Think back for a moment. Close your eyes and imagine it is January of 1998. You were nice and calm and figured you had everything in place. Your co-marketing plans were set and the year was in the bag. You had those supermarket customers under control.
Wrong.
While you were sipping champagne on New Year’s, I guarantee you had no idea how your world was going to change. It’s okay, neither did I.
The consolidation in retailing that has swept though the industry in the last few months is yet again detouring your route to the marketplace. In January, if someone had told you that the two biggest retailers in Chicago were going to be Albertson’s and Safeway and that your biggest customer in Los Angeles would be Kroger, you’d look at them like they landed from another planet. But, at least at this writing, that’s what the landscape looks like.
Rip up the allocation plans. Throw out the summary documents. You’re in for a big ride.
This year’s major mergers and acquisitions affected 28 percent of supermarket ACV (all commodity volume). Affected means that the nature of that customer has changed. When the Safeway/ Dominick’s deal is closed, neither Safeway nor Dominick’s will be the same. Yes, 28 percent! That’s a $99.3 billion chunk, and that’s all supermarket volume, not just chains. Recalculate it for top and key accounts and you’re closer to 50 percent. These are huge shifts.
Barring further consolidation, the projected top 10 supermarket accounts going into 1999 are:
1. Kroger-Fred Meyer
2. Albertsons-American Stores
3. Safeway
4. Ahold
5. Winn-Dixie
6. Wal-Mart (Supercenters only)
7. Publix
8. Food Lion
9. A & P
10. H. E. Butt
This top 10 is equal in volume to last year’s top 17 accounts. Astounding concentration. The top 10 share of total market has gone from 40 percent in 1997 ($137 billion) to 47 percent($166 billion) right now – an increase of 26 percent. The entire channel has grown 3.5 percent.
As a reality check, the actual number of supermarkets has grown 0 percent in the last 10 years. That’s not a misprint. There are 30,000 supermarkets now and there were 30,000 supermarkets then. It seems that the U.S. can be served by 30,000 supermarkets. They gain square footage, move more volume, but the total stays the same. Within that number, however, 13 supermarkets open and close every day.
Kroger, by any other name . . . The expansion issue forces some branding hands. There isn’t much chance that any of these expanding retailers will form a true national supermarket brand. Ralph’s will stay Ralph’s, not change to Kroger. Local chain names are important and don’t transplant very well. If you say Schnuck’s to a New Yorker, you’ll probably get punched. Supermarket shopping and the connection to the consumer remains remarkably local.
The real national retail grocery brands come from outside the grocery channel. Wal-Mart has national recognition in a way that Safeway and Albertson’s will never gain. Wal-Mart will continue to grow in dominance, but it has its roots outside grocery.
One source told me that Kroger announced to their vendors that they were going to centralize promotion and merchandising decisions. National dominance? Yes, but not a national branded identity. So if you really believe that you’ll have centralized co-marketing activity with Kroger, think again. Make sure you are fluent in all the different logos they maintain. There’s Kroger (Express, Future Store, Sav On, Signature, Super Store, Pharmacy, Petfood Place, and Petfood Supercenter), Bell Market, Cala Foods, City Market, Dillon Food Store, Falley’s Market, Food 4 Less, Foods Co, Fred Meyer (Marketplace, House & Garden and Department Store), Frying Pan Market, Fry’s Food Store, Gerbes Supermarket, Hughes, King Sooper’s, Owen’s Supermarket, Finer Foods, Price Rite Warehouse, Quality Food Center, Ralph’s, Sav Mor Foods, Smith’s, Smith’s Food & Drug, Smitty’s (Market Place and Super Valu), Stock Market Foods, Thriftway Super Markets, Loaf N Jug Food, Milk Barn, Mini Mart, Tom Thumb, Turkey Hill, Minit Market, Quik Stop and Kwik Shop. Hey, let’s go Krogering!
What’s Next? More of the same. Retailers will just get bigger and bigger and they will continue to reach out to gain national distribution. No one really has it yet. Independents still account for 10,000 supermarkets, one-third of the total.
So don’t get too comfortable with the way things are now. And, oh yeah, enjoy your New Year.
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