Food consumption choices of the extremely busy, urbanized consumers globally are rapidly changing. Improving GDPs of countries and the rising disposable incomes of a larger population base are allowing access to a larger set of food products from renowned private label brands. Increased purchasing power has led to a significant rise in consumer spending on food products and an increased preference to shopping at organized outlets such as supermarkets and hypermarkets. These trends are collectively propelling the global food retail market.
While the market witnesses restraints such as lack of effective supply chains and dominance of unorganized players, especially in developing countries, factors such as the rapidly rising population of middle-class people and the rising popularity of online retail shopping are presenting growth opportunities for food retail companies.
Impact of Private Label Brands Slowly Fading as Economies of Developed Regions Recover
Private label brands refer to the products of small-scale food processing companies that are supplied to food retailers at much lower prices as compared to products of organized food processing companies. In the past few years, the sales of a number of private labels saw significant hike, in part owing to the recent financial depression that grappled many European economies. The cash-strapped economies led to a healthy demand for private label brands, but now as the European economy is slowly progressing towards a steady recovery, the demand for private label brands is again projected to drop in the near future.
Some of the key restraining factors for the global food retail market are the prominence of unorganized food retailers in several regional markets and an overall lack of an effective supply chain. The lack of an effective supply chain is a factor especially rampant in developing economies, thus posing difficulty for the expansion of multinational brands. However, with the help of government investment aimed at infrastructure development and invasion by many global food processing companies, the scenario is rapidly changing. The number of organized players is also rising at a swift pace in developing regions of Asia Pacific owing to the rising urbanization and increasing disposable incomes. Regulatory scenario that promotes foreign direct investment (FDI) in many developing regions is also projected to promote the global food retail industry in the near future.
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High Concentration of Organized Retail Chains in Developed Regions Leading to Stiff Competition
The global food retail market exhibits a medium level of rivalry owing to the presence of nearly 90 global companies and some regional players. Owing to factors such as low product differentiation, high brand identity, and good growth rate, the intensity of rivalry has increased in the market in recent times. High concentration of organized food retail chains in Europe and North America leads to tough competition in the food retail market in these regions. Non-transferrable assets and low investments in the market have led to low exit barriers. As a result, the market features high competition with many major players offering similar product collections. Some of the major vendors in the market are Seven and I Holdings Co., Ltd., Wal-Mart Stores, Inc., Metro AG, Carrefour S.A., The Kroger Co., Tesco Plc, Costco Wholesale Corporation, AEON CO., Ltd., REWE Group, and Groupe Auchan SA.