3 Issues Challenging the Grocery Channel

CHICAGO -- The disruption shaking up the retailing industry is beginning to take an obvious toll on the grocery business, according to a report in The Wall Street Journal. The new competition from discounters such as Aldi and Amazon's Whole Foods, among others, "will leave even the best-positioned supermarkets struggling for growth," the newspaper reported.

Here are three insights into the state of the grocery business, according to the report ...

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"The big losers will be regional chains," the report says, noting that chains such as Tops Markets and Southeastern Grocers, the owner of Winn-Dixie and Bi-Lo, have filed for bankruptcy protection. These regional chains account for the bulk of sales in the U.S.’s supermarket industry.

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But don't expect the biggest names in groceries to buckle under. "Walmart and Kroger have the resources to fight back," the report says. Kroger Chief Financial Officer Michael Schlotman told the newspaper that the chain can compete on more than price, citing its prepared foods and in-store restaurants, online ordering and in-store pickup system, and customer loyalty programs. “We started competing against Walmart in 1992,” he said. “There’s always been people out there competing mainly on price, offsetting selection and experience.”

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One key opportunity for U.S. chains is private-label brands, the report said. Private-label products account for about 15% of packaged food and household products sold in the U.S., compared with more than 40% in the U.K, according to Nielsen. With significantly higher margins, these private-label goods could mean significant growth for retailers. Growth in private-label products, however, could mean trouble for name brands, the report says.

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