Study shows that consumers still prefer visiting supermarkets for groceries

Despite all the hype around online ordering and delivery services, a recent study conducted by TABS Analytics found that conventional supermarkets and Walmart are overwhelmingly the top destinations for regular grocery shopping.

Of the 1,000 U.S. adults surveyed, 75% said traditional grocery stores were the retail venues they regularly visited to buy food and beverages (more than six times per month), and 57% cited Walmart.

However, compared to last year, 2% fewer people named supermarkets and Walmart as the places they regularly shop for food and beverages, and 2% - 4% more customers named dollar stores, drug stores and discount grocery stores. Target, Trader Joe's and Whole Foods saw gains as well.

Just one in six consumers said they regularly shopped online for groceries.

Giant Eagle launches Scan Pay & Go service

The Pittsburgh-based Giant Eagle supermarket chain recently launched Scan Pay & Go, a service that enables customers to use their phones or a store-provided device to scan groceries as they shop. The service allows shoppers to keep track of how much they are spending and experience a faster checkout process.

Scan Pay & Go is currently available in two Market District and three Giant Eagle stores.

Giant Eagle operates over 400 food, fuel and pharmacy locations, including over 200 supermarkets, in PA, OH, WV, IN and MD.

Supermarkets lead customer experience survey; Wegmans tops all companies

The Temkin Group, a research and consulting firm, said earlier this month that its 2018 Temkin Experience Ratings survey of 10,000 U.S. shoppers revealed that supermarkets were tops in customer experience ratings among 20 industries evaluated.

Supermarkets posted a rating of 78.5%, up from 78.1% in 2017. The industries near the top of the list include retail (74.4%), banks (73.1%), and parcel delivery (71.9%). A score of 80% or above is considered "excellent," 70% or higher is "good," and below 60% is deemed "poor."

Ratings are determined by customer responses in three main categories - success (can you do what you want to do?), effort (how easy is it to work with the company?), and emotion (how do you feel about the interactions?).

Overall, Wegmans turned in the top rating of all 318 companies included in the survey. The Rochester, NY-based food retailer had an overall customer experience rating of 86%. Among supermarkets, H-E-B, the top company in 2017, and Publix tied for second with a score of 83%.

Rounding out the top 10 scores among supermarkets for overall customer experience were Aldi and Wawa (82%), Trader Joe's and ShopRite (81%), Save-A-Lot and Food Lion (80%), Meijer, Kroger, Hy-Vee and Winn-Dixie (79%), Albertsons (78%), Safeway and Piggly Wiggly (77%), Stop and Shop (76%) and Vons (75%).

Discount grocers are getting it right... here's how

Earlier this month Supermarket News listed six reasons that discount grocers continue to grow, and provided the following background.

Ten years ago, two-thirds of U.S. shoppers reported that supermarkets were their primary grocery channel, as per the Food Marketing Institute's 2016 U.S. Grocery Shopping Trends Report. However, in 2016, only 49% of U.S. shoppers said that supermarkets were still their primary grocery channel. The average shopper is now using five to seven retail channels and two to three shopping channels on a regular basis. More than half of Americans feel overworked and overwhelmed, making convenience increasingly important.

Here are the six things that discount grocers are getting right, according to Supermarket News, and below is a link to the article that provides more detail on each point.

• Good deals attract consumers from all economic levels.
• Stores that are modern, convenient and offer a more supermarket-type experience with great value attract customers.
• Discounters benefit by offering a wide selection of products including wine, produce, health and beauty, bakery and organic products.
• Discounters are customer-obsessed about their brand and model, and keeping it very simple.
• Discounters are proving private labels can provide extremely good quality and amazing values.
• Discounters are adopting multi-channels.

Viewpoints: What discount grocers are getting right

Supermarkets in malls proving to be a win-win

Here in Greater Philadelphia, we are getting used to having supermarkets at the mall (Wegmans in Montgomeryville, Whole Foods in Plymouth Meeting, Sprouts coming to Moorestown...), but it's still a new concept in many parts of the county. Industry analysts believe we will see several more supermarkets lease space in malls in the coming years.

