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Sprouts Farmers Market’s Positioning in the US Supermarket Industry

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Dec. 24 2015, Updated 8:07 a.m. ET

A US supermarket industry overview

The $638 billion US supermarket industry is highly competitive but also fragmented. The industry consists of a wide array of food retailers, including natural and organic players, specialty retailers, conventional supermarkets, and mass merchandisers, who compete among themselves to woo customers with similar products.

According to Progressive Grocer’s 82nd Annual Report on Grocery Industry, the conventional supermarkets have a 65% share of total sales, grocery and mass merchandisers make up 25%, and natural and gourmet vendors enjoy 6% of the industry total sales. There was an approximate 3% increase in the total sales of supermarkets in 2014 compared to the previous year.

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Supermarkets are the largest grocery retailing channel in the US. It accounted for 95% of the total grocery sales in the US (according to the US Census Bureau) in 2013. There is fierce competition and strong market concentration at the top. The top four players accounted for 36% of the US supermarket industry market share in 2013. The top two positions were acquired by Wal-Mart Stores (KR) and Kroger Company (KR).

Continued consolidation, rising focus on organic and natural products and growth in the online sales are the major trends that can be seen in today’s supermarket industry.

Sprouts Farmers Market in the supermarket industry

With a sale of approximately 3 billion, Sprouts Farmers Market (SFM) accounted for around 0.5% of the supermarket’s market share in 2014. Sprouts’ main competition comes from traditional grocery stores, which account for more than 50% of the company’s consumers.

Sprouts’ competition and ETF exposures

Sprouts’ (SFM) competitors include conventional supermarkets such as Kroger (KR), organic food retailer such a Whole Foods Market (WFM) and mass merchandisers such as Wal-Mart (WMT).

Sprouts Farmers Market (SFM) along with Kroger (KR), Wal-Mart (WMT) and Whole Foods Market (WFM) are included in the holdings of the SPDR S&P Retail ETF (XRT). Together these companies account for approximately 4.2% of the fund’s total portfolio.

Continue to the next part of this series for a look at Sprouts Farmers Market through the lens of Porter’s Five Forces.

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