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Report: Channel Blurring is Changing Food Retail Biz

MINNEAPOLIS - As the mass-merchandising industry begins to mature, the channel's focus on food as a vehicle for growth is resulting in supercenters that are beginning to look like conventional grocery stores, says U.S. Bancorp Piper Jaffray Senior Food Processing and Distribution Analyst George Dahlman in his recently published report, "The Blurring Food Retail Channels."

"Thirty years ago, consumers had to visit the local supermarket to purchase a food staple such as milk; today, one can buy milk at a supermarket, a mass merchandiser, a drug store, a gas station, a video-rental store, and out of a vending machine," said Dahlman. "While 'one-stop shopping' was quite common 100 years ago with general stores dotting the landscape, we have slowly evolved to a retail dynamic that specializes along category lines. However, the retail food chain is slowly evolving back to the general store format without losing the economies of scale and scope that the 'category killer' approach has afforded."

In his report, Dahlman states that in 1990, the four leading grocery retailers accounted for only 16 percent of the total retail food dollar. Today the top six
retailers, Kroger, Albertson's, Wal-Mart, Safeway, Costco, and Ahold USA, account for approximately 50 percent of the total retail food dollar. He goes on to say that the food retailer consolidation of the past several years has resulted in a transfer of power within the food processor/food retailer relationship in favor of the larger retailers.

"As general merchants have begun to sell more food, conventional supermarkets have fought back by expanding their offering of general merchandise, making them look more like supercenters," said Dahlman. "The net result is a blurring of the food retail channels."
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