The PG 100: Top 10 Market Movers
(Editors' Note: This is part three of a three-part series)
A highly favorable macroeconomic climate helped retailers in the 2020 edition of the PG 100 generate a combined $1.869 trillion in sales, up 5.7% from prior-year sales of $1.768 trillion. The wealth was spread evenly among PG 100 constituents, with 86 of the companies listed showing sales growth versus 14 that saw sales decline.
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Successful operators such as Ahold Delhaize USA, Publix Super Markets, H-E-B and Meijer all grew sales by healthy amounts. Leading Canadian food retailers such as Loblaw and Sobeys also turned in respectable performances. Meanwhile, retailers such as Aldi and Dollar General ascended the PG 100 through aggressive store expansion and a low-price value proposition that resonated with shoppers. German discounter Lidl debuted at No. 95 on the list and appears to be headed higher, with more new stores in its pipeline. Conversely, online meal kit provider and 98th-ranked Blue Apron, once considered a disruptive force, is poised to fall off the list as its business trends have deteriorated.
Overall, 2019 was a year that saw the biggest retailers get a lot bigger, with the U.S. sales of the top 20 companies on the list accounting for combined sales of $1.487 trillion, or 79.3% of the PG 100’s combined sales of $1.869 trillion. The prior year, the top 20 companies accounted for 79.5% of total sales of $1.7 trillion. The sales concentration was especially pronounced among the top 10 companies, which accounted for roughly 15% of the PG 100 sales.
Here’s a look at the top 10 retailers on the PG 100 and some of the noteworthy developments that drove their performance:
Aggressive digital efforts around grocery pickup and delivery, along with overall e-commerce growth, helped Walmart improve productivity of its existing selling space. Walmart’s total U.S. selling space was flat with the prior year, but with 3,200 grocery pickup and 1,600 delivery locations operational at year end, the company added $9.338 billion in sales volume at U.S. stores to end the year atop the PG 100 with sales of $341.3 billion. Big increases came in two areas: The category defined as grocery, which includes all types of foods, as well as nonfood consumables products, increased to $190.5 billion from $184.2 billion, and Walmart’s U.S. online sales, which don’t include grocery orders fulfilled by stores, even if initiated online, increased to $21.5 billion from $15.7 billion.
The juggernaut rolls on is the best way to describe Amazon. The company’s North American retail business, excluding Whole Foods Market, grew by 24.5% to $154.6 billion, accounting for more growth than the other retailers in the top 20 combined. Ever-faster shipping times on the industry’s broadest assortment, offered at attractive prices, is a value proposition unrivaled in retail. As for Amazon’s acquisition of Whole Foods nearly three years ago, the destructive impact it was widely believed that the deal would have just hasn’t materialized. In fact, Whole Foods has been somewhat of a laggard when it comes to expanding omnichannel capabilities, and only recently, in response to COVID-19, was grocery pickup expanded from 80 to 150 of its more than 500 stores. More recently, the company introduced its first ever 7,500-square-foot Amazon Go Grocery cashierless concept, and the industry is anxiously awaiting the opening of Amazon’s first-ever full-size grocery store.
3. The Kroger Co.
Kroger’s store count shrank by seven units to 2,757 stores in 2019, which, combined with modest comparable-store growth, gave it the smallest sales increase of any company in the top 20. The company’s sales were aided by the aggressive expansion of grocery pickup and delivery, which at year end were available at 1,989 and 2,385 locations, respectively. Kroger also continues to emphasize its store-brand program, which now generates total sales of $23.1 billion and includes three brands with sales in excess of $2 billion. What makes Kroger one of the most intriguing companies in the top 10, however, is its huge bet on the future of digital grocery. Kroger’s deal with U.K. online grocery provider Ocado to develop 20 large-format automated customer fulfillment centers (CFCs) could give the company tremendous growth potential in the coming years. Unfortunately for Kroger, the first of the facilities isn’t due to become operational until late next year, even though the deal was struck two years ago. The robotic facilities measure upwards of 300,000 square feet and take a long time to develop, but once operational, they will remove order picking from physical stores that were not designed for that purpose.
4. Walgreens Boots Alliance
The Retail Pharmacy USA segment of Walgreens Boots Alliance generated sales last year of $104.5 billion, and of those sales, 26.2%, or $27.4 billion, were generated by nonpharmacy product categories; in other words, the same product categories — food, consumables, health and beauty, nonprescription medicines, and a smattering of general merchandise items — that are found in a traditional grocery store. Walgreens’ 9,277 stores, located in highly traffic-convenient locations, with a steady flow of pharmacy traffic, enable it to siphon customers from other types of retailers that offer similar nonpharmacy categories. Walgreens’ real estate and health and beauty acumen caught the attention of Kroger, and the companies have a major pilot program underway that offers Kroger-branded food departments inside Walgreens stores. If effective and expanded rapidly, Walgreens will quickly become a more significant player in food, with the aid of Kroger.
