65%
|
Safeway Inc. Common Stock
|
8.95%
|
|
Laggards in Long-Term Growth Rate (5 yr)
|
|
Winn-Dixie Stores, Inc
|
7.00%
|
SuperValu Inc. Common Stock
|
7.55%
|
Etablissements Delhaize Freres
|
7.70%
|
Safeway Inc. Common Stock
|
8.95%
|
Kroger Company (The) Common Stock
|
9.65%
|
Caseys General Stores, Inc.
|
10.23%
|
Ruddick Corporation Common Stock
|
12.00%
|
Ingles Markets, Incorporated
|
13.30%
|
The Pantry, Inc.
|
15.00%
|
Susser Holdings Corporation
|
15.00%
|
|
|
|
Leaders in Total Revenue (ttm) 2009
|
|
Kroger Company (The) Common Stock
|
$78.7 B
|
Safeway Inc. Common Stock
|
$41.0 B
|
SuperValu Inc. Common Stock
|
$39.4 B
|
Etablissements Delhaize Freres
|
$25.5 B
|
Companhia Brasileira de DistribCBD
|
$16.0 B
|
Whole Foods Market, Inc.
|
$8.7 B
|
Great Atlantic & Pacific Tea Co
|
$8.6 B
|
Winn-Dixie Stores, Inc.
|
$7.2 B
|
The Pantry, Inc.
|
$6.2 B
|
Caseys General Stores, Inc.
|
$4.4 B
|
|
Laggards in Total Revenue (ttm)2009
|
|
Arden Group, Inc.
|
$419.2M
|
Village Super Market, Inc.
|
$1.2 B
|
Alon Holdings - Blue Square Inc.
|
$1.9 B
|
Weis Markets, Inc. Common Stock
|
$2.6 B
|
Ingles Markets, Incorporated
|
$3.4 B
|
Susser Holdings Corporation
|
$3.8 B
|
Ruddick Corporation Common Stock
|
$4.3 B
|
Caseys General Stores, Inc.
|
$4.4 B
|
The Pantry, Inc.
|
$6.2 B
|
Winn-Dixie Stores, Inc.
|
$7.2 B
|
|
|
|
For comparative analysis we are going to compare the two top companies making the most revenue, Kroger Company and Safeway Inc. The Kroger Companies primary sources of revenue are the food stores which account for approximately 95% of total company sales. The companies owns 2,470 grocery retail stores in 31 states,operates 779 convenience stores in 18 states. 375 fine jewelry stores under names like Fred Meyer Jewelers, Littman Jewelers, Barclay Jewelers, and Fox's Jewelers. These are high-margin businesses which generates good cash flow. Kroger is the only major U.S. supermarket company to operate an economical three-tier distribution system. Kroger also operates 40 food processing or manufacturing facilities producing high quality private-label products that provide value for customers and enhanced margins for Kroger. Kroger operates 909 supermarket fuel centers, which are a natural addition to their one-stop-shopping strategy. Kroger's 1,963 pharmacies, located within stores, provide high quality services at everyday low prices. Growing market share is an important part of Kroger’s long-term strategy. Market share is an important part of their long-term strategy which allows the to leverage the fixed costs in their business over a wider revenue base thus their fundamental operating philosophy is to maintain and increase market share. In 2009, Kroger’s overall market share increased approximately 60 basis points, according to Nielsen Homescan Data. Throughout 2009, Kroger successfully grew identical sales, one of the key objectives of their strategic business model. Identical supermarket sales increased 2.1%, without fuel, compared with the prior year. The business continues to widen the gap between Kroger’s identical sales growth trends and those of most of their competitors. Even in the face of high unemployment, unprecedented deflation, and a weak U.S. economy, Kroger improved its operational performance and continued to focus on creating value for its shareholders.
Safeway Inc. is one of the largest food and drug retailers in North America. As of
March 28, 2010, the company operated 1,712 stores in the Western, Southwestern, Rock Mountain, and Mid-Atlantic regions of the United States and in western Canada. In support of its stores, Safeway has an extensive network of distribution manufacturing and food processing facilities. With 8% of the market, Safeway is the second largest traditional supermarket operator in the United States. With its Blackhawk Network subsidiary, Safeway is also the largest distributor and seller of third party gift cards, offering brands such as Barnes & Noble (BKS), iTunes, and Home Depot (HD).
Safeway earned $40.8 billion in revenue in 2009, down from $44.1 billion in 2008 (and the latter was reported for 53-weeks). In 2009 Safeway reported a net loss of $1,097 million, as compared to net income of $965 million the previous year. However, the poor result includes accounting for a non-cash goodwill impairment charge related to Safeway’s reduced market capitalization and the recession; excluding the charge, Safeway would have posted net income of $720 million. Management blamed the decline in revenues on reduced consumer spending and an increase in bargain shopping, lower fuel prices, and “unprecedented levels” of price deflation for items such as dairy, meat, and produce.
http://www.wikinvest.com/wiki/Safeway#Competition
Source: Company Data
Comparison of Operational Metrics, Margins and Capital Expenditure
|
Company (Fiscal Year)
|
Comp Sales Growth
|
Square Footage Growth
|
|
New Store Additions
|
Closures
|
Average Store Size (Square Feet)
|
Gross Margin (%)
|
Operating Margin (%)
|
Net Profit Margin (%)
|
Capital Expenditure/Sales (%)
|
Whole Foods Market (WFMI)
|
11.0%
|
9.6%
|
879.3
|
14
|
3
|
34,000
|
35.0%
|
5.7%
|
3.6%
|
6.1%
|
Safeway (SWY) (FY2009)
|
(4.90%)
|
(0.40%)
|
N/A
|
8
|
23
|
46,000
|
28.62%
|
(1.54%)
|
(2.69%)
|
2.08%
|
Kroger Company (KR) (FY2009)
|
0.90%
|
0.01%
|
518.47
|
14
|
27
|
60,000
|
22.60%
|
1.42%
|
0.07%
|
2.99%
|
SuperValu (SVU)
|
N/A
|
2.00%
|
N/A
|
68
|
85
|
NA
|
14.50%
|
2.20%
|
1.00%
|
1.80%
|
Wal-Mart Stores (WMT)
|
3.00%
|
8.60%
|
NA
|
140
|
2
|
NA
|
23.10%
|
5.90%
|
3.60%
|
4.50%
|
Costco Wholesale (COST)
|
8.00%
|
NA
|
127.00
|
25
|
NA
|
NA
|
10.60%
|
2.80%
|
1.90%
|
2.00%
|
BJ's Wholesale Club (BJ)
|
3.60%
|
NA
|
NA
|
8
|
0
|
NA
|
10.40%
|
2.60%
|
1.60%
|
1.50%
|
|
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