business news in context, analysis with attitude

The Wall Street Journal this morning writes about how supermarkets, having been major winners last year during the pandemic as people ate almost exclusively at home, "look poised to slip this year" as many people return to pre-pandemic eating habits.

Here's how the Journal frames the issue:

"As more Americans get vaccinated, they are showing a desire to eat out again and may spend less money filling up their cupboards and refrigerators. Grocery owners are competing against each other to grow their e-commerce business while delivery companies like Instacart Inc. expand aggressively. And Inc. is entering neighborhoods with its new grocery chain, taking on some stores that had faced little bricks-and-mortar competition … It’s grocery store owners’ turn to face fresh headwinds and new competition.  Some analysts noted that unless grocers expand in high population growth areas, the pie doesn’t get bigger. Instead, it gets split up between more players."

There are a variety of approaches cited in the article as retailers adjust to ever-changing realities:

•  "Kroger Co. has undertaken a major initiative to improve profitability on digital sales, including building automated warehouses in Florida, where it has no stores. The chain is spending hundreds of millions in increased automation and robotics that includes the option of delivering goods directly from warehouses."

•  "At Sprouts Farmers Market Inc., which plans to open about 20 new locations this year, the pandemic is accelerating plans to streamline and upgrade the shopping experience, said chief format officer David McGlinchey. The grocer aims to expand areas for pickup orders and add more self-checkout stations, while pulling back salad bars, seating areas and production space."

•  "Aldi, a discount supermarket chain with more than 2,000 stores across 37 states, said it plans to open approximately 100 stores this year, focusing on Arizona, California, Florida and the Northeast."

KC's View:

There will, of course, be analysts who will not look at 2021 comps in context - it is almost inevitable that supermarkets are going to see some slippage in sales this year as  competitors from the restaurant business get back into business.

The degree of competition, I think, will be an ongoing and important story … I continue to believe that the supermarket industry may be about the embark on some of the most intensely competitive periods in its history.  And essential-ness will be key to survival.