Grocery stores are continuing to lose market share as discounters and dollar stores increase their fresh food offerings and focus on low prices,  according to Citi Investment Research analyst Deborah Weinswig. Grocery stores have been facing increased competition from a variety of competitors, including drugstores, that have begun to increase their food offerings.  Wal-Mart was the only retailer to gain market share in 2010, while supermarkets were the “major losers,” Weinswig said.

Weinswig expects this trend to continue in 2011, and she expects supermarkets such as Kroger, Winn-Dixie , and Safeway to lose share in 2011 as they slow square-footage growth and consolidate under performing stores. “We expect macroeconomic headwinds to continue to pressure the consumer while the acceleration of Target’s P-Fresh remodels and increased competition from the dollar stores and drugstores eats into the pie of food market share,” she said.

Target has said it plans to remodel 400 stores in 2011 to align with its “P-Fresh” concept, which typically increases a store’s grocery offerings by 40 percent.  Dollar stores like Dollar General and Family Dollar are another area to watch, Weinswig said.  “We believe they will continue to take share from the grocers as their price points, convenience, and smaller pack sizes present a competing option for consumers to perform fill-in trips,” she said.

 

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