ELMWOOD PARK, N.J. - As supercenters and other nontraditional formats expand their focus on food, they stand to topple traditional food retailers as the leaders in grocery sales in the next seven years, consulting firm Willard Bishop predicted.
"We think that sometime in 2013, food retailers will actually sell less food than the [nontraditional] retailers," said Jim Hertel, senior vice president at Barrington, Ill.-based Willard Bishop. He made the projections along with firm President Bill Bishop in a Web-based presentation, Future of Food Retailing, last week in partnership with the Food Institute here. "That is representative of a sea change, kind of a tipping point."
Traditional supermarkets risk falling in the "unsustainable middle" between discounters and pricier fresh formats unless they work to understand shoppers and their competitors and effectively differentiate themselves, he said.
Retailers' trading partners can help by providing insights into shopper behavior. "CPG manufacturers have been focused on research a lot longer than supermarkets have, and it's in their best interest to help supermarkets try to figure out what to do," Hertel said.
Traditional operators are defined as those that get at least two-thirds of their sales from grocery and consumables. They comprise conventional and super stores, food/drug combos, super warehouses, limited-assortment, small grocery, and fresh formats. Nontraditional formats include wholesale clubs, dollar stores, mass merchants, supercenters, drug and military stores. Convenience stores are a separate category.
Willard Bishop defined grocery and consumables as edible and non-edible grocery, health and beauty care, and general merchandise.
The forecast goes beyond Willard Bishop's 2005 outlook, which went through 2008. At that time, it said traditional food retailers' share would continue its decline, to 49%, while nontraditional channels' share would climb to 39%.
In the forecast issued last week, Willard Bishop predicted nontraditional formats' share of the food market would increase to 38.6% by 2009 and 43.5% by 2013, vs. 33.3% in 2005. Traditional operators were seen falling to 46.5% by 2009 and 40.2% by 2013, vs. 50.7% in 2005.
Within nontraditional retailers, the firm predicted all but one format would grow share through 2009. The exception was mass merchants, whose share was expected to decline slightly as many of those stores are converted to supercenters.
Risks to the success of nontraditional formats include a failure to become better food marketers and extend their private-label efforts.
Within food-focused formats, all but limited assortment and fresh formats - which include chains like Whole Foods and H.E. Butt's Central Market - will lose share through the 2009 forecast period, Willard Bishop predicted. Bill Bishop pointed out, however, that the estimate may understate supermarkets' potential because it doesn't take into account sales of prepared meals. "We do feel the growth of solutions, more and more, is a substantial and growing opportunity for the supermarkets."
The firm has grown more bullish in the past year on the fresh format, noting the presence of new banners like Supervalu's Sunflower and Food Lion's Bloom. "Since that time, it's become evident that there's absolute growth in store numbers, if not share," Bishop said.