Walmart Grocery
When times get tough, even Walmart's (WMT) "everyday low prices" aren't all that alluring to shoppers -- except in one segment of its business: food.

For its core customers, like everyone else, food is a budget item that can only be reduced, never eliminated -- and for them, it's a major one. Walmart's CEO recently confirmed that, for its customers, "food is consistently the top monthly expense outside of housing and vehicle payments."

So it's little wonder Walmart is seeing so much growth in groceries -- and why it continues to add food to its general merchandise stores.

One-Stop Shops on the Rise

It's no secret that Walmart has a huge presence in the grocery business. It became the nation's largest grocer a decade ago, killing 25 of the 29 supermarket chains that went bankrupt along the way.

But Walmart isn't alone in devoting more floor space to selling food. Many other bargain retailers are making similar shifts. Dollar Tree (DLTR) is adding more food items and installing new freezers and refrigerators to a growing number of its stores. And Target (TGT) is similarly adding a "broader food assortment," according to its CEO.

But, due to Walmart's ability to charge significantly less than its supermarket competitors, Walmart and its discount brethren have the opportunity to completely kill the "Big Three" supermarket chains -- Kroger (KR), SuperValu (SVU), and Safeway (SWY) -- and change the grocery industry as we know it.

We're already seeing big changes in the way people buy their groceries:

  • SuperValu has seen a decline in same-store sales (a good measure of foot traffic) for three years running.
  • And Safeway's same-store sales rose a paltry 1.6% in the recent quarter.
  • Kroger is holding strong, with same-store sales increases of around 5% over the past several quarters. But as we've seen in the past, if SuperValu and Safeway start to lose ground, it only quickens Walmart's move to the top, spelling more trouble for Kroger.

Consolidation in the grocery industry is a good thing for Walmart.

What It Means for Shoppers

It's conceivable that within a decade, most of us will be more likely to grocery shop at a Walmart, Target, or Dollar Tree than at the supermarkets we visit now.

The positive side is that this will probably mean lower prices on the food portion of our household budgets.

But there are also some negatives. For example, Walmart has done notoriously poorly at finding smart strategies for fresh seafood and meat. They don't offer as many product choices as major supermarket chains. And their produce isn't always as fresh as their competitors'.

However, if Walmart and its discount brethren want to become the leading grocery stores of the future, you can bet they'll figure out ways to cheaply remedy those shortcomings. And that will and add put more savings back in your pocket.




This article was written by Motley Fool analyst Adam J. Wiederman, who owns no shares of the companies mentioned above. The Motley Fool owns shares of SuperValu. Motley Fool newsletter services have recommended buying calls on SuperValu and creating a bull call spread position in Walmart Stores.


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hazel

our wal mart just added on a new food section checked it out no bargin publics cheaper cleaner very helpful workers. only get meds at wal mart ......

August 12 2012 at 3:03 PM Report abuse rate up rate down Reply
CATS RULE HERE

Walmart's meats suck. In fact it's pretty gross. The latest is their choice to carry GMO corn on the cob, bad idea.
I don't shop Walmart for groceries any more, and especially after hearing this GMO bit on the news.
We have stores here in the West called WINCO, they are way better than Walmart, prices are the same or lower, it is employee owned and they pay their employees a decent wage, unlike Walmart. Sorry Walmart, you've lost my business.

August 08 2012 at 9:09 PM Report abuse rate up rate down Reply
donut999

Wal Mart day in day out is just about impossible to beat for grocery staples. They do not have an olive bar at $8.99 a lb or sushi or soup shack selling items at gougy prices, but, for the staples, again hard to beat. Just received in the mail about 20 coupons from Kroger. Everything from a dozen free jumbo eggs to various amounts off this and that if you buy 3 or 5. And of course the weekly ads/specials for all the grocery stores. Why?? Simple, if they can get you in the door to save $5-7, they will sell you another $80 worth other stuff including high priced olives, soup and sushi.

August 07 2012 at 10:42 AM Report abuse rate up rate down Reply
parthenon1

We buy what we need that Walmart offers as well as Kroger but there is another upstart grocer that is going to give all the big boys pains...Aldi's. We buy as much as we can from them. Yes it is a pain they take only cash, one must stop at the cart rack and pay a (refundable at return) 25cent fee to get a cart from the rack at the front door and one must supply their own bags etc. But the price savings are surprising. Also why dont all grocers supply paper grocery bags instead of plastic; plastic is made generally from petroleum, it is not biodegradable. Paper on the other hand is fully biodegradable, is made from recycled fiber and helps keep agriculture going for tree farmers. I use old newspapers for mulch in my vegitable garden and at the end of the season just till them into the soil but grocery bags made from already recycled fiber will decompose as fast or faster.

August 06 2012 at 12:45 PM Report abuse rate up rate down Reply
1 reply to parthenon1's comment
txblkleon

I also buy all my eggs, milk, cereals, snacks and produce from AlDI. They do take credit cards. You will not find to many of their carts all over the city.

August 08 2012 at 10:37 PM Report abuse rate up rate down Reply
bigtreesleo

The story says 25 of 29 Supermarket chains are gone in the decade Walmart became the largeest grocer. Time for the U.S. to look into this possible monopoly building and a lot of good stores will be lost..They stopped ATT .

August 05 2012 at 11:22 AM Report abuse rate up rate down Reply
THE LEADER

Krogers stock up 2 bucks a share in the last year,Walmart up 24 a share.I shop Krogers.Help me Kroger.

August 04 2012 at 9:29 AM Report abuse rate up rate down Reply
crrunch

Their fresh food prices aren't all that great. Canned and junk food are lower than most. Dairy isn't great. If all we ate was canned and junk, it'd be the place to go.

August 03 2012 at 7:35 PM Report abuse +1 rate up rate down Reply
Robert & Lisa

Once they run their competitors out of business, Wal-Mart raises it's prices and nothing is cheaper any more.

August 03 2012 at 7:25 PM Report abuse +1 rate up rate down Reply
Fed Up

I'm not crazy about rat feces.

August 03 2012 at 7:09 PM Report abuse rate up rate down Reply
Patti

Well with RATS running over their meat as caught on a customer';s cell phone not long ago I'd say they have a lot of work ahead to get to where they want to be! EEEWWW1

August 03 2012 at 6:18 PM Report abuse +1 rate up rate down Reply