NEW YORK — Supermarket retailers this year can expect consolidation to increase, margins to shrink and consumers to remain focused on value, according to a new “Market Navigator” report from Coresight Research exploring the U.S. grocery market and critical factors influencing the sector’s growth.
The report forecasts that the U.S. grocery market will grow 5.6% in 2023, which is down from 9.2% in 2022, bringing the market size to $1.5 trillion.
“Inflation will drive market growth, as it did last year, with the U.S. Department of Agriculture projecting the overall consumer price inflation rate for food categories at 6.6%,” according to Coresight. “As such, we expect a moderate real-term (volume) retail sales decline in the grocery market in 2023.”
Coresight notes that the market share for traditional food retailers declined from 69.7% in 2017 to 66.6% in 2022. During that period, mass merchandisers increased their collective market share to 19% from 18.4%, while major discounters and dollar stores increased their food retail share to 3.4% from 3.1%. “Major warehouse clubs saw the greatest jump in sales share, moving from 8.7% to 10.9%,” according to the report.
Coresight foresees softening growth for online food and beverage retail sales this year, with digital’s market share growing 15.1%, down from last year’s 16.5% increase. “Prolonged grocery inflation and other macroeconomic headwinds will cause the growth streak seen by online grocery to decelerate in 2023, although pricing increases and the retention of some online grocery shopping behaviors will partially offset these factors,” Coresight says. “As the sector matures, we expect growth to further taper off in 2024 and beyond.”
Consolidation will steadily increase as major grocery players reap the benefits of scale, fund online investments, compete aggressively on price and gain share at the expense of smaller rivals, according to the report.
The lingering impact of higher food prices will continue to shape consumer spending in 2023, with many shoppers favoring money-saving opportunities over quality and convenience.
Coresight identifies a number of paths grocery retailers can pursue to offset declining margins and slower online growth. These include catering to consumers’ growing interest in sustainability, greater reliance on private label merchandise and deployment of retail data-monetization opportunities such as retail media.
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