US grocery market forecast to be worth $1,722bn by 2022, IGD reports

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The US grocery market is forecast to be worth $1,722bn by 2022, with strong growth expected in both the online and discount channels, according to new figures released today by IGD, the international grocery research organisation.

Key findings include:

  • IGD forecasts that the US grocery market will have a compound annual growth rate (CAGR) of 3.6%, for the 2017-2022 period
  • Online will be the fastest growing channel in the US over the next five years, with a CAGR of 18.1%, representing a $20bn opportunity
  • The discount grocery channel is also expected to generate growth, driven by dollar stores and hard discount operators
  • The market share of hypermarkets and supermarkets is forecast to slip back over this period as retailers continue to rationalise their store networks, but investment will continue as retailers focus on ensuring they stay relevant
                                                            

2017 share of US marketby channel

(%)

2022 share of US market by channel (%)

Compound Annual Growth Rate

 Discounters

6.0%

7.2%

7.6%

 Hypermarkets

24.2%

22.9%

2.5%

 Supermarkets

38.0%

36.9%

3.0%

 Convenience

18.5%

18.7%

3.8%

 Online*

1.0%

2.0%

18.1%

 Specialist stores &   others 5.3% 5.1% 4.1%
 Traditional**

7.0%

7.1%

 Total

100%

100%

3.6%

Source: IGD Datacentre. Data from 2017 onwards are forecasts. Earlier years contain actuals or estimates where figures are not publicly available. Excludes wholesale, club and cash and carry sales. Figures correct at time of going to press.

*Online data are IGD estimates and includes all retailers’ food online services including meal kit services, direct to consumer sales and other online operations focusing on food and grocery

**Data represents sales through informal trade

Stewart Samuel, IGD’s North America Program Director, has identified several key trends that are fuelling double-digit growth in the online grocery channel.

He says: “The online channel is developing at pace in the US and although many leading retailers have operated online for over 20 years, it is only in the last three years where we have seen an acceleration of investment and activity. In the next five years, the online grocery channel will grow by $20bn and will be the main driver of growth in the US grocery market.”

Three factors underpin this growth, according to Stewart:

  • To capitalise on growth, many retailers are using their store networks to offer convenient collection options that are often free or low-cost, which are proving popular with shoppers
  • Meal kit delivery services are growing at a rapid pace, with specialist companies like Blue Apron and Hello Fresh continuing to expand their operations. Grocery retailers, including Walmart and Kroger, are also entering the foray by testing a curb-side pickup service from eMeals, while Albertsons recently acquired Plated
  • Grocery retailers are partnering with third-party companies, like Instacart and Shipt, to enter the online channel, with relatively lower capital investment

Stewart continues, “A key area for retailers to focus on is to make online shopping as convenient as possible, with a particular emphasis on making it easier to order frequently purchased products. New technologies also have an important role to play in this space, with voice-based ordering set to revolutionise how products are ordered.

 

“Technology is not just important for ordering products, but also has a big impact in other online fundamentals like fulfilment and delivery,” adds Stewart. “For example, the use of robots to make deliveries and pick orders in store and the advent of drones making small deliveries by air are examples of how new technologies can improve the economics of the online grocery market, although it may be many years before they are deployed at scale in the US market.”

Stewart highlights some further key trends for the US grocery market. “The discount channel is also gaining traction across the US,” he continues. “Dollar store chains continue to expand at pace, opening several hundred new stores each year. Discounters are also increasingly expanding their fresh food offers and with Aldi aiming to have a store network of 2,500 by the end of 2022 and Lidl entering the market, the discount channel is becoming much more mainstream in the US.

 

“The performance of the convenience channel will hold steady and we’re expecting consolidation, which so far has been driven by 7-Eleven and Couche-Tard, to continue,” says Stewart. “Convenience stores will increasingly focus on improving their fresh food offer and selling innovative food-to-go ranges, both of which are high priorities for the convenience store shopper.”

“We expect hypermarkets and supermarkets to face a more challenging time, with both experiencing a declining market share over the five-year period,” adds Stewart. “However, as sales shift online, both types of store are innovating with new ways to entice shoppers in-store and merge the digital and physical worlds, for example by developing healthcare hubs, investing in their prepared foods and food-to-go ranges and using digital tools to inform, engage and reward shoppers.”

To understand how the international retail landscape is changing, download IGD’s free ‘Store of the Future’ report.