The One-Stop Shop

Once upon a time, shoppers had to visit the butcher, the baker and the candlestick maker to gather all the ingredients necessary for at-home meals. But that began to change 75 years ago when the first supermarket gathered all those different product categories under one roof. In just one trip, shoppers could conveniently purchase everything necessary for breakfast, lunch, dinner and more. World War

Once upon a time, shoppers had to visit the butcher, the baker and the candlestick maker to gather all the ingredients necessary for at-home meals.

But that began to change 75 years ago when the first supermarket gathered all those different product categories under one roof. In just one trip, shoppers could conveniently purchase everything necessary for breakfast, lunch, dinner and more.

World War II slowed progress a bit. But once the war ended, the supermarket industry exploded, growing from close to 100 supermarkets in 1934 to nearly 15,000 nationwide in 1950. Today, the $432.8-billion U.S. supermarket industry includes more than 33,000 stores and employs 3.4 million people, according to Progressive Grocer.

Consumers visit a supermarket twice/week on average, looking for fresh, wholesome products at a good value. Depending on household size, average weekly grocery bills range from $59 to $133, according to the Food Marketing Institute (FMI).

Nowadays, shoppers can buy food items in a variety of places — convenience stores, dollar stores, drug stores, supercenters, natural or organic specialty stores, ethnic markets and even through the Internet. But the traditional supermarket remains the dominant outlet for meat and other fresh products.

The number of Americans who consume beef and their frequency is directly linked to the supermarket industry, says Mark Thomas, National Cattlemen's Beef Association (NCBA) vice president of consumer marketing.

“Without the evolution of the supermarket, the beef producer segment would not be enjoying the reach and frequency of its products across the country,” he says.

Randy Irion, NCBA's director of retail marketing, agrees.

“It's a convenient way of getting the product distributed to consumers,” he says, “because they can purchase it in the same place where they purchase the rest of the ingredients for their family meals.”

Supermarket chains also are a loyal and vital component in successfully marketing beef to consumers. Every week, most U.S. retailers feature fresh beef cuts in newspaper ads at their own expense, Thomas notes.

A premiere destination

Perhaps the most significant way the supermarket industry has affected beef retailing is the introduction of self-service meat cases. Self-service meat cases offered consumers a wide variety of cuts to choose from, and provided convenience because shoppers no longer had to wait to be served, Thomas says.

Another noteworthy impact supermarkets had on beef retailing was retailers' acceptance of boxed beef in the 1960s. Thomas says boxed beef allowed more product to be cut for consumers into the self-service case. It also made the sale and marketing of fresh beef more efficient.

As the beef industry moves to offering more branded fresh products and case-ready products, supermarket meat cases remain the dominant outlet for beef. A recent study by indicates the supermarket meat case is where 82% of consumers purchase meat. The rest buy from a butcher in a full-service case or rely on an independent butcher.

The same study also reports consumers are visiting the meat case often; 87% visit it on all or most of their trips to the store.

“It's obviously a premiere destination for the supermarket,” Irion says.

It's also pivotal because it distinguishes one store from another. Unlike the aisles of dry groceries, where boxed and canned foods are uniform from one store to the next, meat departments vary widely. Each chain controls the exact presentation, selection, in-stock conditions, and pricing of its meat products.

It is no surprise high-quality meat has consistently been among the top reasons consumers select a particular supermarket over another. In a 2004 FMI report, consumers indicated high-quality meat as the No.-3 factor in selecting a primary supermarket; a tidy store is No.1 and high-quality fruits and vegetables is No. 2.

More specifically, retailers use the beef section of the meat case to help their stores stand out from competitors in terms of quality, marketing and knowledge, Thomas says.

“It's beef that sets the store apart from the competition,” he says. “There's not much difference in chicken and pork.”

Plus, there's more space devoted to beef. According to NCBA's 2002 review of the U.S. retail meat department, beef controls the largest share of case feet at 29%. Chicken had 16% and pork had 14%.

A meat department usually offers a premium brand of beef, as well as a house brand, and nearly all stores have a small clerk service where consumers can get larger roasts or steaks cut thinner. Some stores still have full-service butchers, while others have eliminated that service for cost reasons.

Irion notes that supermarket meat departments continually evolve to meet the changing demands of beef consumers. One recent example is the addition of a section for branded heat-and-serve meat products.

FMI's Bill Greer concurs, noting that supermarkets are now introducing a lot of food that's ready to be heated. Furthermore, supermarkets are becoming a chief source of ready-to-eat food. In the take-out food category, they're substantially ahead of full-service restaurants and are only slightly behind fast-food restaurants.

Greer says, in this age of dual-income couples, some consumers want to cook but have neither the time nor the skills. Others just don't like to cook.

“Getting a product packaged in portion sizes consumers want for convenient meals is more critical today than ever,” Irion says.

One reason supermarkets work to accommodate beef consumer demands, he says, is because beef is an item that drives a store's total floor sales. According to Progressive Grocer, the meat department accounts for more than 13% of total supermarket sales. It's the store's single largest perishable unit in terms of sales.

