GROCERY FOOD – Food glorious profit

chazFood continues to be a huge and profitable business for Britain’s delivered wholesalers and cash ‘n’ carries. The convenience sector is very different to 20 years ago, but the fittest independents are not only surviving, they are thriving.

On average some four fifths of UK grocery sales go through the major supermarkets. Even so, that still leaves one fifth of the cake for the independent sector, which relies on the wholesalers for its supplies, and in many grocery markets the proportion is considerably higher.

Bagged snacks are one such market, with almost half the volume going through the impulse sector, of which a large proportion are independents. And if you break out single packs the figure is much higher.

In addition there are many ethnic food and drink products that you rarely find in supermarkets.  Traditionally these see most of their consumer purchases in the independent sector in stores serving the local ethnic community, supplied by specialist wholesalers or cash ‘n’ carries with their roots in the community.

Next, there’s the speciality and fine food sector, made up of hundreds of little companies. Many of these are keen to keep their products well away from the supermarkets and favour independent grocers, even though the more enlightened multiples are doing their best to be seen to be caring and nurturing.

Another factor is the recession, which has curiously enough been good news for the independent sector. Local retailers are capturing more purchases from shoppers who used to favour the nearby supermarkets but are being more careful now about how they spend their money.

The population still in work are working harder than ever, to keep their jobs. This means longer hours and last minute shopping for that evening. Not everyone has a supermarket-owned convenience store on their doorstep.

And then there are the small but significant group of ‘anti-corporate’ consumers who protest against the might of the supermarkets by shopping locally. It’s all good news for the independent sector and the wholesalers who provide the primary link between convenience stores and product suppliers.

The Competition Commission’s 2008 report quoted the ACS and the FWD saying that as the number of convenience stores served by grocery wholesalers declines, the average costs of supplying these stores will rise. A tipping point might come where the closure of a certain number of convenience stores means the grocery wholesale sector is no longer economically viable. But that won’t happen any time soon.