Grocery Stores

Industry Profile Report

Dive Deep into the industry with a 25+ page industry report (pdf format) including the following chapters

Industry Overview Current Conditions, Industry Structure, How Firms Operate, Industry Trends, Credit Underwriting & Risks, and Industry Forecast.

Call Preparation Call Prep Questions, Industry Terms, and Weblinks.

Financial Insights Working Capital, Capital Financing, Business Valuation, and Financial Benchmarks.

Industry Profile Excerpts

Industry Overview

The 41,000 grocery store firms in the US sell non-perishable dry foods and an extensive array of perishable products; including meat, produce, dairy, bakery, frozen, and several specialty food related products or services. Grocery retail is a low margin, high volume business. The industry is concentrated, as the largest 50 firms account for 73% of industry sales.

Reliance On Information Systems

Grocery retailers depend on large, complex information technology systems to manage their business operations.

Stores Face Intense Competition

Competition in the retail grocery trade is fierce and intense.

Industry size & Structure

The average grocery store employs 64-65 workers and generates over $21 million in annual revenue.

    • The retail grocery business is a highly competitive, diversified industry with about 41,000 firms employing 2.6 million workers and annual sales of $810 billion.
    • The grocery store industry is concentrated, as the largest 50 firms operate over 17,650 stores and account for 73% of industry sales.
    • The average store is 48,000 square feet, but large supercenters can exceed 180,000 square feet.
    • On average, a grocery store carries about 31,530 items, or Stock Keeping Units (SKUs).
    • The median store sales are about $596,000 per week (about $29.1 million per year).
    • Customers typically make 1-2 trips to a grocery store each week. The average US household spends $164 per week on groceries with households with children spending considerably more.
                                  Industry Forecast
                                  Grocery Stores Industry Growth
                                  Source: Vertical IQ and Inforum

                                  Recent Developments

                                  Feb 14, 2024 - Price Increases Slowed in 2023
                                  • The producer price index for grocery stores rose 5.4% in December compared to a year ago after climbing 14.7% in the previous annual comparison, according to the US Bureau of Labor Statistics. At the consumer level, as measured by the consumer price index (CPI), the rise in grocery prices has outpaced the rate of inflation since the onset of the COVID-19 pandemic. While prices overall have risen by 19% in the last three years, families are now paying 25% more for groceries than they were before the pandemic, per the Federal Reserve Bank. Prices for many grocery staples have fallen over the past year, most notably eggs (down nearly 24%), lettuce (-16.7%), and apples (-5.9%), providing shoppers with some relief.
                                  • Grocery chains are coming under increasing pressure from the Biden administration to lower their prices, The New York Times reports citing an analysis by the White House Council of Economic Advisers. The analysis of Census data shows that grocers have maintained the higher profit margins they began generating following the onset of the pandemic while at the same time, other types of retailers have reported lower margins. It indicates that the food and beverage sector is generating profit margins that are approximately 2% above where they were in early 2020, bringing them to a 20-year high, according to NYT. “There are still too many corporations in America ripping people off: price gouging, junk fees, greedflation, shrinkflation,” the president remarked in late January. After hitting a 40-year high of 13.5% in September 2022, grocery inflation has steadily eased to a 1.3% annual rate in December 2023.
                                  • Digital grocery sales were projected to decline in 2023 from the previous year, with sales estimated to fall more than 1% to make up just 13.1% of the total grocery market, according to the 2023 Digital Grocery: Year in Review from Grocery Doppio. Still, grocers are optimistic about digital grocery sales in 2024, with 59% saying they expect digital sales to improve versus 2023. While the overall grocery market is expected to grow to $926 billion in 2023 (up 3.1% year over year), digital sales are estimated to capture $121 billion, down from $128 billion in 2022, per the report. Digital sales fell in 2023 due to unavailable or unsubstituted items and thinner margins. Inflation also contributed, “As customers modified their shopping strategies to battle rising costs, they did more in-store purchasing,” the report notes. Grocers are planning to increase their digital budgets by 8-14% in 2024.
                                  • Grocery delivery, which soared during the pandemic, is less sustainable than in-store shopping, Supermarket News reports citing new research from Carnegie Mellon University (CMU). Researchers at CMU’s College of Engineering examined the impact of grocery delivery on energy use, emissions, and traffic congestion and found that grocery delivery was less energy efficient than people shopping for products themselves. Because grocery delivery – while down since the pandemic – isn’t going away, the goal of the research is to provide a new set of insights for organizations to integrate into e-commerce and grocery delivery trends for long-range, and more sustainable transportation planning, SN reports. Experimenting with different variables including store location and time of day of delivery, researchers found little improvement in energy usage because deliveries replaced grocery trips when consumers were on their way home from somewhere else.
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