Jul 23, 2008
If you’ve seen one of the big movies of the summer, Wall-E (and I give it a thumbs up, even if you don’t have little kids), you’ll recall that a key premise of the film is that human life in the 28th century is defined by its mindless consumer consumption, and all that consumption occurs at one retailer: Buy n’ Large. BnL represents the logical evolution of 21st century superstores and hypermarkets, which have led to monopolistic control of consumer marketing in 2700 AD.
If you look at recent data on what’s happening in the food business today, however, you’ll deduce that we won’t have to wait 700 years for the future of retailing to arrive…it’s already on our doorstep.
In the July 7th issue of Feedstuffs magazine, there’s an article accounting for the sales and market shares of the nation’s largest supermarkets. The figures are intimidating to compute, even for Wall-E. The top five retailers – Wal-Mart, Kroger, Safeway, Costco and SuperValu, have a 54% collective market share (this was in 2007). Just the first two alone have fully one-third of all supermarket sales in the U.S.
When you add in the next five, including Sam’s Club (which wasn’t even counted in the initial Wal-Mart tally), Publix Super Markets, Ahold USA, Delhaize America, and HEB, the consolidation trend continues. These second five sell 19% of the groceries, giving the top 10 outlets 73% of all sales.
The funny thing in agriculture and, really, the entire consumer food chain is that consumers profess to be very concerned about the apparent demise of small, “family” farms, which are viewed as inherently superior to corporate, “factory” farms (as if there are only these two business models possible in farming, and they are distinctly black and white).
But at the same time, food processing, and especially food retailing, has become enormously concentrated and big – much more so than down on the farm. Yet, apart from occasional outbreaks of Wal-Mart bashing, generally spearheaded by labor unions, this clear and unmistakable trend is hardly notorious at all. This, despite the fact that the consumer’s main conduit to food is through the stores that s/he patronizes.
It’s sometimes thought that the changing structure of farming is due to pressures that exist strictly, or primarily, at the farm level (the argument about whether farming is really changing dramatically today, other than through the century-old trend of fewer but larger farms, is a topic for another day). But you rarely hear the argument made that many of today’s economic pressures on production agriculture are a reflection of the restructuring of the food distribution chain. When the fate of your business depends on the merchandising decisions of just a handful of buyers at these large food corporations, it first concentrates the mind…and the rest of the infrastructure often follows.
In fact, I think a small portion of consumers are concerned about this trend, and they’re the ones pushing to support farmers markets and other manifestations of the buy-local trend. But a lot of the major retailers already buy locally anyway – at least to a degree. Seeing as how most families don’t have time to drive miles every weekend to a farmers market (as opposed to patronizing one of the big 10 on the list above), it’s hard to envision the “locavore” movement as a viable alternative model that will achieve any type of critical mass in comparison to the $390 billion in grocery sales enjoyed by those top 10 marketers.
Will Wall-E’s world of tomorrow come to pass? In a certain respect, we won’t have to wait long to see.