The Battle Raging for Your Grocery Money

The announcement of Amazon’s purchase of Whole Foods was a big deal, but it also has raised the profile of a war that’s been raging in the grocery business for years now. Americans seem to have become more price conscious and that has bolstered low-price stores like Aldi. They’ve also become more focused on online grocery shopping, which has helped many smaller companies gain a share of the market. But big grocers are having a tough time holding on to customers in the face of the new competition from low cost and online companies.

Consumers are buying more of their groceries outside of traditional supermarkets. Online merchants, discounters and meal-kit delivery services are all grabbing market share. At the same time, a global commodity glut has pulled down prices for many staple foods over the past 18 months, putting pressure on many retailers to lower prices.

Sales have continued to slacken. In the first quarter, food and beverage sales at brick-and-mortar stores in the U.S. were off nearly $3 billion, or 2.5%, from a year earlier, market research firm Nielsen says. Grocery-store visits rose just 0.5% over the past year.

Some grocery sellers are making gains. Trips to deep-discount chains are up 2.9% over the past year, Nielsen says, and online grocery orders have risen 6.8%.

“The economic model of the traditional grocery store is incredibly challenged,” said Wolfe Research analyst Scott Mushkin.