A strengthening economy is helping drive growth in the supermarkets and grocery store industry, according to a report published by IBIS World, New York.
As per capita disposable income increased during the period, many consumers shifted to premium, organic and all-natural brands, helping lift industry revenue. Conversely, inflationary food costs have caused consumers to continue purchasing private label brands over the past five years. While a shift toward more generic goods curbs revenue growth, it helps operators maintain profit margins, as store brands are less costly to produce than national brands. Overall, industry revenue is expected to grow an annualized 1.3% to $666.5 billion over the next five years, including a 0.9% increase in 2019 alone.
Likewise, the industry is exposed to the following threats and opportunities:
- The agricultural price index measures the prices received by farmers for all agricultural products, including livestock and crops. As prices increase, industry operators often raise the price of their merchandise sold to consumers, boosting industry revenue. In 2019, the agricultural price index is expected to decrease. Volatility in the agricultural price index could pose a potential threat for operators in the industry.
- Per capita disposable income determines an individual's ability to purchase discretionary goods and services. When disposable income declines, consumers limit purchases to essential items and more affordable brands, curbing industry revenue growth. Per capita disposable income is expected to increase in 2019, representing a potential opportunity for the industry.