The grocery wars are intensifying with Walmart and Kroger in the lead and Amazon poised to 'cause disruption'
- Walmart and Kroger remain the top grocery leaders in the US with roughly 30% of combined market share, according to a new UBS report.
- UBS expects the grocery industry to face challenging conditions in 2020, with discounters raising pricing pressures and Amazon poised to "cause disruption," the report stated.
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The grocery wars are intensifying, according to a new UBS report.
Hard discounters including Aldi and Lidl are expected to ramp up pricing pressure this year by aggressively opening new stores, while regional chains such as Wegmans and Publix are predicted to gain market share, UBS analysts wrote in a 49-page outlook on the US grocery industry.
UBS also expects Amazon to "cause disruption" this year as the chain expands its cashierless Amazon Go technology and prepares to open its first conventional brick-and-mortar grocery store.
"We expect the food retail sector to face challenging conditions in 2020," the UBS analysts wrote.
There's a lot of money at stake in this battle. The food retail industry will be worth approximately $1.3 trillion in 2020, according to UBS.
Shayanne Gal/Business Insider
Overall, Walmart and Kroger remained the top leaders in the US grocery market in 2019 with a combined market share of roughly 30%, which is largely unchanged since 2017, according to the report.
Individually, Walmart's US market share - including that of its warehouse chain, Sam's Club - totalled 21.3% last year, according to UBS estimates. Kroger ranked second with a share of 9.9% and Costco ranked third with a share of 5%.
Amazon and Whole Foods, by comparison, accounted for 2.2% of the US grocery market in 2019, which is up from a 1.6% market share in 2017.
Despite Walmart's and Kroger's strong lead, the grocery market in the US remains otherwise highly fragmented, UBS analysts wrote.
"Independents and smaller chains control a sizeable portion of the US grocery market," the report states. "We estimate that these retailers ... still account for over 25% of total US grocery sales."
Digital sales of groceries will become increasingly important in 2020. These sales will remain a small slice - roughly 4% - of overall grocery sales this year, but account for more than one third (about 38%) of food retail's overall growth in 2020, according to UBS.
"As online grocery penetration increases, cost control will become increasingly critical for grocers," analysts wrote.
Some of these cost controls may come through automated fulfillment solutions, such as Walmart's Alphabot and Kroger's Ocado warehouses.
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