"With the fast-paced nature of America, shoppers want to be as efficient as possible when running errands," said Displaydata Marketing Director Paul Milner. "Grocery stores in malls could give Americans the benefit of a one-stop shop for all of their needs... This transition is another step towards providing shoppers with the advanced and friction-less shopping experience that the American consumer demands."

Milner also sees supermarkets in malls as a winning proposition for landlords. Mall owners, often stuck with a declining retail property, can transform their asset into a destination allowing consumers to complete all of their shopping in one place. He warns, though, that parking could be a deterrent if shoppers have to carry their groceries too far.

Survey says millennials shop for groceries differently than the rest of us

According to a recent survey by the International Council of Shopping Centers, 99 percent of adults in the U.S. buy some or all of their groceries in person. Those surveyed cited immediate access to products and the ability to select fresh meat, dairy and produce as the top reasons.

The survey also revealed that 93 percent of adults shop for groceries at discount department stores (Walmart, Target), and 92 percent shop at traditional supermarkets . Sixty-nine percent of the people surveyed said they shop at limited assortment food stores (Aldi, Trader Joe's) and warehouse clubs.

Millennials revealed different shopping behaviors from all others. Seventy-four percent of them buy groceries from convenience stores, 67 percent from Amazon or other online retailers, and 66 percent from high-end supermarkets. Even when buying online, 81% of millennials go to the store to pick up their groceries.

Pet care ranked as top category in supermarket sales

As a kid I had a dog, and up until recently I had a cat. Now, as a member of a household without a pet, I'm in the minority, as nearly two-thirds of the households in our country include a pet.

That fact explains why consumers spent $60.28 billion on pets last year, with sales projected to climb to $63 billion in 2016. Industry experts call pet care spending "recession resistant." 

It should be no surprise, then, that pet care is the top ranked category in sales among the 256 categories sold in U.S. supermarkets, drug stores and mass market retailers. And dry dog food ranks as the number two trip driver to supermarkets, behind pharmacy and ahead of milk. (Bananas must be number three, as every shopping cart seems to have them!)

"If you're not winning in pet, you're losing," said Paul Cooke of Nestle Purina PetCare Company. "We know that the loss of a grocery pet shopper leads to an overall 12 percent loss in grocery store trips. So, prioritizing the pet category in-store and catering to these shoppers has never been more important to the health of total store sales."

According to Supermarket News, retailers must establish the right product mix, retail display and value equation, and also connect with the pet shopper on an emotional level. Appealing to pet owner's hearts could hold the key to increasing total store sales.

PA wine sales expand to grocery and convenience stores

Although it's been widely publicized in Pennsylvania, those outside the state may not be aware that the laws here regarding wine and beer sales have entered the 20th century - sort of. (Yes, I know it's the 21st century.)

Here's the deal. In PA, beer must be purchased at package stores, and only by the 12-pack or case. However, some supermarkets and convenience stores can sell beer, but only under specific guidelines (i.e. separate registers). And some bars can sell 6-packs for take-out only.

As for wine and liquor, they can only be sold at state-owned stores. Until now, that is. As of earlier this month, consumers may buy up to four bottles of wine at supermarkets and convenience stores that already sell takeout beer. That's only if the supermarket or convenience store has the right kind of license, though.

Here's an excerpt from a Supermarket News article explaining the new law.

"Before the retail establishments can make it more convenient for their customers to purchase wine, the stores must clear some hurdles of their own. Those without existing liquor licenses seeking to sell wine for off-premise consumption must first comply with certain provisions regarding these sales. They must apply and obtain a restaurant liquor license known as an 'R' license. Once acquired, licensed eateries - and even gas stations - may sell up to two six-packs of takeout beer per transaction. However, in order for retail establishments to begin selling wine in addition to beer, they must also apply for a 'wine expanded permit,' which authorizes stores to sell up to four, 750 ML bottles of wine for off-premises consumption."

There is plenty more, including fees depending on how much wine the retailer purchases, and rules regarding how much square footage can be used in the store as well as how many tables and chairs are required.

