Introduction
Kroger is the largest traditional supermarket chain in the United States, with over $130 billion in annual sales and more than 2,700 stores across 35 states. The company has been a dominant force in the grocery industry for decades, known for its wide selection, high-quality fresh departments, popular private label brands, and personalized customer experience powered by its best-in-class loyalty program.
However, the grocery business is notoriously competitive, and Kroger faces threats from all sides as rivals seek to chip away at its market share. As a shopper, understanding the competitive landscape can help you make more informed decisions about where to spend your grocery dollars based on your individual needs and preferences.
In this in-depth article, we‘ll take a detailed look at Kroger‘s major competitors, analyzing their strengths and weaknesses, and highlight key trends shaping the future of the grocery industry.
Kroger‘s Competitive Position
First, let‘s level set on Kroger‘s current competitive position. The company is the #2 overall grocer in the U.S. behind Walmart, with an estimated 10% market share according to Euromonitor. It holds a #1 or #2 market share in the majority of its local markets.
Some key Kroger statistics:
- $132.5 billion in sales in fiscal year 2020
- 2,742 supermarkets across 35 states
- 62% of sales from loyal households
- 11 consecutive years of positive identical sales growth
- 58 million active loyalty program members
- Over 2,200 pickup locations and 2,450 delivery locations
Kroger‘s core strengths include its significant scale, unmatched combination of national footprint and local market concentration, best-in-class private label program with $26 billion in sales, strong loyal customer base, and industry-leading customer data and personalization capabilities. It also benefits from an experienced leadership team, flexible store formats, and significant free cash flow to reinvest in the business.
The Competitive Set
Now let‘s look at Kroger‘s key competitors across several main categories:
Other Large National Supermarket Chains
Kroger‘s most direct competitors are other large supermarket chains with a national presence.
Albertsons: Albertsons is the second-largest traditional supermarket operator behind Kroger with 2,252 stores across 34 states and $62.5 billion in sales in fiscal 2020. It also owns the Safeway, Vons, Jewel-Osco, Shaw‘s, and Acme banners. Albertsons‘ strengths include its strong market position in certain key regions like California, but it has struggled to match Kroger‘s ID sales growth and isn‘t as far along in e-commerce.
Ahold Delhaize: This Dutch company owns the Food Lion, Giant, Hannaford, and Stop & Shop chains in the U.S., with over 2,000 stores along the East Coast and $51 billion in pro forma sales in 2020. Ahold Delhaize has a leading position in certain Northeast and Mid-Atlantic markets, but its geographic footprint has very limited overlap with Kroger.
Publix: Publix is the largest employee-owned company in the U.S. and one of the fastest-growing supermarket chains, with over 1,200 stores concentrated in Florida and other Southeast states. It‘s known for its superior customer service and store experience. Publix is a major share donor to Kroger in markets where they compete like Atlanta and Nashville.
Retail Giants Moving Into Grocery
Several major retailers from outside the traditional grocery space have made aggressive moves into the category, changing the competitive dynamics.
Walmart: The retail behemoth is the largest grocer in the U.S. with over $300 billion in grocery sales in 2020, leveraging the traffic from its 4,700+ Supercenters. Walmart‘s key advantages are its "everyday low prices", huge range of products in one store, and rapidly growing pickup and delivery capabilities. However, Kroger is perceived to have better quality fresh departments, friendlier service, and a superior loyalty offering.
Amazon: The e-commerce giant became a major grocery player overnight with its $13.7 billion acquisition of Whole Foods in 2017. It has since expanded its Amazon Fresh delivery service and is opening a new chain of Amazon Fresh grocery stores with cutting-edge technology. Amazon‘s unmatched logistics network, analytics capabilities, and Prime membership base make it a formidable threat, but its lack of experience in physical grocery retail still shows.
Costco: The leading warehouse club operator continues to gain grocery share with its rock-bottom prices on bulk items, high-quality private label Kirkland Signature brand, and beloved departments like wine and meat & seafood. But Costco‘s limited selection, requirement for membership, and less-frequent trips make it more of a complement than replacement for Kroger.