However, anyone who thinks retailers are taking a huge profit margin on fresh beef is mistaken, Thomas says.

While a supermarket's gross profit margin on fresh beef is likely close to 25%, its net profit margin is only 1-2% when the costs of marketing, labor, shrink, theft and the butcher's time and talent are considered.

“It's pennies,” Thomas says. “They make money on turnover or volume.”

Indeed. The supermarket is a low-profit, high-volume business that actually has contributed to controlling the cost of beef and food in general, Greer says.

Before the introduction of the supermarket, Americans spent nearly a quarter of their family income on food. Today, Americans spend 6% of their disposable income on at-home food and 4% on food away from home, says USDA's Economic Research Service.

“That's due to the (supermarket) business model and the intense competition in the industry,” Greer says, adding that the supermarket contributed to the growth of America's middle class.

“The decreasing cost of food has freed up money for consumers to afford other things — luxuries, education, health care and clothing,” he says.

An industry partner

Through the years, the supermarket industry also has played a valuable role in food safety.

The opening of supermarkets coincided with the introduction and increasing sophistication of refrigeration in stores and homes, Greer says. Supermarkets had a major impact in introducing refrigerated products and frozen products to preserve perishable foods, particularly meat, for a longer period of time. That obviously contributed to food safety.

More recently, supermarkets have partnered with the beef industry in efforts to increase consumer awareness of food safety. One example is the “sell-by” or “use-by” date on fresh beef packages. Another is the label on ground beef alerting consumers to cook it to 165∞ F. to kill any bacteria.

The supermarket industry also has worked closely with NCBA and its predecessors to promote all types of beef products, Thomas says.

NCBA recently developed a training program for meat retailers. It also has account managers assigned to regularly call on retailers to keep them updated on beef promotions, they provide supply information and help manage issues like the December 2003 BSE incident in Washington state.

State beef council organizations are also a key industry link to the retail trade, Thomas says.

“We spend a lot of time working with retailers and helping them — with checkoff dollars — to position the product in such a way the passion consumers have for beef stays where it is,” he says.

Consumers spent more than $70 billion on beef in 2004, Thomas adds. That's a big jump from the $45-billion average annual beef expenditures of the 1990s.

“The demand curve for beef has shifted significantly,” he says. “And the retail grocery store — in its partnership with the beef producer over the years — is a critical part of that success.”

Diana Barto is a freelance writer based in Waconia, MN, and a former BEEF senior associate editor.

Sharing the market

Just 15 years ago, supermarkets completely dominated the food-at-home world. Today, the traditional supermarket is experiencing a downward shift in market share.

The Food Marketing Institute (FMI) reports 21% of shoppers name a discount store or supercenter as their primary grocery store. Meanwhile, 72% consider a traditional supermarket their primary grocery store.

Traditional supermarkets lost market share in all product categories in 2004. Fresh products, including beef, remain the only category where supermarkets dominate.

“The penetration of supercenters and club stores is not as great for fresh beef as for some of those items in grocery stores' center aisles,” says Randy Irion, National Cattlemen's Beef Association director of retail marketing. “Beef, and meat in general, have held a better position than dry groceries because people purchase beef more frequently than they would, say, paper towels.”

In addition to buying from large club stores and supercenters, shoppers are buying food items from smaller retailers, such as convenience stores, dollar stores, drug stores, natural or organic specialty stores, ethnic markets and even via the Internet.

FMI's Bill Greer says the supermarket is really the concept of mass-merchandising and self-service of food, rather than a single format.

“Whether you do that through a traditional supermarket, a supercenter, a combination food-pharmacy store, a limited-assortment store, or any number of other alternatives, it's still the supermarket concept,” he says.

Greer adds that, throughout history, the supermarket has mirrored consumer lifestyles, and this is a period of tremendous diversity.

“The decline in the so-called traditional store is really a reflection of the industry's attempt to appeal to a very diverse consumer base,” he says. “The concept is evolving into a multiplicity of formats, each designed to serve a particular kind of consumer need or combination of needs.”
by Diana Barto

A super start

The grandfather of the supermarket was Michael J. Cullen. As general sales manager for Kroger, he first described his revolutionary idea of mass-merchandising in a letter to the company's president. When Cullen never got a reply, he quit his job and opened the first supermarket.

King Kullen Grocery Co. opened in Queens, NY, in August 1930 during the Great Depression. It was located a few blocks from a busy shopping district and housed in what had been a vacant garage. With 6,000 sq. ft. and about 1,000 items, King Kullen was the first to combine volume dealing, self-service, discount pricing, chain marketing and separate departments.

Promoted as “The World's Greatest Price Wrecker” in magazine, radio and daily newspaper ads, King Kullen attracted the buying public in droves. Police reserves and hastily constructed rope aisles helped keep eager shoppers in line.

Kullen's concept offered consumers affordable prices, one-stop convenience, an ever-increasing variety of products, year-round produce, and other fresh foods to which people otherwise would not have had access.

Still a family-run business, King Kullen currently owns and operates nearly 50 stores in New York and does an estimated $800 million in annual sales.
by Diana Barto