Alternative Formats Taking A Big Bite Out Of The Grocery Industry

The landscape of the food retailing industry continues to change dramatically, with traditional grocery chains being squeezed out of the picture by the growth of alternative formats. According to a report from global trade credit insurer Euler Hermes ACI, these other outlets – including supercenters, warehouse clubs, dollar stores, drugstores, and convenience stores – are increasing their grocery square footage and sales, thus taking a big bite out of the consumer base of the traditional grocery chains.

(PRWEB) December 16, 2005 -- Alternative Formats Taking A Big Bite Out Of The Grocery Industry Consumer base, operating margins diminish amid increased competition.

The landscape of the food retailing industry continues to change dramatically, with traditional grocery chains being squeezed out of the picture by the growth of alternative formats. According to a report from global trade credit insurer Euler Hermes ACI, these other outlets – including supercenters, warehouse clubs, dollar stores, drugstores, and convenience stores – are increasing their grocery square footage and sales, thus taking a big bite out of the consumer base of the traditional grocery chains.

According to the report – published in Foresight, a Euler Hermes ACI publication – the competition for customers in the food retailing industry is fierce, while top-line growth in the industry remains modest. “The pricing pressure has intensified with the rapid expansion of the alternative formats, especially Wal-Mart Stores Inc.’s Supercenter stores,” said Euler Hermes ACI Risk VP Francois Bergeron. “This has affected operating margins for the grocery chains, and the smaller regional players in the industry may suffer disproportionately from the increased competition and tougher climate.”

In response to the changing business climate, many regional and national grocery chains are changing their primary focus in order to survive, Bergeron said. Some are offering more premium goods to customers, while others are focusing more on better execution and increased service for customers. “A new format is also emerging in the U.S., with chains like Aldi’s, Trader Joe’s, and Supervalu’s Save-A-Lot,” he said. “These no-frills, deep-discount stores are designed to compete well against the supercenters and warehouse clubs.” However, Bergeron notes that no matter what the business model, it is obvious that many of the regional and national grocery chains will need to reinvent themselves in order to maintain their share of this increasingly competitive marketplace.

The report shows a troubled outlook for the retail grocery business over the coming years as the major shift in market share continues. The gap is expected to widen between the supercenters/discount clubs and traditional grocery outlets. “Overall, the outlook for traditional grocers is bleak,” concluded Bergeron. “The alternative formats will keep flexing their muscles in the industry, putting a tighter squeeze on the regional and national grocery chains.”

Euler Hermes ACI is North America’s oldest and largest provider of trade credit insurance and global risk mitigation information. Euler Hermes ACI is the U.S. subsidiary of the Euler Hermes group, which has offices in more than 40 countries, and is a company of Allianz. The company’s risk underwriting department monitors and analyzes various trade sectors to provide proprietary risk mitigation information to policyholders.

The complete Food Retailing Industry report is available in the Fall 2005 issue of Foresight, which may be obtained upon request from Euler Hermes ACI. For more information about Euler Hermes ACI products and services, visit www.eulerhermes.com/usa.

Note: Euler Hermes ACI Risk VP Francois Bergeron is available for interviews/comments on this industry forecast. To schedule an interview, please contact Rick Ostopowicz at 410-753-0652.

Euler Hermes is the worldwide leader in credit insurance and one of the leaders in bonding and guarantees. With 5,400 employees in 40 countries, Euler Hermes offers a complete range of services for the management of customer receivables and posted a consolidated turnover of 1.9 billion euros in 2004. The North American subsidiary (Euler Hermes ACI) is headquartered in Owings Mills, MD. For more information visit www.eulerhermes.com/usa.

Euler Hermes, a subsidiary of AGF and a member of Allianz, is listed on Euronext Paris. Standard & Poor’s rates the group and its principal credit insurance subsidiaries AA-.

Press Contact:
Rick Ostopowicz
Euler Hermes ACI Public Relations and Communications Specialist
Phone: (410) 753-0652

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Certain of the statements contained herein may be statements of future expectations and other forward-looking statements that are based on management's current views and assumptions and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in such statements. In addition to statements which are forward-looking by reason of context, the words ‘may, will, should, expects, plans, intends, anticipates, believes, estimates, predicts, potential, or continue’ and similar expressions identify forward-looking statements. Actual results, performance or events may differ materially from those in such statements due to, without limitation, (i) general economic conditions, including in particular economic conditions in the Allianz Group's core business and core markets, (ii) performance of financial markets, including emerging markets, (iii) the frequency and severity of insured loss events, (iv) mortality and morbidity levels and trends, (v) persistency levels, (vi) the extent of credit defaults (vii) interest rate levels, (viii) currency exchange rates including the Euro-U.S. Dollar exchange rate, (ix) changing levels of competition, (x) changes in laws and regulations, including monetary convergence and the European Monetary Union, (xi) changes in the policies of central banks and/or foreign governments, (xii) the impact of acquisitions, including related integration issues, (xiii) reorganization measures and (xiv) general competitive factors, in each case on a local, regional, national and/or global basis. Many of these factors may be more likely to occur, or more pronounced, as a result of terrorist activities and their consequences.

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