Rise in the global population, changing customer preferences and emerging economies are making the way for the food retail industry. It is a dynamically progressing industry and contributes to the development of several industries such as food packaging. Food Retail is categorized under distribution channel into four different segments: supermarkets/hypermarkets, independent and specialist retailers, convenience stores and others. Supermarket or hypermarket segment accounts for a comparatively larger market share.
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Increasing customer preference towards private label brands, rising consumer spending on food items and increasing supermarket shopping culture are some of the major drivers of the market. Market share of independent and specialist retailers is expected to decline on account of rapid growth of other segments such as supermarkets/hypermarkets. The industry is facing challenges in the form of supply chain ineffectiveness and threat from unorganized players. However, the burgeoning middle-class population and increasing online retail shopping are offsetting these challenges and presenting growth opportunities for the industry.
Private label brands are priced lower than national brands as the supply chain and branding costs are low for the manufacturer and the stores providing private label brands. Owing to the economically crisis situation in Europe and to some extent in the U.S., consumers are increasingly switching to private label brands from national brands. Additionally, private label brands are sold in large quantities at food retail stores. Hence, the rising food consumption from these brands is escalating the growth of the food retail market.
The impact of the expanding private label brands market is expected to be high in the short and medium terms, and medium in the long term. Private label brands are expected to lose their share towards the end of the decade due to the expected recovery in European economy. This will eventually lead to retention of customers by the brands of organized food processing companies. The impact of increasing customer spending on food items is expected to be medium in the short term, and high in the medium and long terms. Certain issues such as unemployment and inflation are some of the factors that have kept the impact of increasing customer spending medium in the short run.
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The intensity of rivalry is medium in the global food retail market with the presence of about 90 global companies and some regional companies. Healthy growth rate, high brand identity, and low product differentiation have increased the intensity of rivalry in the food retail industry. Higher concentration of organized retail in North America and Europe shows the stiff competition in the food retail industry in these regions. Exit barriers in the global food retail market are low owing to low investments in non-transferable fixed assets.