Target: The discounter has significantly expanded and improved its grocery business, aided by the launch of its Good & Gather private label line and remodels of its stores‘ grocery departments. But Target lacks the assortment depth of a full-line grocer and remains more focused on "fill-in" trips.
Hard Discounters
The hard discount model pioneered in Europe has found success in the U.S. over the past decade, led by Aldi and Lidl.
Aldi: The German chain has over 2,000 U.S. stores and is growing quickly, with plans to become the third largest grocer behind Walmart and Kroger by store count by the end of 2022. Its streamlined, mainly private label assortment and highly efficient operations enable it to undercut Kroger on price by 20%+. It has found particular success with budget-conscious Millennials.
Lidl: Aldi‘s arch-rival has had a slower start since entering the U.S. in 2017, with around 140 stores. But it is starting to ramp up expansion and its prices are even lower than Aldi on many items. Lidl also offers a "treasure hunt" experience with unexpected non-grocery items that keeps shoppers coming back.
While Kroger can‘t match these deep discounters on absolute price, it still attracts more affluent and less price-sensitive shoppers through its broader assortment, better fresh quality, and more enjoyable store experience.
Specialty Players
A wide range of chains specializing in natural, organic, and premium products have found a niche serving specific shopper segments.
Whole Foods: The largest U.S. natural & organic grocer was long Kroger‘s most troublesome specialty competitor, as Kroger ramped up its own organic offerings. But the Amazon acquisition has seemingly led to some brand erosion. Still, with 500+ stores and a devoted base of affluent shoppers, Whole Foods remains a strong premium player focusing heavily on fresh quality, healthy products, and in-store experience.
Sprouts: This fast-growing chain based in Arizona has around 340 smaller-format natural food stores. It aims to make healthy eating more affordable with its Sprouts brand and emphasis on fresh produce.
Trader Joe‘s: The quirky, secretive California-based chain has a cult following thanks to its unique store experience, constantly rotating selection of distinctive products, and low prices on wine and staples. It‘s less of a head-to-head competitor for Kroger than a complementary shop for many consumers.
E-Commerce and Delivery-Only Services
E-commerce is the new frontier in grocery retail as the industry races to meet the growing demand for omnichannel shopping.
Instacart: The leading third-party grocery delivery platform partners with many of Kroger‘s rivals like Albertsons, Publix, Aldi, and Costco to offer on-demand delivery in as fast as an hour. Its marketplace model poses a long-term threat to Kroger‘s digital sales if shoppers go straight to Instacart.
FreshDirect: The New York-based online grocer has established itself as a top player in the Northeast with its high-quality fresh and prepared foods and white-glove delivery service. But it has struggled to expand beyond its core market.
GoPuff: This fast-growing delivery startup operates a network of over 250 micro-fulfillment centers to enable 30-minute delivery of convenience items, snacks, alcohol, and essentials. It appeals to younger, more impulsive shoppers but is still a minor threat to Kroger today.
Meal Kit Providers: Services like Blue Apron, HelloFresh and Kroger‘s own Home Chef compete with grocers for the dinner occasion but are more complementary than directly competitive at this stage.
Kroger has responded aggressively to the e-commerce threat by rapidly expanding its own pickup and delivery services, now covering over 90% of its customers. It has also launched an online marketplace for third-party sellers and is testing ghost kitchens and innovative fulfillment technologies.
Regional Competitors
While Kroger is a national chain, grocery still has strong local dynamics, and the company faces a wide range of regional competitors that are powerhouses in their respective markets.
H-E-B: The Texas chain is consistently rated as one of the top grocers in the U.S. for its high-quality fresh foods, prepared meals, and beloved private label products. It maintains a dominant share in its home state and has recently expanded into Mexico.
