5 Shocking Facts About Buying Groceries in the U.S.
Is there anywhere that you can't buy milk, toilet paper and Twizzlers these days? From convenience stores to warehouse clubs, dollar stores to gas stations -- and even via Amazon.com -- it seems that everyone's trying to get a slice of consumers' food dollars.
There's been a sea change in the supermarket business over the past decade -- for instance, did you know that the world's largest grocer is not a grocer at all? -- and certainly more changes to come.
Read on for some surprising facts about the buying -- and selling -- food.
1. Groceries in the U.S. are cheaper than anywhere else on the planet.
Food has never been cheaper for us. In fact, the cost of food (as a share of income) is at a historical low. Plus, it's cheaper in the U.S. than in any other country.
We spend 5.5% of our disposable income on food at home. Compare that to the 11.4%, 13.6% and 14.4% spent by the Germans, French, and Italians, respectively. If you were to move to Mexico, Turkey, or Kenya, putting food on the table would cost you 24.1%, 24.5% and 45.9% of your disposable income.
2. Wal-Mart is the nation's largest grocer.
Wal-Mart Stores , world's largest retailer, added "the nation's largest grocer" to its list of titles in 2000. Its first supercenter went up in 1988, and in its rise to become the go-to grocer it has reportedly put 25-plus supermarket chains out of business.
Credit Wal-Mart's "everyday low pricing" -- a cornerstone of the company's strategy -- with its rapid rise to the top. The company claims the average family can save $700 annually on groceries shopping at Wal-Mart. That would work out to be a 27% savings on groceries for the average American.
Even if you don't shop at Wal-Mart, you're still benefiting from the behemoth no matter where you buy groceries. A Global Insight survey in 2008 found that shoppers save $2,500 a year at other grocers because Wal-Mart's competitive pricing forces them to lower their prices.
No. 3: Brand-name foods are commanding less shelf space in our pantries.
Private label products -- items manufactured by big national food companies and major brands like Conagra and then sold under a retailer's or a generic label --comprise 17.4% of food sales for U.S. retailers, accounting for a whopping $90 billion in business in 2012, according to Nielsen Company. Nielsen reports that sales of private label products have grown 19% over the last year. .
Offering less-expensive private label brands is one way that supermarket chains are trying to compete with the low prices offered by competitors. Recently Safeway has been pushing private label brands in its stores. CEO Robert Edwards told analysts in July that private label dollar sales were up 37 basis points and private label volume was up 53 basis points. He added the company is rapidly growing private health and wellness private label brands, in particular, with 2,000 stock keeping units (SKUs).
No. 4.The nation's second largest seller of natural food is...
Guess who's giving Whole Foods Market the most competition as a purveyor of natural food? Kroger. Kroger CEO Rodney McMullen told analysts just weeks ago that comparing on sales numbers alone Kroger would be the nation's second largest natural retailer "by a pretty wide margin." He added:
If you look at the market share opportunities for us, we can easily see how that business could double from where we are today. But we don't see it as something that's a dream to double our business. We actually have a pretty good plan in place that will get us significantly along the way on getting there in a reasonable period of time.
McMullen also said natural and organic is their fastest-growing section by percentage and plans to offer even more store brands in that category.
No. 5: There's a science to making you stray from your shopping list.
There's a reason why when you walk into nearly any grocery store you'll find flowers and produce are prominently located at the entrance. That's done to signal freshness.Then you're hit by the aromas from the bakery, in-store deli, and coffeeshop. Feeling hungrier? Of course you are. That's the plan to make you buy more. Even bare-bones warehouse stores like Costco offer in-store sampling and hot dog stands to get you to linger and buy more, more, more.
Then there's the calculated layout of a supermarket. Much-needed items like bread and milk are at the back to lead people to wander through the store and pick up a few extra goodies. Shelf display is equally designed for optimal profit with higher-margin and best-selling items at eye level. Lower-priced goods are displayed at knee level or lower. In candy and snack aisles higher-margin treats lure the unwary at a kid's eye level.
Finally, impulse items are always placed by the cash register. According to Paco Underhill, author of Why We Buy:The Science of Shopping, this is the highest profit shopping area of a store.
Check out anyone?
Yes, modern grocers are masters of myriad marketing tools. But be cheered, the average market basket as a per cent of income is much lower than in decades past. Knowing these facts will help you cut that percentage down further. Those investing in these merchant mavens should be heartened that they're doing their darnedest for every last thin dime of margin.
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The article 5 Shocking Facts About Buying Groceries in the U.S. originally appeared on Fool.com.John Mackey, co-CEO of Whole Foods Market, is a member of The Motley Fool's board of directors. AnnaLisa Kraft has no position in any stocks mentioned. The Motley Fool recommends Costco Wholesale and Whole Foods Market. The Motley Fool owns shares of Costco Wholesale and Whole Foods Market. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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