It seems more confusing than it needs to be, but the law actually represents some progress. It is likely that alcohol sales in PA will eventually be completely privatized, but not for a long time. For now they are still regulated by lawmakers. Hence my 20th century reference above.

Update: Southeastern PA stores that received approval under the new law to sell wine include the following:

Bucks County:
Acme - Doylestown
ShopRite - Bensalem
ShopRite - Fairless Hills
Giant - New Hope

Chester County:
Acme - Wayne
Giant - Exton

Delaware County:
Acme - Glen Mills
Acme - Media
Giant - Havertown

Montgomery County:
Acme - Flourtown
Giant - Flourtown
Giant - North Wales
Giant - Willow Grove

Philadelphia County:
Thriftway - Aramingo Ave.
Acme - Red Lion Road

Traditional supermarkets continue to lose market share

An article in the February issue of Shopping Centers Today reported on the affect grocery discounters are having on the supermarket industry, stating that traditional supermarkets are losing market share "thanks to a rapidly advancing horde of competitors seeking to outdo them on price, convenience and quality."

The article quoted an analyst from JLL who said that "consumers are now splitting their grocery shopping across multiple channels - as many as five," and that "by 2018, traditional supermarkets' share of grocery dollars in the U.S. will have shrunk 300 basis points to 37.2 percent."

As we all know by now, the list of traditional supermarket competitors includes large wholesale clubs, supercenters, fresh grocers, and small-format, dollar, drug, convenience and online stores.

And, of course, the Germans are coming. Aldi plans to expand from 1,300 to 2,000 American stores in the next three years, and Lidl is planning to open stores here in 2018.

According to an analyst from PerishablePundit.com, "A box of laundry detergent or Kellog's Corn Flakes is the same no matter where it is sold. That makes it easy for price-conscious shoppers to hunt for bargains on commoditized goods by website, in dollar stores, at Walmart, or in a multiplicity of other food selling outlets. Even if traditional supermarkets can continue to sell center-store items, they have to do so at such deep discounts that they're just not able to generate profitability."

To combat this issue, major chains are focusing more on fresh and prepared foods, and creating "foodie-friendly cheese caves, wine bars, mini-restaurants and more." They are also trying to alter their product mix to include the types of products found at warehouse clubs. Ultimately, traditional supermarkets are trying to make their stores appeal to everyone (like they used to) - discount-oriented consumers, aspirational consumers and affluent consumers.

Meanwhile, online grocery sales continue to grow. The online grocery spend in 2014 was $23 billion, and it is expected to be nearly $100 billion by 2019, or 12 percent of total grocery spending.

Kosherfest panel names best new kosher products

Kosherfest, the world's largest kosher tradeshow, was held last week in New Jersey and the best new products in 16 categories were selected by a panel of judges that included buyers from a number of supermarkets.

Before you get all meshuge (pronounced meh-shoo-geh for those that have never been outside their farm), here are some of the winners:

• Best overall new product: Single serve beverage cups for k-cup brewers (cappuccino, hot chocolate and chai tea)
• Best new dessert: Baked by Melissa Cupcakes
• Best new savory condiment: Buffalo Zinger Sauce (yes!)
• Best new frozen entrée: Tassol Tortilla Espanola (makes perfect sense)
• Best new candy: Sugarless Rosemarie Milk Chocolates
• Best new deli meat: Breaded Chicken Fries (really?)
• Best new pasta: Mikee Mac Non-Dairy Macaroni & Cheese Dinner

I'd like to take this opportunity to thank my parents for not raising me in a kosher home.

Dollar Tree continues to add coolers, ramp up competition with food stores

Dollar Tree said last month that it would add coolers for frozen and refrigerated foods to 550 stores this year, which is more than it has ever added in one year. Coolers were added to 215 stores in the company's second fiscal quarter, and it now has coolers in nearly 3,000 of its 4,842 locations.

Coolers in dollar stores are significant, of course, as it allows them to increase the amount of grocery items they carry, and allows them to compete head to head with traditional supermarkets, discount grocers and other retailers that sell food.

