Brief

Will discount retailers hurt grocery stocks in 2017?

Dive Brief:

  • Wolfe Research released reports last week that project grocery retail stocks will continue to struggle in 2017 as they did last year, Supermarket News reported.
  • The reports predict double-digit percentage stock-price declines at Kroger and Wal-Mart, two of the nation’s largest food retailers.
  • These stocks remain under pressure from discount retailers, rival e-commerce sites and overcapacity, due to store development outpacing population growth.

Dive Insight:

Consumer interest in the small deep discount store formats at retailers like Aldi and Lidl are shaking up the $5.32 trillion retail food market, and are likely the cause of Kroger and Wal-Mart's disappointing stock prices. 

Lidl is trying to expand its reach by opening 150 stores along the eastern U.S. seaboard, and recently spent $2.88 million on four acres of land in Philadelphia to be used for future development. Aldi is also undergoing an accelerated expansion plan that will increase its U.S. stores to almost 2,000 by 2018 — a nearly 50% increase in five years. 

It may be wise for larger chains to embrace high-end amenities that consumers can't find when shopping online or in discount groceries, such as in-store meal stations, cooking demonstrations and dietitians, to entice shoppers  to their brick-and-mortar locations.

When trying to compete against discounters, larger stores should also promote their quality produce, as well as their wider variety of brands, food products and flavors, to drive revenue back to their stores.

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Filed Under: Grocery Corporate
Top image credit: Flickr user ell brown