Supercenters moving on up

While Wal-Mart's produce executives have always been refreshingly accessible, they typically have not shared specific food or produce sales data. Of course it hasn't been tough to figure that the world's largest retailer has made a monster dent in the grocery business. But how big have they become is a matter of conjecture.

At the USDA's Agricultural Forum I attended last week, Ephraim Leibtag, economist with the Economic Research Service, said ACNielsen has offered a data product since 1998 that analyzes the grocery buying habits of 65,000 consumers. Those consumers scan what they buy when they bring it home and report it to ACNielsen, he noted. The consumers log what they buy, what they paid and where they buy it from.
The data from that more complete picture of consumer habits indicates that the market share of traditional supermarkets has declined from 80% in 1998 to about 60% in 2005. On the other hand, the share of market owned by non-traditional retailers increased from 20% to 40%, Leibtag said. So-called nontraditional food retailers are on a path to eventually eclipse "traditional" retailers.
Wal-Mart’s supercenters accounted for about 3.2% of the market in 1998 and 13.2% of the food market by2005.
Wal-Mart has captured customers with lower prices and the lure of one-stop shopping.
Research performed by the USDA’s ERS at the end of 2006 compared dairy product prices at Wal-Mart with their retail prices at traditional supermarkets. Leibtag said that study showed Wal-Mart supercenter prices were, on average, 8.6% lower for hard cheese, 16.5% lower for soft cheese and 12.6% lower for random weight cheese. Depending on the dairy product, Wal-Mart’s supercenter prices ranged from 5% to 25% lower than traditional supermarket prices, he said. The ERS will also evaluate other departments within Wal-Mart, but those studies aren't finished yet.
Meanwhile, Jon Hauptman, analyst with Willard Bishop Consulting, Barrington, Ill.,, said supercenter pricing is generally estimated to be 13% to 18% lower than traditional supermarkets.

TK: One retail analyst at the Outlook Forum said a price differential on food above 10% causes many consumers of traditional supermarkets to consider switching to Wal-Mart. Consumers don't notice price differences in the 3% range, and generally will remain loyal even if prices at 5% to 8% higher if they are being well served by traditional retailers. Hitting that price sweet spot is important, and price optimization software is finding favor among retailers to help in the task.

Coming closer

A staff member for Congressman Dennis Cardoza, D-Calif., said the EAT Healthy America Act - the specialty crop title to the farm bill - may be reintroduced sometime early next week. The bill was first introduced in September of last year, but expect some tweaks and adjustments based on input from the specialty crop farm bill alliance.

Cardoza will be one of six original co-sponsors; here are the rest:

John T. Salazar (D-CO)
Adam Putnam (R-FL)
Kevin McCarthy (R-CA)
Rick Larsen (D-WA)
Randy Kuhl (R-NY)


Meanwhile, the Specialty Crop Farm Bill Alliance has released a news release about the Informa Economics study on planting flexibility provisions in the farm bill.
From the release:

The report, which looks at a wide range of states and specialty crop commodities, concludes that removing the planting restrictions would result in a realignment of market forces that have long influenced the total supply of specialty crops. That realignment would increase the supply of fruits and vegetables and result in a reduction of income to those growers in excess of $3 billion. “It is clear that a larger supply without a corresponding increase in demand will lead to dramatically lower prices—and a direct reduction in revenues of existing specialty crop producers,” stated John Keeling, Executive Vice President & CEO, National Potato Council and Co-Chair of the Specialty Crop Farm Bill Alliance.

According to the report, removing the planting restrictions will result in a shift of 1.03 million acres into production of specialty crops. This is a small shift in the more than 220 million acres of program crops but represents a 10% increase in total specialty crop acreage. The 15 states where the greatest expansion of acreage is expected alone account for about 88% of the new specialty crop acreage. Other Key observations include:

The biggest jump in acreage would occur in California, which already has a large, diverse specialty crop industry. More than 230,000 acres – mainly from cotton and rice – are likely to shift to specialty crops.
Idaho and Colorado would see the largest percentage increase in specialty crop acreage. Potatoes are likely to dominate the acreage shifts in Idaho, Washington and North Dakota.
Relatively little expansion of specialty crop acreage is expected in most Corn Belt states, reflecting the competitive dominance of program crops and limited existing specialty crop acreage and infrastructure.
Along with potatoes, crops that could increase 10 percent or more in acreage include peas, pears, sweet corn, apples, onions, cabbage, snap beans, berries, cherries, pumpkins, asparagus, cucumbers and squash.

For the full report, see this Web site: www.competitiveagriculture.org.