Net income for Dollar Tree in the second quarter rose 4.6% to $124.7 million on sales of $1.85 billion.

Walmart Neighborhood Market fastest growing U.S. supermarket

A report from Chainlinks Retail Advisors recently listed what they believe to be the 10 fastest growing supermarkets (excluding warehouse clubs) in the U.S. They are listed here along with the number of new stores planned for the next year:

1. Walmart Neighborhood Market: 95 - 115
2. Aldi: 80 - 100
3. Save-A-Lot: 60
4. Whole Foods: 50
5. Trader Joe's: 30
6. Food Lion: 22
7. Fresh Market: 20
8. Sunflower Farmers Market: 20
9. Grocery Outlet / Amelia's: 20
10. Food 4 Less: 16

Costco to add 150 stores in five years

Since I just posted a story about how supermarkets have gained market share against warehouse clubs for grocery sales in the U.S. last year, and how the growth of warehouse clubs is slower than the growth of supermarkets, it makes perfect sense for me to now post a story on Costco's aggressive growth plans.

To wit, Costco announced last week that it expects to open 150 new warehouse stores over the next five years, including 28 this year. Of the 150 stores, though, only 55 would be in the U.S. About half would be in-fill locations and half would be in new markets.

The 28 stores this year include 19 already open. The remaining nine stores will be in the U.S. (3), Japan (3), and one each in the United Kingdom, Taiwan and Australia.

Costco's third quarter ended on May 12, and the company announced that net income rose 18.9% to $459 million on sales of $23.6 billion, which represents a 7.8% increase as compared to the same period a year ago. Costco EVP and CFO Richard Galanti said in an earnings call last week that gas accounts for about 10.5% of Costco's sales.

Report says supermarkets gained share on warehouse clubs last year

A study released last week by DSR Marketing System claimed that U.S. supermarkets gained market share against warehouse clubs (i.e. Costco, BJ's) and superstores (i.e. Walmart, Target) in 2012.

The study showed that supermarkets owned a 59.3% share of grocery sales, up 0.4% from 2011. At the same time, the share of grocery sales for warehouse clubs and supercenters decreased 0.4% to 22.6%.

According to DSR, the share increase for supermarkets reflects the impact of fast-growing food retail concepts like Aldi, Kroger, Publix, Wegmans and Whole Foods, as well as closures at Kmart and slower relative growth of warehouse clubs. The company also noted that the aging population helps smaller format stores like supermarkets, since older shoppers generally dislike larger stores. (And older shoppers don't need a three-year supply of ketchup and Cheese-Its, like my family apparently does.)

Walmart ramping up its smaller-format stores

Wal-Mart said earlier this month that its smaller-format stores are making inroads against dollar stores, supermarkets and pharmacies, and that the company will increasingly move toward stores below 60,000 square feet.

During the current fiscal year, Wal-Mart's Bill Simon said they expect to open about 115 smaller-format stores, with The Neighborhood Market and Express locations accounting for about 40% of stores the retailer opens. Simon calls it a "rapid ramp-up."

"We can deliver price, and assortment and fresh food and Rx," said Simon, who believes the smaller-format stores provide a full package of products and services that competitors lack.

Even with the growth of these smaller-format stores, about 90% of Wal-Mart's existing stores are supercenters or large stores. The company plans an additional 125 supercenters this year.

ShopRite damaged by Sandy reopens in snow storm

A ShopRite in Hoboken that had been closed since Hurrican Sandy reopened on February 9, the same day Winter Storm Nemo dumped about a foot of snow on the area. Reports say shoppers braved the weather and lined up to see the redesigned store, which features green technologies, new glass doors on dairy and freezer cases, improved lighting and environmentally friendly systems.

The store is owned by Inserra Supermarkets.

Analysts predict better year-end for supermarkets

Industry analysts said earlier this month that they expect the financial performance of supermarkets during the second half of the year to be slightly better than in the first half. Reasons cited include the following:

• A slowdown in inflation, which may result in better value propositions;
• Slow but ongoing acceleration in the general economy;
• More meals at home expected this winter, as compared to 2011 when mild weather resulted in more meals away from home.

