Groceries and Related Products, NEC

SIC 5149

Companies in this industry

Industry report:

This industry is comprised of wholesale distributors of groceries and related products, not elsewhere classified. Some of the products included in this category are: breakfast cereals, bottled water, canned goods, coffee, cookies, cooking oils, crackers, dairy products, pet food, flour, dried fruits, health foods, honey, macaroni and spaghetti, canned or dried milk, pickles, salad dressing, sauces, soft drinks, soups, refined sugar, and yeast. Establishments primarily engaged in the wholesale distribution of beer and ale are classified in SIC 5181: Beer and Ale. Wine is classified in SIC 5182: Wine and Distilled Alcoholic Beverages.

Industry Snapshot

Grocery wholesalers and distributors buy grocery items from manufacturers or other distributors and typically resell them to retail--including grocery and convenience stores--or other commercial enterprises--including food service establishments--that in turn sell the goods to users. The wholesaling industry also includes many firms that import foreign goods or export U.S. products. In practice many wholesalers are integrated with manufacturing and retailing of grocery products as well.

In the 2000s, grocery wholesalers and distributors claimed more than 50 percent of the total grocery and related product sales. Manufacturers' sales offices and branches accounted for 25 percent, and brokers and agents shared 19 percent. According to Dun & Bradstreet, the U.S. wholesale grocery (not elsewhere classified) industry was worth more than $75 billion in 2009.

Background and Development

In 1997, Dun & Bradstreet listed 23,093 establishments engaged in the wholesale distribution of groceries and related products. The top 50 wholesale grocers shared 38.6 percent of the market, with each business averaging $1.62 billion in sales. The top 10 industry leaders totaled $54.2 billion in sales. Industry employment increased nearly 10 percent during the first half of the 1990s, reaching 270,000 workers with a payroll of $8.1 billion. Industry sales totaled more than $150 billion during the mid-1990s, which accounted for more than half of the broader grocery wholesaling market in the United States.

The industry faced diminished sales growth during the late 1990s. In 1997, the top 50 wholesale grocery giants reported sales of $81.1 billion, compared to $81 billion the previous year. One reason for the stagnation was competition from vertically integrated grocery retailers such as The Kroger Co. and Safeway Inc., which, because of their size, were able to buy goods directly from manufacturers--as well as to make many of their own private label products--rather than relying on other distributors. The warehouse clubs, such as Wal-Mart-owned Sam's Club, Costco Wholesale Corp., and BJ's, Wholesale Club, also grabbed market share from traditional wholesalers by offering volume discounts to small businesses and consumers. In 1998 Sam's Club had 451 U.S. locations, BJ's had 96 U.S. locations, and Costco had 288 locations worldwide. By 2009, those figures had risen to 595, 185, and 565, respectively. Costco had the highest sales figures, rising from $26 billion in 1998 to $71.4 billion in 2009; Sam's Club's revenues almost doubled during the same time period, from $24.4 billion to $46.7 billion, whereas BJ's sales rose from $3.4 billion to $10.1 billion.

According to the U.S. Census Bureau, there was a sharp decline in the total number of establishments in 2001, down to 13,703. There were approximately 301,333 employees with an annual payroll of $11.8 billion. By 2003, the total number of establishments had risen to 19,083, which together generated approximately $98 billion in sales, with the average sales per establishment totaling about $6.4 million. The total number of employees fell slightly to 256,719 people. California had the majority of the establishments with 3,427, followed by New York with 1,622, and Florida with 1,288.

According to a report from the U.S. Food Marketing System, the four largest U.S. grocery retailers accounted for 27.4 percent of sales in the early 2000s. The eight largest accounted for 40.5 percent of sales, and the 20 largest controlled 52 percent of sales. The top 10 grocery stores dominated almost 50 percent of the overall market and represented $728.7 billion in sales. According to the Market Share Reporter, the leading grocery stores in 2002 were Wal-Mart, Kroger, Costco Wholesale, Albertsons, Safeway, Sam's Clubs, Ahold Retail, SuperValue, Publix, and Fleming. States with the largest grocery markets were California, Texas, Florida, New York, Pennsylvania, Ohio, Illinois, North Carolina, Michigan, and Georgia. Wal-Mart retained its position as the top seller of grocery items throughout the decade.

In the 2000s, Canada was the largest exporter of food into the United States, followed by Thailand, Mexico, China, and Chile. Canada was also the largest market for U.S. imports of miscellaneous food, followed by Japan, South Korea, Mexico, and China.

Current Conditions

In 2010, like many other wholesalers, grocery distributors were facing an increased risk of being bypassed, as more retailers internalized the wholesale function. In addition, according to a report by IBISWorld, "With competition coming from fresh and organic produce, operators will need to focus on product differentiation, value-added products and the provision of additional services to ensure that this mature industry obtains a greater share of the market." Soft drinks/bottled water, canned foods, and grocery specialties were the largest categories of products within this classification.

According to Dun & Bradstreet, 22,613 establishments employed 232,934 people in the wholesale grocery industry (not elsewhere classified) in 2009. Of these firms, a majority were small, with almost 79 percent employing fewer than 10 workers. California had the most establishments in the industry with 3,717, or 16 percent of the nation's total, followed by New York with 1,879 and Florida with 1,714. California also had the most workers, employing 33,894 people in the industry. Other top-employing states were New York with 16,473; Florida with 14,795; Texas with 12,827; Illinois with 12,029; and New Jersey with 11,034. In terms of sales, Texas led by far, garnering $38.1 billion in 2009 revenues or just over 50 percent of the industry total. California was second with $7.0 billion, followed by Georgia with $6.6 billion, Rhode Island with $3.5 billion. Michigan and New Jersey rounded out the top five, with $1.9 billion and $1.6 billion in sales, respectively.

Industry Leaders

SuperValu Inc. of Eden Prairie, Minnesota, was the nation's largest grocery wholesale distributor in 2010, supplying more than 2,000 U.S. grocery stores. The company rose to number two in the retail sector (after Kroger) with the purchase of more than 1,100 Albertsons stores in 2006, a transaction that also increased the company's employee roster to 160,000 by 2010. Sales for SuperValu soared from just under $17 billion in 1997 to more than $40.5 billion in 2009.

C&S Wholesale Grocers of Keene, New Hampshire, was the second largest U.S. grocer wholesaler in 2010 and was listed as the eighth largest privately held company in the country in 2009 by Forbes magazine. The company supplied more than 4,600 stores in 12 states. C&S grew through expansion and acquisitions throughout the 2000s, including the purchase of former rival Fleming Companies in 2003. By 2009, the firm had 20,000 employees and $19 billion in annual sales.

Another significant player in the industry was Nash-Finch Co. of Minneapolis, with 7,563 employees and $5.2 billion in 2009 sales. Based in Keasbey, New Jersey, Wakefern Food Corp. was the largest wholesale grocery cooperative in the country, with 50,000 employees and $11.7 billion in 2009 sales; Kansas City-based Associated Wholesale Grocers Inc. was the second largest retailer-owned co-op, with $6.9 billion in 2009 sales and 4,000 employees.

According to The Food Institute, there were a total of 40 mergers or acquisition in the food industry in 2001, 35 in 2002, and 32 in 2003. Although activity slowed during the economic recession of the late 2000s, by the first half of 2010 acquisitions and mergers had risen almost 30 percent from the same period in 2009.

© COPYRIGHT 2018 The Gale Group, Inc. This material is published under license from the publisher through the Gale Group, Farmington Hills, Michigan. All inquiries regarding rights should be directed to the Gale Group. For permission to reuse this article, contact the Copyright Clearance Center.

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