Product and Service

Companies included in Grocery Distributor& Retailer sector in food industry primarily distribute grocery and perishable food to retailers and usually as well their own retail stores. 

Demand for Product and Service

The driver of growth in grocery& food distribution has been the new customers of companies and new opened stores of their existing retail customers in the past several years as indicated by our data. Our data also indicates that comparable stores sales of companies own stores have decreased. And this is consistent with the decrease in demand from their retail customers’ existing stores. The new opened stores’ emphasizing on perishable food may be able to explain the current trend in retail industry.

The Sector

Sector’s current, trend, causes behind trend, and future

Current and Trend

  • Retail demand for grocery and food seems to be growing in the past several years but traffic may be shifting away from traditional convenience stores to other retail channels.
  • Increased demand from stores newly opened and from new retail customers has been the major driver behind the growth in grocery& food distribution of those companies in this sector.
  • Sales in the existing stores/channels have decreased as indicated by decrease in comparable stores sales and in demand from existing stores.
  • Demand from stores for food wholesale increased in the past several years.


Causes behind the trend

  • Many factors, from demographic changes, economy development, to consumers’ food preference, all contribute what is happening in this sector. However, the shifting of consumers’ preference to more fresh food from traditional grocery food and mass merchandise stores may the key to explain why traffic shifted away from traditional grocery stores.


Industry Future

  • Gradually increasing population and accelerated recovery of economy form a foundation to support growth in grocery & food retail.

    Shrinking demand for traditional grocery food is resulting in more intensive competition, which may cause lower margins for companies who try to win business from new stores and new retail channels and help existing stores keep their sales.

    Increasing demand for fresh food from local stores will bring more opportunities for food distributors but challenge for the current retailers.



General Financial Performance of Companies In the Sector

Existing stores sales, as indicated by comparable stores sales of companies in this sector and by demand from existing stores of those companies’ customers, have had a downward trend in the past several years ( down by 3-4% between 2015 and 2017 and down by 1% in 2018). However, at the same time our data indicates there is a generally increasing demand for distribution of grocery, especially food, from retailers (for example, we data indicated an average 7% growth in wholesale of those companies in this sector in 2017). Those growths seem to be coming mostly from outside those companies’ traditional retail chain and as well from new opened stores of their existing customers.  We think demographic changes should be playing a role supporting growth in grocery and food retail industry, It should be changes in consumers’ preference/shopping habits to explain the difference in performance between wholesale and retail of companies in this sector. Facing changes in retail stores, wholesalers have higher flexibility in adopting those new changes. And we also see increasingly intensive competitions among retailers.

In fact, because the wholesale segment has better performance in sales growth and as sales of wholesale of companies in this sector have gradually weighed more in companies in this sector compared with their retail sales, their operating efficiency and margin have been significantly changed ( down due to lower margin in wholesale).  

Our 12 months trailing data indicates that companies in this sector usually have an average of 11%, SG&A% of 11% and about 1% operating margins. And, while their wholesales increased, they have been losing cash flow from their retail stores.

According our analysis, companies’ enterprise price/adjusted EBI is around 30 with interest/EBI ratio of 40-130%. 

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