5. Costco Wholesale
It was another banner year for Costco as its U.S. operations landed the No. 5 spot on the PG 100, thanks to some of the highest-volume stores on the planet. Its 548 U.S. locations averaged about $190 million in sales, with most of that volume coming from core grocery categories and fresh food. Forty percent, or $59.7 billion, of Costco’s global sales come from a category that the company calls “food and sundries,” which includes dry and packaged foods, groceries, snack foods, candy, cleaning suppliers, and alcoholic and nonalcoholic beverages. The fresh food category — meat, produce, deli and bakery — accounted for 13.4%, or nearly $20 billion, of total global sales. Costco continued to gain shares in the food and consumables world as it added 16 new U.S. locations in its most recent fiscal year and continued to generate mid-single-digit same-store sales, excluding fuel.
6. CVS Health
On the surface, CVS Health has a lot in common with Walgreens. It has a similar number of stores (9,900) that are about the same size, in many of the same locations. The similarities end there, however, as CVS Health’s front end categories account for only 23.3% of sales (down from 25% two years ago) in the company’s retail and long-term care (LTC) pharmacy segment. Front end sales in this segment grew at a meager 1.6% over the past two years, making CVS Health’s retail footprint less of a food and consumables threat than Walgreens, even though CVS Health remains a major seller of key categories that overlap with traditional food retailers. It also offers 7,000 store brands that accounted for 22% of its front end revenues. Even so, the company’s impact on the world of food and consumables could diminish in the coming years, due to the rollout of a concept known as HealthHub. CVS added 50 HealthHub locations in 2019 in markets such as Houston; Tampa, Fla.; Atlanta; and Philadelphia, and these stores offer expanded health services that reduce front end selling space by 20%. This year, the HealthHub total will increase to 600 to 650 locations, and by the end of 2021, there are expected to be 1,500 locations, making CVS Health, which already fills 26.6% of the nation’s prescriptions, an even more formidable competitor to conventional food retailers that operate pharmacies.
Food and beverage sales at Target increased a respectable 3.1% to $15 billion and represented 19.5% of the retailer’s total sales of $77.1 billion. Add in the beauty and household essentials category’s sales of $20.6 billion, up 6.8% from the prior year, and core grocery categories at Target accounted for 46% of total sales. The figure could be headed even higher this year, as Target went all in last August on a major launch of a new store brand called Good & Gather. Target expects the brand to be its largest private label, with roughly 2,000 products in stores by the end of this year. The other growth driver at Target is small-format stores that can function as grocery stores in the communities where they’re located. The company has largely abandoned its long-standing approach to large-format stores in favor of stores that measure less than 50,000 square feet. Target’s small-store count increased to 91 units last year, up from 71 the prior year.
8. Albertsons Cos.
There’s a lot going right at Albertsons under the leadership of Vivek Sankaran, who joined the company as CEO in April 2019 after his tenure as CEO of PepsiCo Foods North America. Sales reached a new high of $62.5 billion during Albertsons’ fiscal year ended Feb. 29, aided by remodeling initiatives and effective marketing personalization efforts that yielded a 2.1% identical-store increase. Albertsons has a major opportunity ahead of it as it looks to narrow the digital grocery gap with rivals Kroger and Walmart, whose grocery pickup and delivery services are available at more locations than Albertsons’ programs in this area. The Drive Up & Go service that Albertsons offers is currently available at roughly 500 locations, will expand to another 500 stores by year end and be available at 1,600 of Albertsons’ 2,262 stores by next year. The other major sales-generating initiative underway is further expansion of Albertsons’ own brands. Sankaran signaled the company’s intention to accelerate own-brand growth last fall, with the appointment of Own Brands President Geoff White to lead all merchandising. Own-brand penetration stood at 23% in 2017; increased to a new high of 25.4% last year, with the introduction of 900 new items; and is projected to reach at least 30% over time as the company further expands its assortment of 12,000 own-brand products.
9. Sam’s Club
Tepid same-store sales growth and a flat year-over-year store count hindered Sam’s Club’s overall sales growth. However, of the five merchandise categories for which Sam’s discloses sales, the category described as “grocery and consumables” increased to $35.3 billion from $33.7 billion, and helped offset weakness in other merchandise segments. While Sam’s total sales of $58.8 billion make it a formidable competitor, with a 9th-place ranking on the PG 100, it represents just 11.2% of Walmart’s total revenues of $524 billion and lags well behind Costco in terms of productivity. Frequent senior leadership changes haven’t helped over the years, and Sam’s again changed bosses earlier this year, when it named Kathryn McLay CEO to replace John Furner, who was tapped to lead Walmart’s U.S. division.
10. Alimentation Couche-Tard
This Canada-based global convenience store operator has become a major force in North American and U.S. retailing. The highly acquisitive company did six deals in the past two years, which added roughly 2,500 locations, giving it a total of nearly 10,000 stores in the United States and Canada, and making it the largest independent convenience store operator in the United States. A major global initiative to rebrand stores as Circle K is nearing completion, with more than 85% of stores now flying the banner. Acquisitions remain a priority, but so, too, does improving the productivity of existing selling space. The key way to do that, as it is with many of the market-leading c-store operators, is through an improved offering of food and prepared foods. Alimentation Couche-Tard has an initiative in place it calls “food at scale,” which it maintains has been strongly accepted by customers and has been described by CEO Brian Hannasch as a critical advancement in the company’s food journey.
It seems many retailers, regardless of their heritage or perceptions of the channel in which they operate, are on a food journey. As became apparent during the height of COVID-19, the essential nature of food and consumables makes the space more attractive than ever to a broader array of companies.