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November 2002 Times & Trends Executive Summary
Channel Competition

Mass merchandisers assume the channel leadership position in non-foods.
While supermarkets have maintained their position as the only universal shopping destination, they continue to lose share and shopping trips to drug stores and mass merchandisers. Consumers now make nearly five fewer trips per year to supermarkets than they did in 1999. Motivated by convenience and an enhanced demand for value, and enabled by an unprecedented number of options, consumers have fundamentally changed their shopping patterns. Value-conscious consumers have gravitated to supercenters, whose aggressive expansion continues. With a 17% increase in Wal-Mart supercenters projected for 2003, this trend will intensify over the next few years.

Food share shifts to Wal-Mart.
Over the last three years, supermarkets’ share of food category dollar sales slipped from 83% to 80%. The share points went to Wal-Mart, who now commands 14% of total food dollars.
Value-conscious consumers have gravitated to supercenters, whose aggressive expansion continues. With a 17% increase in Wal-Mart supercenters projected for 2003, this trend will intensify over the next few years.

Mass merchandisers assume the channel leadership position in non-foods.
Mass merchandisers' share of non-foods has reached an all-time-high of 43% -- taking over supermarkets’ position as the non-foods channel leader. Over the past three years, both drug stores and supermarkets have steadily lost share to mass merchandisers, as consumers exhibit major shifts in channel loyalty in “health, beauty and personal hygiene” categories as well as “grocery non-edibles.”

Convenience stores and drugstores increase "basket ring."
Between 1999 and 2001, the average dollars spent per trip per shopper rose a phenomenal 22% at convenience stores and 9% at drugstores. Convenience stores’ expansion of both space and inventory has paid off. Drugstores have benefited from offering shelf-stable foods and refrigerated “everyday” items such as milk that many consumers pick up when in the store for other products. Expanded offerings have not been effective, however, in bringing new consumers into the channels. Penetration in both drugstores and convenience stores declined during the same period.

Dollar stores take an ever-increasing share of CPG sales.
Offering national brands at low, low prices, dollar stores are an increasingly popular venue for consumer packaged goods shoppers. Over half of US consumers have shopped at dollar stores. One in five consumers are heavy dollar store shoppers, who visit dollar stores more frequently than drugstores, convenience stores or club stores. Sweet and salty snacks, household cleaners, detergents and diapers are particularly hot categories at dollar stores currently. This is a channel to keep on the radar screen, as consumer trends and channel expansion point to continued high growth.

Supermarkets face the new competitive reality.
Leading retailers are seeking ways to reinvent themselves and the channel to effectively serve a changing consumer and to differentiate versus powerful competitors. From new formats, such as supermarket-drugstore combo stores to self checkouts to special signage and product selections targeted to specific consumer groups, supermarkets are employing new strategies to protect their position. A new way of conducting business within the channel, with a focus on becoming the preferred destination for specific categories and shopping occasions will ultimately emerge.