Discounts eating into all food and beverage groups - Discount Store News Annual Discount Industry Report; Part 2: Merchandising and Productivity Analysis

Discount Store News, August 2, 1993

Discounters are taking a larger bite out of U.S. food sales, particularly in snacks, candy and beverages.

Add to that the millions of dollars Wal-Mart and Kmart are extracting from the food marketplace with their combination food and general merchandise stores and the total food sales for full-line discounters is $5.2 billion, according to DSN's State of the Industry Report: Part 2.

Increasingly, discount retailers--including warehouse clubs--are seen by consumers as a competitive outlet to supermarkets and grocery stores for consumables. These stores are a real competitive threat to traditional food outlets even though the total sales figure of $16.3 billion pales in comparison to the grocery industry's $282.6 billion.

Competition for food dollars will get even hotter as Wal-Mart and Kmart commit more resources to developing their food programs and other retailers look for ways to capitalize on hot food trends.

Target, for instance, currently shy about entering the food business and denying that a combination food and general merchandise store format is in its future, unveiled a private label food program called Greatland when it entered the Chicago market March 14.

Food, particularly the snack food variety, also is a top margin producer and more space is now devoted to chips, pretzels, crackers and nuts. As a result, discounters' share of the market is increasing.

Driving the snack food category in 1992 and so far this year are pretzels, packaged popcorn and multigrain chips, said a spokeswoman at the Snack Food Association. While the group does not forecast trends for 1993, she said these trends will likely continue.

In beverages, juices, particularly cranberry blends, are hot and the source of many new product introductions in 1992. National brands such as Ocean Spray, Dole and Coca-Cola's Minute-Maid label have flooded retail shelves with a variety of juice blend beverages and Wal-Mart and Kmart have followed suit with an assortment of juice products under their own private labels, Sam's American Choice and Nature's Classics, respectively.

Other popular soft drink beverages include flavored carbonated drinks, teas, waters, sports drinks and juice-flavored beverages. These beverages are rapidly gaining shelf space at discounters and visibility via refrigerated coolers.

For example, at Wal-Mart and GrandPa's, refrigerated beverage coolers have been added at checkout. Kmart, Target, Venture and others offer refrigerated coolers in the beverage department of some stores, with soda and juices in single serving cans and bottles. And at Target Greatland in Chicago, one cooler offered Tropicana fresh squeezed orange juice in a half-gallon carton.