The food retail industry has become more consolidated over the previous decades and the competitive market is slowly disappearing. A recent USDA report focused on the way that the different markets concentrate throughout the country, using data from the 1990-2019 period.
One aspect the study found with more than 15 years of data is that “food retailing market concentration at the county level is considerably higher than at the national, state and Metropolitan Statistical Area levels.”
In comparison, “The food retailing market concentration at the national level increased at a much faster pace than it did at the county level.” Different factors play into the growing consolidation of the food retail sector, including the increased prevalence of superstores such as Costco and Sam’s Club.
The study showed a dramatic difference in the rural and urban markets. “Local concentration increased from 1990 to 2015, with significant differences between rural and urban markets and exits of independent grocery stores. Furthermore, the study shows that rural areas have higher food retail concentration.” This could stem from rural communities’ reliance on one individual food retailer, and the need for those to be superstore centers that can hub all needed items for those territories.
Conversely, the study showed how urban markets only need to travel an average of 1-3 miles to the nearest grocery store, and they have additional competition highly localized within that radius.
With this considered, county-level concentration increases only happen over a relatively slow period of time. The influx of major corporate stores and retailers has the possibility of not being accepted by local communities, and local, independent retailers will remain competitive until unable to do so.
In 2019, the top four food retailers accounted for 34% of total food sales, the report showed. The study is looking for changes to continue to occur over the food retail sector moving forward, as “non-food merchandisers” enter into the food retail markets. These mass production centers—such as Target, Amazon, etc.—entering the grocery space could cause a significant change in the approach to markets for the future decades.
This study does not include all data, as certain retailers are beginning to break into the market and do not have the depth of data to analyze their impact on markets. One specific example was Dollar Tree, a mass product store that is beginning to break into the food retail space with its economic options, but it does not have the data available to analyze its impact on local, state and national levels of the food retail industry.
The U.S. Bureau of Census released statistics in 2019 stating that, “Although online shopping has increased sharply in the past decade, it still represents only 11% of the total retail trade and this number is much lower for food stores. Specifically, e-commerce sales in food and beverage stores increased 56% from 2016 to 2017 but only represent 0.5% of total sales in the food sector.”
These numbers are examples of the impact an increase in online ordering has had overall within the industry, while also showing how the impact is not as great as some numbers portray.
Another aspect to consider for future food retail industry indicators is how Supplemental Nutrition Assistance Program (SNAP) benefits can be used. For instance, prior to the COVID-19 pandemic, these benefits had to be used in person at the grocery stores, but with the increase in digital purchasing and the shift towards online merchandising in that time, the USDA launched pilot programs to view how individuals used SNAP redemptions online through food ordering services.
Statistical review of the food retail industry over the past three decades shows how consolidation of the different entities has affected county, state and national level purchasing practices. However, in the years to come, the largest shift may become apparent as programs such as Community Supported Agriculture subscription boxes and online SNAP redemption pilot programs increase in popularity, continuing to shift the food retail industry—possibly back to a more direct producer-to-consumer relationship. — Chloé Fowler, WLJ correspondent
