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How 'Big Grocery' is starting to bite consumers

The Exchange
Numerous varieties of soda are shown for sale at a Vons grocery store in Encinitas, California
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Numerous varieties of soda are shown for sale at a Vons grocery store in Encinitas, California October 10, 2013. Vons is a division of Safeway Inc, who are reporting 3rd quarter earnings today . REUTERS/Mike Blake (UNITED STATES - Tags: BUSINESS)

Despite filling your shopping cart with dozens of brands every week, your grocery-store experience is being controlled by an increasingly small handful of big companies. That lack of diversity, says a new report from advocacy group Food & Water Watch, is preventing competition and keeping prices higher.

In “Grocery Goliaths: How Food Monopolies Impact Consumers,” Food & Water Watch makes a call for more oversight of mergers between grocery store chains and between food companies. It also seeks greater regulation of food marketing. Here are some of the highlights, showing how a few companies are capitalizing on consumer habits and their ability to scoop up smaller competition.

We’re all shopping at the same place

Americans spent approximately $603 billion on groceries in 2012. More than half of those sales filled the tills of just four retailers: Walmart (WMT), Kroger (KR), Target (TGT) and Safeway (SWY).

You can’t control your impulse buying

Americans may be spending a lot of time and money at grocery stores, but they aren’t sticking to a list when it comes to what they’re shopping for. A study from Point of Purchase Advertising International found that 55% of the things consumers buy during their grocery trip are made on impulse. Food & Water Watch likens the experience of grocery shopping to that of a casino, noting the “bright lights, Muzak, colorful displays and endless ways to spend your money before you can reach the exit.”

Attacking your senses boosts sales

The Food & Water Watch report delves into the ways grocery stores appeal to your senses in an effort to help you keep making those impulse buys. Something as simple as the choice of music matters. “Supermarkets know that music with slower tempos tends to decrease the flow of store traffic and increase sales volumes. Louder and faster music encourages customers to shop more quickly and purchase less,” according to the report. Shopping for wine? Well, if they’re playing classical music in that area you’re more likely to buy the more expensive wines. You know, because just hearing classical music makes you more of a Mr. Fancy Pants.

That smell of fresh-baked bread coming from the bakery? Probably fake, says the report. “The bakery department pumps aromas of freshly baked bread to get consumers’ stomachs involved in the shopping decisions, even though most in-store bakeries use prepared foods and frozen dough.” Companies specialize in creating these scents. Like the bakery, it should come as no surprise that, even though no one is washing their linens in the vicinity, the aisle of laundry products has a heavy smell of fresh laundry hanging over it.

Brand choice is an illusion

You may see dozens of different brands when you walk down the cereal or drinks aisle, but the reality is most categories are ruled by a couple corporate giants. Food & Water Watch examined 100 grocery categories, finding that 63.3% of sales were controlled by the biggest food companies. Kellogg (K), General Mills (GIS), Post (POST) and Pepsico (PEP) sell almost 50 different types of cereal and own nearly 80% of all cereal sales. Mondelez International’s (MDLZ) Philadelphia brand accounts for almost 61% of cream cheese sales. In everything from sports drinks to baby formula and granola bars, Food & Water Watch found that generally only two to four companies control the bulk of market share.

 

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