Fifty years ago, when I first went to work in grocery store as a teenager in the Pacific Northwest, on average they stocked around 4,000 items. Today’s supermarkets stock an average of 50,000 items.
Yet the top selling 1,000 items generate half of the sales revenue. Further, the average household buys only 150-200 items regularly and about 400 distinct items a year. Dropping 25,000 items would decrease sales only 5%.
Conventional consumer theory is that breadth of choice trumps, but research shows that too much choice suppresses sales. Many suppliers such as Procter & Gamble have increased sales 10% by cutting choice in half.
I must admit, that the primary reason I find myself shopping online for some items is that when I go out shopping, either I can’t remember where I purchased the item I need to restock, or it seems that even big-box stores increasingly won’t have many items in stock.
What’s more important is that much of the “choice” to which we seem drawn as consumers, especially when it comes to groceries, is increasingly concentrated in the hands of a very few suppliers. The cost of all of this choice is climate change.
On average, conventional food products travel 1,500 miles before we see them on the shelves. It takes 9 calories of fossil fuels to produce each calories of the food in supermarkets or about 232,000 per week for the average American.
Adding to the toll of hidden costs, 26 cents of every food dollar is spent on packaging. Some reports estimate the industrial food system is responsible for a third of greenhouse gases.
For example, just one quarter-pound hamburger patty requires 6.7 pounds of grain and forage, 53 gallons of water, 74.5 square feet of land and 1,036 BTUs of fossil fuel energy to bring to market. According to an NPR report, that doesn’t count greenhouse emissions from animal waste.
But a new report entitled Grocery Goliaths shows that while Americans now spend $603 billion on grocery products each year, half (53.6%) is spent in just four chains: Wal-Mart, Kroger, Target and Safeway. Most types of grocery products are also dominated by three or four suppliers.
Rapid supermarket consolidation began when Wal-Mart, which now controls nearly 30% of overall supermarket spending, entered the grocery business in the 1990s, which is more than the entire top four retailers controlled in 1997 (20.8%.)
But independent grocery stores and local and regional chains have been fighting off consolidation since the 1920s when thousands banded together in cooperatives such as IGA, including the store in the small Idaho town near where I was born and spent my early years.
At nearly the same time, another coop of grocers called URM formed. It still has 160 stores across northern Idaho, eastern Washington and western Montana, an area called the Inland Northwest.
There are still 1,750 IGA stores across the nation including one in Durham. A few are over 10,000 sq. ft., about a third the size of the average supermarket. Most IGAs are are 7,000-12,000 and many are convenience store size.
Coops such as these coops permit independents to share the costs of distribution and marketing.
There is still a vibrant, neighborhood Red & White food store in Durham, where I live, a remnant of another co-op of independent stores with distribution based out of Chicago. They were established in the 1920s and thrived after WWII, but independent grocery stores like these seem all but extinct.
Independent grocery stores were squeezed from both ends beginning in the 1930s. At one end, convenience stores began to chip away at their business until the concept really took off in the 1970s when they were fused with gas stations.
At the other end, supermarkets also grew out of the 1930s and tracked with the growth rate of the automobile. The supermarket chains really took off after WWII as an unintended consequence of the Interstate Highway System, which made long-haul distribution more efficient.
The profit margin for grocery stores was a penny on the dollar when I worked in the grocery business during high school in the mid-1960s. Today, it is still only 1.3%. Wal-Mart smelled blood in the water when many grocery chains became employee-owned in the late 1980s and early 1990s.
Some like Harris Teeter tried to go the route of acquisition and expansion beginning when the 1930s Charlotte, North Carolina chain emerged from its local roots in the mid-1980s after watching North Carolina-born Food Town expand and then be acquired by a Belgium company a few years earlier and renamed Food Lion.
In 1988, the year before I arrived in Durham, Harris Teeter entered the Durham market by acquiring the Big Star chain. By the time they were assimilated by Kroger twenty-five years later, the company had grown to more than 230 stores in eight states.
Kroger astutely maintains the local and regional appeal of its acquisitions by retaining their names. In the meantime, Food Lion has grown to be a part of the 9th largest supermarket chain including Sweetbay, Harveys, Hannaford and Bottom Dollar Food.
In 231 metro areas such as the one centered around Durham, just four big grocery retailers make up more than 80% of sales. Wal-Mart alone now makes up half of all grocery sales in 35 metros, according to the report.
Today, we have bigger and bigger stores owned by fewer and fewer companies carrying product categories produced by a handful of suppliers creating the illusion of choice. Soon they will be supplanted by online stores such as Amazon Fresh.
In the meantime, the hidden costs to consumers and the planet are immense, and in the United States, we still have 1.4 million households in poverty including 2.8 million children surviving on $2 or less per day in a given month.
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