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Wal-Mart Stores, Inc. (WMT), Walgreen Company (WAG): Supermarkets Preparing to Eat Restaurants’ Lunch

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Supermarkets in the U.S. generated around $634 billion in revenues last year, according to the Census Bureau, with Wal-Mart Stores, Inc. (NYSE:WMT) owning the lion’s share. Groceries counted for 55% of the retail king’s $469 billion in total revenues in 2012, sales of which were up about 5% from the year-ago period.

Wal-Mart Stores, Inc. (NYSE:WMT)

That’s about the same growth rate in sales the top 500 restaurant chains enjoyed last year, but far lower than the top 10 fastest-growing chains’ 20% average growth rate, which underscores why supermarkets may be looking to get more into the restaurant business. Consider it a fast-causal dining experience while doing your grocery shopping.

Cleanup in Aisle 3
Recently privately held Kings Food Markets launched a store in Gillette, N.J., that will feature several new concepts including its MarketSquare restaurant-style food-service offerings. You’ll be able to buy fully prepared meals, and there is also a cheese shop and a coffeehouse that serves cappuccino, espresso, and pastries. Price Chopper plans to offer a similar concept later this year when it opens a new grocery store with 16 quick-service areas.

It’s an idea gaining a lot of traction, though not a new one for some supermarkets. Tops Friendly Markets, for instance, has offered a Tim Hortons in some of its stores for years. Of course, Whole Foods Market, Inc. (NASDAQ:WFM) has long mastered the melding of the two concepts. Sales there rose 4% to $12.2 million; prepared foods account for some 19% of the total.

A flu shot and a meal
Moving beyond just the deli counter, supermarkets are seeking to attract some of those dollars that have traditionally flowed to restaurants in an effort to shore up their own bottom line. The thinking is that money spent at restaurants is money not spent at the grocery store. It’s a trend that’s crossing over even at convenience stores, where pharmacy chain Walgreen Company (NYSE:WAG) is looking to blur the distinction between its stores and fast-casual restaurants with hand-rolled sushi and sashimi, baristas, and self-serve frozen yogurt stations.

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