Overall, the financial performance for the top 10 publicly traded grocery chains in the first half of 2012 was mixed as compared to the previous year. Sales were up 3.5% and operating income increased 1.2%, but comparable-store sales increased less this year than last.

According to Andrew Wolf, managing director for BB&T Capital Markets, inflation ran at about 3.3% for the first half of the year, so the 3.5% sales gain came almost entirely from inflation.

"As a result, the stronger conventional players generally saw a little bit of improvement in volume trends as inflation dropped from 3.8% in the first quarter to 2.7% in the second - and while comparable-store sales were still down in real terms, they were down less as volume improved."

Top 10 publicly traded grocery chains (ranked by sales volume):
1 - Kroger
2 - Safeway
3 - Supervalu
4 - Ahold USA
5 - Delhaize America
6 - Whole Foods
7 - Harris Teeter
8 - Stater Bros.
9 - Roundy's
10 - Ingles Markets

Save-A-Lot COO leaving, store operators are worried

As if Supervalu isn't having enough trouble with its traditional supermarkets, results at the company's star performer, discount grocer Save-A-Lot, are sagging as well. According to a recent Supermarket News story, licensees say higher costs and a lack of leadership at Supervalu are to blame.

The latest blow for Save-A-Lot and its licensees is the departure of COO Tom Lenkevich, a former licensee who many store operators thought of as their last ally at corporate headquarters. Lenkevich is resigning later this summer to pursue other opportunities.

Earlier this month Supervalu reported that Save-A-Lot's sales for the most recent quarter were flat compared to the same quarter one year ago, despite the addition of 53 more stores since that time. The company said declining identical store sales and higher costs related to Save-A-Lot's growth strategy resulted in lower profitability.

Save-A-Lot's largest licensee, who has 220 stores, agrees that higher costs are to blame, adding that as a result, prices are too high as well.

The Supermarket News story included the following quote from the licensee.

"Supervalu as a whole has bounced around in their priorities. When Herkert first came to Supervalu he said they were going to concentrate on price and expanding the store base. They spent the money expanding the store base without addressing price, not only at Save-A-Lot, but at the chains: Acme, Shaw's and Jewel. And that affects Save-A-Lot because as those chains falter, Supervalu was more dependent on money coming in from Save-A-Lot. It's gotten where the cart is before the horse."

Walmart less threatening to supermarkets than it used to be

Supermarket News asks food retailers every year "which alternative channel has posed the biggest threat to Center Store sales in supermarkets?" Walmart has consistently remained the top threat, but the fear they put into supermarket competitors is obviously diminishing.

In 2009, 64% of respondents listed Walmart as the number one threat. In 2010, 50% of respondents answered the same way, and last year, the percentage fell to 45.3%. In the most recent survey, Walmart's total fell to 34%.

Dollar stores have emerged as a significant threat to supermarkets, as 22.6% of respondents listed them in the top spot. Last year dollar stores received only 17% of the votes.

Club stores (Costco, BJ's) and limited assortment discounters (Save-A-Lot, Aldi) finished third and fourth, respectively.

Whole Foods reports "best results in history"

Last week Whole Foods Market reported another outstanding quarter, "producing the best results in our company's 32-year history," according to Co-CEO John Mackey.

For the quarter ended April 8, 2012, Whole Foods reported a profit of $117.7 million, a 31% increase over the same quarter last year. They also reported the following:

• Sales up 14% to $2.67 billion
• Gross margin widened to 36.3% from 35.6%
• Same store sales up 9.5%

Although the natural and organic foods sold by Whole Foods tend to be more expensive than the groceries at traditional supermarkets, its sales have continued to grow, which has helped shield the company from higher food costs. At the same time, Whole Foods has been trying to come across as more value-oriented in order to attract more price-conscious shoppers.

The company's continued success has resulted in a "positive" outlook from Standard & Poor's.