Meijer: The Michigan-based supercenter chain has over 250 stores in six Midwest states, with half of its sales from grocery. It‘s known for its friendly service and community involvement. Meijer‘s overlap with Kroger has increased as Kroger has expanded in the Midwest.
Wegmans: The family-owned Rochester, NY-based chain is regularly voted America‘s favorite grocery store for its excellent customer service, huge prepared foods selection, and high-quality store brands. But with just over 100 stores in the Northeast and Mid-Atlantic, it has limited direct impact on Kroger.
WinCo: This employee-owned chain based in Boise, Idaho has over 120 stores in 10 Western states, with a focus on low prices and private label products. It‘s a fierce competitor to Kroger in markets like Phoenix, Portland, and Salt Lake City.
Relative Strengths and Weaknesses
So how does Kroger stack up against these competitors? Here‘s my take on Kroger‘s relative strengths and weaknesses:
Strengths:
- National scale and leading market share in many regions
- Highest customer loyalty, driven by best-in-class rewards program and personalization
- Superior quality perception, especially in fresh departments
- Broadest assortment that appeals to widest range of shoppers
- Most advanced digital capabilities and industry-leading customer data
- Strong private label program that customers love
- Highly experienced leadership team
- Flexible store formats to meet local market needs
- Additional traffic driver with fuel rewards program
Weaknesses:
- Higher prices than Walmart, Aldi, Lidl, and warehouse clubs, especially on national brands
- Less convenient one-stop shopping experience vs. Walmart and Target
- More limited presence in key growth markets like California and the Southwest
- Lower margins and returns than some competitors due to unionized workforce
- Playing catch-up on e-commerce and delivery capabilities vs. Amazon
- Viewed as less of an exciting, innovative brand by some younger shoppers
Overall, Kroger remains well positioned as an "all things to all people" grocer with a wide assortment, strong fresh quality, personalized experience, and expanding omnichannel options. But it will have to continue sharpening its prices, elevating its fresh and private label offerings, and innovating with new technologies and partnerships to stave off competitors and stay relevant with shoppers.
Future Outlook
Looking ahead, the key trends shaping the competitive landscape in grocery include:
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Continued price pressure: Walmart, Amazon, Aldi, Lidl will keep pushing prices down, forcing Kroger to find new ways to cut costs without sacrificing quality or experience.
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Rise of e-commerce: Online grocery will keep gaining share, requiring major investments in digital capabilities, automated fulfillment, and delivery partnerships.
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Health and wellness focus: Consumers are seeking out healthier options, putting more emphasis on fresh, organic, plant-based, and functional products.
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Smaller, more flexible formats: Shoppers are gravitating to smaller stores in urban areas for quick fill-in trips, spurring growth in dollar stores, convenience stores, and compact urban formats.
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Increased personalization: Grocers will keep leveraging customer data to personalize offers, recommendations, and experiences, both in-store and online.
To stay ahead of these trends, Kroger will need to lean into its core strengths while also making bold moves to innovate and disrupt. Some key priorities include:
- Continuing to invest in digital capabilities, automation, and fulfillment to become the omnichannel leader
- Leveraging 84.51° data science firm to personalize every customer touchpoint
- Expanding presence in high-growth markets through new stores and ecommerce
- Elevating fresh departments with more organic, specialty, and prepared options
- Doubling down on successful private label brands like Simple Truth and Private Selection
- Testing new store formats and service models to reach different shopper missions
- Considering strategic acquisitions of concepts in growth markets or categories
- Forming creative partnerships with companies like Walgreens, Ocado, and Ghost Kitchen Brands to extend into new spaces
- Strengthening loyalty proposition with new rewards, services, and experiences for loyal shoppers
In the end, there will likely be room for several winners in the massive $800 billion U.S. grocery industry. But there is little doubt the market is getting tougher, and it will take constant innovation, agility, and customer focus to continue to thrive in the years ahead. Kroger‘s track record, strategic bets, and enduring customer relationships point to it remaining a leader, but it can‘t afford to get complacent as the competition keeps heating up.
