IBISWorld projects the industry’s average profit margin will remain low, accounting for an expected 2.4% of revenue in 2023. Additionally, since an efficient workforce will be increasingly valuable, wage costs are expected to increase at an annualized rate of 2.1% to $10.0 billion over the five years to 2023.Industry OutlookThe Grocery Wholesaling industry is expected to continue to grow over the five years to 2023. The price of fuel is expected to rise, enabling operators to increase industry product prices and apply fuel surcharges to boost revenue. However, large grocery stores are seeking to cut costs by eliminating wholesalers, as purchasing food and nonfood items from wholesalers adds to the final cost of goods. Despite the increasing prevalence wholesale bypass, favorable economic conditions are expected to lead industry revenue to grow at a projected annualized rate of 2.5% to $234.8 billion over the five years to 2023.Food service demandWholesalers are also expected to experience revived demand from food service customers. IBISWorld expects this trend to gain momentum, as per capita disposable income is expected to rise an annualized 1.9% over the five years to 2023. Therefore, savvy wholesalers will reposition themselves in a bid to capture new restaurant and food service customers, as these outlets will form a growing portion of the industry’s customer base.One of the hot-button issues that food service distributors have focused on recently is sourcing locally produced foods. As consumer consciousness about the food supply chain increases, more food service operators value grocery inputs with fewer “food miles,” or the distance an item of food has traveled from the location of its production to where it is being consumed. Wholesalers that As demand for ethnic foods increases, it will provide an opportunity for grocery wholesalersProvided to: University of Michigan (2130402155) | 16 November 2018
Grocery Wholesaling in the USJune 2018 10Industry PerformanceIncreased competitionOver the five years to 2023, retail chains with their own distribution facilities are projected to increase in number and size. Known as self-distributing retailers, they are able to shift more products per hour in their own warehouses than the average third-party wholesaler. Competition among industry participants is also expected to continue to intensify over the next five years as companies compete for a smaller pool of potential customers. For example, competition has risen in many areas, as new distribution warehouses opened in locations that were already adequately serviced. Increased competition will encourage establishments to supply other niche services for their clients. As a result, more establishments are expected to provide a range of high-tech logistics services. IBISWorld forecasts that the number of companies in the industry will increase at an annualized rate of 1.2% to 5,359 companies over the five years to 2023.