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The traditional grocery channel is steadily bleeding market share, and grocers must focus on making their pricing strategies and private label programs relevant enough to win back consumers' food dollars, said Willard Bishop Consulting (WBC) managing partner Jim Hertel during a Webcast yesterday highlighting the consultancy's Future of Food Retailing Report.
In 2007, the grocery channel saw market share decline of 0.9 percent, to 48.9 percent of the total, according to the just-released report from Barrington, Ill.-based WBC.
Hertel said food price inflation is only expected to increase in the next several years, but this can benefit those food retailers that have "winning shopper value equations." Supermarkets, in particular, can win by understanding how their shoppers are trading down, and merchandising accordingly, he noted.
He said retailers with "winning shopper value equations" are those that understand their shoppers, think about their banner(s) like marketers think about brands, have a strong financial performance, and typically have a strong private brand program.
Their merchandising strategies include: having compelling prepared foods presentations to capture new food at home occasions, pricing and promotion of private brands to capture price-sensitive shoppers, and having a third-tier offering in every category to prevent deflection to hard discounters.
In Willard Bishop's annual report, traditional grocers are defined as those retail formats that have two-thirds of sales coming from food and consumables. For 2007, these retailers saw a modest sales increase of between 3 percent and 4 percent.
Traditional supermarkets experienced a relatively small sales increase of 3 percent, reaching $389.7 billion in 2007, while share of dollar sales decreased to 42.9 percent. They continued to lose market share as more consumers looking for lower prices turned to supercenters and limited-assortment stores, according to Willard Bishop.
Among the non-traditional grocery segment, wholesale clubs saw the strongest sales growth, with a 12.8 percent jump to $71.6 billion; drug stores remained flat; and mass merchandisers and dollar stores lost sales, according to the report.
The Future of Food Retailing Webcast was presented by The Food Institute and Willard Bishop.