In the reality competition show “The Challenge,” competitors complete daily challenges in order to save themselves or at times team members from the upcoming elimination matchup. Although retailers aren’t eliminating others outlets when they “win” over shoppers, today’s competitive grocery retailing environment, has proprietors exploring a variety of technologies and SKU sets to keep consumers engaged.

In the June 2024 report for Chicago-based Mintel titled “Grocery Retailing – US,” Diana Smith, associate director and client adviser for retail and eCommerce, notes how consumers are no longer tolerant of high food costs, prompting them to switch to lower-cost retailers and buy private label products instead.

This also is reflected in consumers showing more loyalty to prices than retailers.

“Customer loyalty is harder to come by as consumers will shop where the best prices and deals are: this is by far the top driver of retailer preference,” the report states. “BOGOs and dollar or percentage off discounts are the most attractive. A majority of consumers also point to better prices as the top factor that would entice them to switch brands.”

In terms of opportunities, Smith notes in the report that expanding private label sets can draw in consumers as many have found they can save money and not have to sacrifice the quality or experience with these products.

“Private label will evolve in the future as retailers explore tiered offerings, promote sustainability and ethical practices and place more emphasis on quality and unique product features,” the report states.

This comes as supermarkets have more competition not just from mass merchandisers, but more specialty formats.

“Supermarkets are losing market share to other retailers, especially in food and beverage,” Mintel’s report states. “About 30% of grocery sales are from non-food categories where supermarkets fall behind. To draw in consumers purchasing non-food items elsewhere, supermarkets need to push [beauty and personal care] (BPC) and household goods more competitively, focusing on price advantages.”

Independent opportunities

Although larger supermarket retailers might garner much of the headlines when it comes to this channel, the independent outlets are active is improving consumer experiences.

David Cutler, vice president of media relations and public affairs at the National Grocers Association, Washington, D.C., notes that many independent grocery retailers provide an omnichannel experience to support today’s consumers.

“From apps, to online ordering and in-store experiences, independent grocers are reaching their customers in more ways than ever before and keeping up with the competition by providing superior customer service, product selection, and cleanliness ― all while giving back to their local communities,” he says.

Cutler notes that as digital coupons and mobile apps have increased in popularity, independent retailers also are embracing these models.

“In FY2023, 46% of independent grocery retailers utilized one or more grocery store apps,” he says. “Digital coupons have also made significant inroads, which have helped improve promotional lifts.

The independent supermarket segment also remains tapped into the evolving consumer demands, as well as efforts to ensure those products are in stock.

“FY2023 saw a 3% increase in the number of SKUs across both food and beverage and are slowly rising to pre-pandemic levels,” Cutler says. “In addition, strengthened supply chains and improved communications have allowed retailers to better anticipate and communicate to customers when certain items may be in-or-out-of-stock.”

These engagement efforts all come as independent supermarkets operate at thin margins in today’s retail landscape.

“For independent supermarkets, FY2023 (April 2023-March 2024) saw store sales grow by an average of 1.8%, with net revenues averaging only 1.4%, showing the razor-thin margins independent retailers operate on,” Cutler explains. “Labor and benefits continued to be the highest operational costs for independent retailers, increasing to 15.6%, up from 14.4% in 2022.”

Despite these challenges, independent supermarkets remain committed to offer the products that consumers seek out, while also supporting community needs.

“What sets independent supermarkets apart from national competitors is their ability to nimbly meet the changing tastes and preferences of their customers,” Cutler says. “In 2025, we expect independent retailers to continue to differentiate themselves by providing superior product selection, store cleanliness, and customer service, all while continuing to give back to their local communities.”

Wait and see

The supermarkets channel also had been abuzz as many analysts and consumers had been anticipating the what impact the proposed merger of The Kroger Co., Cincinnati, and Albertsons Companies Inc., Boise, Idaho.

However, that saga became clearer when Albertsons Companies announced it had exercised its right to terminate its merger agreement with Kroger after the U.S. District Court in Oregon and the King County Superior Court for the State of Washington issued injunctions with respect to the proposed merger on Dec. 10, 2024.

In a statement, Albertsons Companies CEO Vivek Sankaran said: “Given the recent federal and state court decisions to block our proposed merger with Kroger, we have made the difficult decision to terminate the merger agreement. We are deeply disappointed in the courts’ decisions.

