How to make money (in groceries)

February 28, 2012 § 1 Comment

The latest FOODmap report was released this week by the federal Department of Agriculture, Fisheries and Forestry. Who also do Food.

I pounced on it because I’m kind of obsessed with the rise of private-label (that is, retailer-owned) grocery brands. It seems that every time I go to the supermarket these brands are cramming the shelves and squeezing other brands to the outer margins. I’m not a short woman, but I have had to get on my toes (or rummage around on the floor) to reach non private-label groceries.

If you’re wondering why I have to go to the supermarket, it’s because of the long list of processed and packaged goods that a family goes through even when that family also buys from farmers markets and specialty grocers. Think dog food, toilet paper, soda water and breakfast cereal. And pretend-foods my kids will actually eat, like fish fingers.

Anyway, FOODmap has a little section on the private-label issue, from which I have extracted these facts:

  • Private-label food brands now account for one-quarter of all supermarket sales.
  • Private-label market share of bread and butter categories has more than doubled from 2002-2010.
  • The five biggest private-label categories are grocery staples: sugar, butter, eggs, bread and milk.
  • In each of these categories, private-label brands now have more than 50% market share.

There are some very good reasons for the growth of private-label brands, but I’m concerned about the loss of diversity in our supermarkets because of the category-killer expansion of retailer-owned brands.

On a related issue, in Question Time in the House of Representatives just yesterday, Bob Katter had a go at the intense duopoly of Woolworths and Coles, the top two retailers. If you push it out to the top five, you’re looking at more than 90% of the market.

Take a look at this extraordinary chart from a 2004 report Food Exporter’s Guide to Indonesia. (Sorry it’s so tiny.) It shows the level of concentration in selected Asian countries. Australia is way up there. Like I said, we buy more than 80% of our groceries from just a couple of companies.

Now look at China. There are 1.4 billion people in a country whose five biggest grocery chains only account for 2% of the market. It’s an incredibly decentralized and disintegrated market where everyone still buys from Ma and Pa on the street, the provisions shop on the corner and the wet market down the road. (Which is actually rather nice and makes for great holiday snaps.)

But if I were a grocery tycoon with a view to a kill, or at least a killing, that other 98% is what I’d be thinking about.


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