Cutthroat
Competition

Competition for food basket share intensifies as new entrants, formats and concepts clash with the old order.

Thirty-five percent of the average grocer’s competition barely existed fifteen years ago. Non-conventional formats — only 27% of the market in 1980 — held a 77% share in 1995.

Grocery marketers slice their targets into smaller, ever more precisely defined segments. Sharpshooting replaces yesterday’s newspaper shotgun blasts as the weapon of choice. The war threatens to expand. Already, advance elements of the grocery elite skirmish fast food outlets for total stomach share.

Supermarkets fought back between 1990 and 1996 by spending $38 billion on “bricks & mortar” to enlarge stores from 19,000 to 35,000 square feet. Massive inventory investments were then made to fill-up this new space by increasing SKU count from 11,000 items to 25,000.

The result? No new sales, in constant dollars — even though USA population grew 6%! Market share dropped 5%. Profits plummeted more than 20%. Meanwhile, the supermarket nemesis — Wal*Mart — saw its grocery sales more than double, growing to $60 Billion during the same period. (Wal*Mart is projecting $120 Billion in grocery sales by the year 2005). Independents — especially ethnic grocers — also prospered, racking-up gains of 10% a year.

The 1990-1996 disaster is part of an industry long term “re-invention.” MicroNEX’s Best Practice Deal Management White Paper drives home the enormity of the sales decline. Their every attempt to grow organically stymied, chains turned to buying share. The late 1990's saw merger and acquisition frenzy. But acquisitions do not grow industry or same-store sales. At best, certain efficiencies may be achieved. Effectiveness, though, requires new skills, new tools.

CRISP allows supermarkets, and independents, to adopt the same enterprise strategies that Wal*Mart has so successfully used to dominate the grocery market — but without spending the $2 billion Wal*Mart spent to hone its technology.