Comparing Two Food Retailing Giants

Articles
April 12, 2012

Comparing Two Food Retailing Giants

Walmart recently issued its 2012 sales data and though not spelled out specifically in the filing with the Securities and Exchange Commission, the Food Institute calculates that the retailer’s 4,479 units (including its Sam’s Clubs warehouse stores) generated a whopping $174.9 billion in sales from grocery products -- that’s 55% of the retailer’s overall sales in the United States.

Walmart recently issued its 2012 sales data and though not spelled out specifically in the filing with the Securities and Exchange Commission, the Food Institute calculates that the retailer’s 4,479 units (including its Sam’s Clubs warehouse stores) generated a whopping $174.9 billion in sales from grocery products  -- that’s 55% of the retailer’s overall sales in the United States.

And with the Bureau of Labor Statistics reporting overall food expenditures at about $1.25 trillion (at-home and away-from home), that means that nearly 14% of all consumer expenditures for food in 2011 was spent at a Walmart-operated location in the United States according to The Food Institute. Thus nearly one-seventh of every dollar spent on food went to the nation’s largest retailer – Wal-Mart.

Having been around since 1928, The Food Institute was able to reach into its archive some 62 years ago when another retailer dominated the food retailing business in the United States – The Great Atlantic & Pacific Tea Company, better known as A & P. In 1950, the chain had 4,000 units across the United States. That was not that many fewer than Wal-Mart has now even though the population is more than double 1950’s 150 million at 311 million today. Even so, it was only one-fourth of the 16,000 much smaller units A & P operated across the county in the late 1920’s. Those 4,000 A & P’s generated a full $1.0 billion in sales in 1950 -- the first time that chain topped that billion dollar milestone– quite a feat. But that billion only accounted for 6.1% of the $52.0 billion in food expenditures that year – or just one in every $16 spent on food. Unfortunately for A & P, that is thought of as the chain’s peak as from then on it met with stronger and stronger competition after that point as consumers demanded more and more from their retailers.

And while currently there is no single supermarket chain close to Wal-Mart’s size, the nearest being the Kroger Co., which generates about $79 billion in sales, grocery products are being sold at more and more outlets from drug stores to convenience stores to dollar stores.  And dollar stores are continuing to grow in the number of outlets as well of the amount of food products offered. There are expected to be over 33,000 dollar stores in operation by 2020 – 50% more than there are currently. And recently the number of dollar stores in the U.s. exceeded chain drug stores – another formats increasing their food offerings significantly.

So rather than facing competition on a single front, Wal-Mart will be facing it on many fronts in the future and The Food Institute will continue to report on the every changing food retailing industry as it has since it was founded back in 1928.