The retails where Cooperative Grocer is read exist in a very wide variety of markets, from small town to large metropolis, across the U.S. and Canada. While almost all of these stores are characterized by cooperative ownership and a natural foods emphasis, few generalizations are possible. With the total volume of these stores but a tiny part of the entire industry, it is our diversity and our ability to find viable market niches which will determine our future.
Bearing in mind these complexities, a few figures and findings gleaned from recent trade press help outline the current state of the larger environment in which U.S. retails must survive. (In the future, Cooperative Grocer hopes to provide more specific information on the cooperative grocery field. And I offer apologies to Canadian readers; I have no current information on that country's food industry, though I doubt that the general picture is much different.)
Concentration and Segmentation
Food distribution businesses in recent decades have been marked by great instability and increasing concentration. As in the economy at large, attrition through competition and periodic recession combine with few restraints on market dominance by larger companies. But the overall economy, fed by inflation and the multiplication of debt, grows and gives the (probably false) appearance of health.
Overall income levels continue to rise. The percent of disposable income spent on eating away from home is slowly increasing -- now over 4%. And the percent spent on food at home continues to decline. Even 25 years ago, this figure was only 16%. In 1984, it declined to below 11%!
However, at the same time, financial and time pressures are increasing for many families and workers, especially at lower income levels. It is doubtful whether the current customer base of most retail food cooperatives -- despite the more trendy "upscale" aspirations of some -- shares in the same degree the trends of growth in income and decline in the percent spent on food at home.
The food distribution industry, limited to slow growth overall, currently is totalling $400 billion in sales annually. Roughly two-thirds of this is for food at home. Capturing a share of that market is the business all retailers are in.
The top fifty firms get nearly half of total grocery purchases. Single stores -- as contrasted with chains of from 2 to over 100 stores -- account for a diminishing amount, now only a quarter of total sales.
The conventional supermarket (over $2,000,000 sales) as a category has been experiencing a decline in its share of grocery sales for over 20 years. These stores now account for about 40% of the total.
The overall market is increasingly segmented, as new formats, especially large ones, are introduced. Superstores (at least 30,000 square feet) are growing and now get 20% of total sales. The share going to small grocery stores is already smaller than that and is continuing to decline. But increased market share is being gained in almost all other formats, from the huge warehouse and superwarehouse stores to much smaller convenience and specialty stores.
Competition and Survival
The natural foods sector of the food distribution industry is growing, though not as fast as it was a few years ago -- at 8% in 1984 to a total of $3.3 billion. And here, in a field with a greater proportion of small operations, supermarkets are gaining in total share. Over 3000 supermarkets now have natural foods sections, ranging in size from over 1000 square feet to very small. (Some sections have been introduced and then eliminated, with natural foods integrated into the rest of the products on the shelves.) Supermarkets also are increasing their sales of food in bulk, often overlapping with the natural foods products.
The fate of many small natural foods retailers, including cooperatives, will be greatly affected simply by how near they are to such supermarkets and warehouse stores, and by how well those larger stores market their services. But what will prevent increasing dominance by these stores is what makes possible the successful operation of smaller retails: an informed grasp of your market, a good definition of your business purpose and your price/quality/service niche, skilled management, and the ability to keep your members and customers satisfied. A basic point about a highly segmented food market is that size is not the only thing, or even the primary thing, which determines whether your store has the ingredients of survival and success.