COLUMBUS, Ohio -- The supermarket industry could in the next five years see the emergence of several global powerhouses as expanding European companies, such as Belgium's Delhaize and the Netherlands' Ahold, merge with such major U.S. companies as Albertson's, Boise, Idaho; Kroger Co., Cincinnati, and Safeway, Pleasanton, Calif., according to a recent report from the PricewaterhouseCoopers Retail Intelligence System.
aphic scope.
The report offered five scenarios of how consolidation could play out. In addition to the global powerhouses scenario summarized above, the outline of possible developments included:
Status quo -- The market leaders will continue to acquire "midtier regional chains," but there will be no more megadeals. The report noted, for example, that since its megadeal with Fred Meyer, Inc., Portland, Ore., Kroger has accomplished several minideals, from the acquisition of 74 stores in Texas and Oklahoma from Winn-Dixie Stores, Jacksonville, Fla., to the 8-store Anderson, Ind.-based Pay-Less Super Markets chain.
Hypermarket USA -- Just as Wal-Mart Stores, Bentonville, Ark., chose to enter the U.K. by acquiring a major food retail chain, Asda, so might a foreign retailer like the French Carrefour or Auchan or the German Metro chose to enter the United States through buying a major U.S. supermarket company.
Domestic dominance -- Similarly, one of the major U.S. mass merchandisers, like Target, Minneapolis; Kmart, Troy, Mich., or Wal-Mart -- could change course and decide to expand its food offerings through acquisition instead of the slow, costly process of new store development they have been pursuing.
Channel blur -- With the rapid rollout of new supercenters and expansion of club stores, what had been considered alternative formats will become part of the mainstream of the retail food industry. The report said in 2004 supercenter food sales are projected to reach $75 billion and club store food sales to hit $38 billion. Wal-Mart alone, the report noted, could generate supermarket-type merchandise sales of $65 billion, or 10%-11% of the entire superstore/supermarket club store food channel, by 2004.
The report continued with an exploration of the effects of retail consolidation on suppliers. "Expect to see more partnerships, more joint forecasting, and more collaboration" between retailers and suppliers, the report said.
It also predicted, "Global retailers will seek global supply contacts with worldwide purchase volume discounts... The demand for consistent terms, conditions, pricing and services around the globe will become the rule, not the exception."
The largest firms will continue to expand their control of the industry, the report concluded. "Expect a handful of market leaders to continue to pull away from the pack," it said. "Expect those players to be bigger than ever, grow faster than ever before, and positioned to act even bigger in a broader marketplace."
