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Q: published supermarket profit margins ( Answered,   0 Comments )
Subject: published supermarket profit margins
Category: Business and Money > Accounting
Asked by: ferret007-ga
List Price: $50.00
Posted: 17 May 2003 01:37 PDT
Expires: 16 Jun 2003 01:37 PDT
Question ID: 204979
Are there any published results for the gross profit margins that
supermarkets make on the goods they sell? If so what is the high gross
profit margin, the low gross profit margin and the profile gross
profit margin for a supermarket business that turns over $15 million
to $20 million per year.
Subject: Re: published supermarket profit margins
Answered By: omnivorous-ga on 17 May 2003 05:25 PDT
Ferret007 - -

An interesting question for those of us who are out shopping each day.

Let’s take the easy part first: what’s the typical or profile gross
margin for supermarkets?  There’s a wonderful site called Bizstats
which profiles sectors of business from published reports and
government data:
Home page

According to their retail profiles for "grocery and beverage stores"
any store in the $15-$20 million range, the gross margins are 25.6%
(net margins are 6%).

If you check the grocery store sales for leading chains, you’ll find
from Supermarket News that this is the range for large chains such as
Kroger’s, Albertson’s or Safeway:
Supermarket News
"SN’s Top 75" (2002)

If you look at earnings for Albertson’s or Kroger EBITDA (earnings
before interest, taxes, depreciation and amortization) you’ll find
that these net margins are good.  Kroger reports net margins of 7.6%
and Albertson’s shows 5.1%.  However, one must be aware that both
companies operate other retail stores, including pharmacies, gas
stations, convenience stores and even jewelry stores:
"Financial Information" (2001),2.pdf

"Annual Report" (2002)

You’ll also find the conclusion on net margins supported by this
McKinsey report on retail stores, which notes a supermarket target of
6% for one chain:
McKinsey & Co.
"Competing in a Value Driven World" (February, 2003)


But what are the highest and lowest gross margin items within the
stores?  Using this Google search strategy produces some interesting
supermarkets + "highest gross margin"
Interestingly, the Google search yields different results using
"highest gross margins", so you may wish to look at both.

supermarkets + "lowest gross margin"
supermarkets + "lowest gross margins"

According to a Canadian government study, the highest gross margin
items are in-store bakeries, with 51.2%.  Second are prepared foods,
yielding a 50.3% gross margin:
Canada Agri-Food Trade Service
"Overview of the Retail Grocery Market in the U.S. Pacific Southwest"
(December, 1997)

A Dairy Management Inc. study on marketing of cheese, shows that
butter and margarine are the highest gross margin items in the dairy
case, with gross margins of 39.1%, while milk is the lowest at 29.4%:
Willard Bishop Consulting (for Dairy Management Inc.)
"Ahh, the power of cheese" (2001)

The milk margins are interesting because consumers have long known
that it was priced as a 'loss leader' to draw in customers.  This
report notes that milk has traditionally been among the lowest gross
margin items on a grocer’s shelf, with gross margins in the 25% range:
University of Connecticut (Prof. Ronald W. Cotterill’s page)
"Dairy Policy for New England" (2003)

However, the lowest gross margins, at least for small stores in
Scotland, are cigarettes (at 7%) and wine & spirits (14%):
Community Enterprise Limited
"Community Shops" (1997)


There are two good industry sources for information about the
supermarket industry - -
Food Marketing Institute
Home Page

and Fairchild Publications’ Supermarket News (referenced above):
Supermarket News
Home Page

Neither site is particularly productive in gaining any insight to
supermarkets’ gross margins but you may find some of the FMI
publications useful.  Available for purchase is one report that may
have more detailed financial data:
"Operating Results of Independent Supermarkets 2001-2002"

If any part of this answer is unclear, please let us know via a
"clarification request" before rating the answer.

Best regards,


Request for Answer Clarification by ferret007-ga on 17 May 2003 06:40 PDT
I assumed that as my request originated in Australia that I would have
received information about supermarkets in Australia. Can the answer
be expanded to incorp. the Aust market?

Clarification of Answer by omnivorous-ga on 17 May 2003 08:02 PDT
Ferret007 --

Alas, researchers only see what you see -- the screen name -- so
there's nothing to indicate home country.

There were some Australian references in the search that I did. 
Please give me a little time (it's Saturday) and I'll find what
specifics I can.  The good news about internationalization is that
country-to-country numbers are often comparable.  The Scottish study
referenced has gross margins that are smaller (to be expected for
smaller stores) but aligns pretty well with what U.S. stores

Best regards,

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