We study the state of food retail system serving an ethnic minority community. This group, Israeli Arabs, enjoys a relatively high standard of living but continues to make many food purchases in a variety of small, specialized retail food formats. In contrast, the surrounding Jewish population is mostly shopping in supermarkets.Data from a survey of consumer shopping behavior across formats of different product lines are used to identify the barriers to the advancement of the supermarket format in this minority sector. Our study shows that socioeconomic factors, found in earlier supermarket diffusion studies to be the main barrier, have no impact in this case. We identify the tendency to purchase perishable food items in traditional outlets and the geographical diffusion barrier (distance of supermarket formats) to be the main limitation on supermarkets’ market share growth. Further, we find that both these factors are influenced by underlying cultural and ethnic factors characterizing the study population.