“We start this next chapter in strong financial condition with a track record of positive business performance,” Sankaran continued. “Over the last two years, we have invested in our core business and in new sources of revenue, while enhancing our capabilities through the rollout of new technologies. All of this has been built on a rich asset base, including our beloved brands in premium locations with substantial real estate value. These assets provide us the opportunity to optimize the acceleration of our Customers for Life strategy and other value-creating initiatives. We are excited about our agenda to create long-term value and are committed to returning cash to our stockholders both in the near term and in the future. We will be providing additional details on our plan no later than our earnings conference call in January 2025.”

Immediately following this termination, Albertsons Companies filed a lawsuit against The Kroger Co. in the Delaware Court of Chancery, bringing claims for willful breach of contract and breach of the covenant of good faith and fair dealing arising from Kroger’s failure to exercise “best efforts” and to take “any and all actions” to secure regulatory approval of the companies’ agreed merger transaction, as was required of Kroger under the terms of the merger agreement between the parties, it said in a release. Pursuant to the Court of Chancery rules, Albertsons’ complaint against Kroger is temporarily under seal, it added.

“We are taking this action to enforce and preserve Albertsons’ rights and to protect the interests of our shareholders, associates and consumers,” said Tom Moriarty, Albertsons’ general counsel and chief policy officer, in a statement. “We believe strongly in the merits of our case and look forward to presenting it to the Court to hold Kroger responsible for the harm it has caused.”

This termination entitles Albertsons to an immediate $600 million termination fee and removes contractual constraints on Albertsons’ ability to pursue other strategic opportunities. Additionally, Albertsons is seeking billions of dollars in damages from Kroger.

In response, Kroger issued the following statements: “Albertsons’ claims are baseless and without merit. Kroger refutes these allegations in the strongest possible terms, especially in light of Albertsons’ repeated intentional material breaches and interference throughout the merger process, which we will prove in court. This is clearly an attempt to deflect responsibility following Kroger’s written notification of Albertsons' multiple breaches of the agreement, and to seek payment of the merger's break fee, to which they are not entitled. Kroger looks forward to responding to these baseless claims in court. We went to extraordinary lengths to uphold the merger agreement throughout the entirety of the regulatory process and the facts will make that abundantly clear.”

With the announcement of the lawsuit, National Grocers Association President and CEO Greg Ferrara issued the following statement:

“Today, 69% of all grocery sales are controlled by four nationwide chains. Growth and consolidation once aimed at efficiency are now primarily motivated by amassing raw buyer power used to strong-arm product suppliers while undermining smaller competitors. This marketplace trend was at the core of the failed merger between Kroger and Albertsons. Grocery consolidation stems from decades of FTC failure to enforce critical antitrust laws like the Robinson-Patman Act, which was designed to protect consumers and foster competition by preventing economic discrimination against independent grocers. Without enforcement, dominant chains abuse their power to coerce preferential pricing and terms of trade from suppliers and agriculture producers. As a result, suppliers are forced to offset these losses by charging higher prices to independent grocers —even when independents buy in similar volumes.

“Main Street America has been decimated over the years, losing locally owned grocery stores, pharmacies and hardware stores,” Ferrara continued. “Antitrust laws provide important guardrails to help keep markets free and open, but when enforcers fail to do their jobs, the system breaks down and our communities suffer. Now, it is time for Congress and the FTC to enforce and strengthen antitrust protections to ensure a fair marketplace for independent grocers and their customers.”

Adjusting shelf space

Whether it’s corporations or independent supermarkets, experts highlight that the store shelves of today’s supermarkets should support consumers interest in healthier eating.

“This can be accomplished by offering more health-centered products and services such as a wider range of fresh, organic, and sustainable products; providing educational resources on nutrition; promoting local foods and other partnerships; and enhancing the store and digital platforms for personalized health-led shopping experiences,” Mintel’s report states.

Mintel’s report also pinpoints the impact that natural and organic offerings can have to entice shoppers.

“The natural and organic food market continues to grow rapidly: three in four consumers purchase such items, with most buying from traditional grocers versus natural food stores,” the report states. “Sub-categories garnering interest include plant-based, functional, and clean label. Offering more natural and organic items could bring in new shoppers.”

With consumers having so many grocery options, supermarkets have an abundance of ways to attract consumers.