Grocery wars heat up as newcomers claim larger market share
Lidl and Publix continue to open stores throughout the Charlotte region, luring customers from established grocers. Target is focusing more promotional energy on grocery sales, and Amazon lowered prices at Whole Foods last year. These are some of the trends that have helped make Charlotte’s grocery-store industry more competitive than ever.
The region’s biggest grocers are losing market share to newcomers, innovators and expanding retailers, according to a new report on 2018 grocery revenue.
Matthews-based Harris Teeter remains the No. 1 grocery chain in the region by market share, according to an analysis from Chain Store Guide, a sales-tracking firm. Walmart and Food Lion remain No. 2 and No. 3 in the region respectively, as they were a year prior.
Combined, those three command more than half the total grocery sales in the region. But they are losing ground, according to Chain Store Guide, a research company that works directly with grocery stores to get its data.
Harris Teeter holds 18.7 percent of the local sales, down from 19.8 percent the prior year. Walmart has a 17.8 percent share, down from 18.6 percent. And Food Lion has a 17.3 percent market share, down from 18.1 percent. In fighting for customer dollars, supermarkets add fancy
perks like wine bars to stores. They lower prices and build stores near their rivals. That competition leads to cheaper and more abundant options, ultimately benefiting customers, experts say.
“The best thing for consumers is a price war,” California-based supermarket analyst Phil Lempert said.
In a competitive environment like Charlotte, food retailers are working to differentiate themselves to woo customers, Lempert said.
For instance, Lidl stocks its shelves with mostly products made by its private labels, meaning they’re made just for Lidl and are much cheaper than national brands. Fresh Market has said it’s going “back to its roots” as a specialty European market.
“It’s about figuring out the consumer you want to reach, and aligning your values with that consumer,” Lempert said.
“It’s very different from our parents generation, when people would go to the same grocery store every Sunday and see the same people.”
GROWTH IN CHARLOTTE
In Charlotte, the retailer that gained the most grocery sales last year was Target, the area’s No. 6 grocer. It didn’t add any stores, but it grew its market share from from 2.5 to 4.5 percent.
That’s because Target has been focusing a lot of energy on promoting food sales, Lempert said. The chain has been pushing its private label, Archer Farms, for instance, he noted. A logistical challenge for Target in many of its stores has long been that its food departments are in the back, so the chain has started putting certain foods like wine up front “to set the stage” for customers, Lempert said.
“We’ve made tremendous progress in food and beverage over the last 18 months and we’re confident in our ability to accelerate this progress moving forward,” Target spokeswoman Jacque DeBuse said.
Under Stephanie Lundquist, Target’s new president of food and beverage, the company expects to continue growing market share in the grocery category, Target CEO Brian Cornell said in an earnings call this month.
“They’re positioning themselves well to be a major player in food,” Lempert said of Target.
The other big retailer that gained market share was Publix, the area’s No. 4 grocer that’s added five stores over the last year. The Florida-based chain, which opened its first North Carolina store in Ballantyne in 2014, grew its market share to 8.9 percent from 7.1 percent over the year.
Publix competes for the same customers as Harris Teeter — that’s why it’s not uncommon to see the grocers opening stores in each others’ backyards. The Publix that opened in Cotswold last summer is across the street from a Harris Teeter. In December, Publix said it plans to open a 68,000-squarefoot store in SouthPark, less than a quarter mile away from the Harris Teeter on Morrison Boulevard.
Publix spokeswoman Kim Reynolds says the company’s employees are “the key differentiating factor” in creating an enjoyable shopping experience for consumers. Publix is an employeeowned company, she added.
Harris Teeter spokeswoman Danna Robinson similarly credited the grocer’s customer service. She added that “innovative solutions” like its ExpressLane Online Shopping, Fuel Points and the Harris Teeter Rewards World Mastercard enhance the shopping experience.
At Whole Foods, Amazon has worked to shake the “whole paycheck” image of the grocery chain it bought in summer 2017. It lowered prices on a number of grocery staples, and last year extended benefits at Whole Foods stores to Amazon Prime members nationwide.
Charlotte’s No. 12 grocer, Whole Foods saw its market share grow last year to 1.8 percent from 1.5 percent. And it opened its highly anticipated uptown store on Stonewall Street last summer.
EUROPEAN GROCERS IN CHARLOTTE
Last year was the first full year German grocer Lidl operated stores in Charlotte. It has six stores throughout the region, with plans for more stores in Charlotte and Mooresville.
Spokesman Will Harwood said Lidl’s low prices and product quality help attract and retain customers. “Our simple approach to grocery is being received positively by customers across the Charlotte area,” he added.
When Lidl enters a new market, other grocery stores tend to respond by dropping prices to stay competitive, according to a study from UNC-Chapel Hill last year.
Lidl’s prices and smallstore format (about 20,000 square feet) are similar to those of Aldi, which has been renovating stores and adding locations in Charlotte, including one recently at the corner of Rama and Idlewild/Monroe roads.
In 2017, Aldi said it planned to invest $3.4 billion to expand its footprint to 2,500 stores nationwide by the end of 2022. That would make it the third largest grocery store chain by count in the U.S., behind Walmart and Kroger, which owns Harris Teeter.
Lidl and Aldi’s smallscale footprint and private label focus are attractive to young shoppers who generally care less about brand names, said Lempert, the supermarket analyst.
“Nobody has set in stone that a supermarket should be 45,000 square feet,” Lempert said. There’s a lot of dead weight on these supermarket shelves.”
A handful of grocers have lost market share because they have closed stores in the region.
Bi-Lo, Charlotte’s No. 7 grocer, saw its market share fall from 4.9 percent to 3.1 percent last year. In February, nearly a year after closing six Charlotte-area stores amid a bankruptcy, the parent company of Bi-Lo, Southeastern Grocers, said it is closing two more stores in the region — in south Charlotte near St. Matthew Catholic School and in Belmont on Wilkinson Boulevard.
Amid plans to improve its financial health last summer, Greensborobased Fresh Market announced plans to close 15 under-performing stores nationwide, including its north Charlotte store on Prosperity Church Road.
Fresh Market, Charlotte’s No. 18 grocer by market share, saw its market share decline from 0.9 percent to 0.7 percent last year.
Looking ahead, Charlotte’s grocery industry could get even more competitive.
Charlotte’s rapid growth (an estimated 60 people move here every day) makes the city attractive for out-of-town retailers looking to expand.
The Phoenix organic grocer Sprouts opened its first local store last spring in Ballantyne. Wegmans, based in upstate New York, recently began hiring for its first North Carolina store, which is expected to open in Raleigh this fall. The grocer has two other stores planned for Chapel Hill and Cary, too.
Spokeswoman Valerie Fox said there are “no plans for Charlotte at this time,” however. That doesn’t mean the chain will never come here, though, as the Observer has reported.
It would make sense for the retailer to want to get the most use out of its distribution network, according to Bill Urda, senior retail analyst at the Boston Consulting Group. “It would be consistent with the way Wegmans has expanded in the past,” Urda told the Observer in October.
With Wegmans looming and Publix and Lidl expanding, some grocers will need to rethink their strategy, which could lead to more store innovation and “absolutely” more store closures, Lempert said.
“It used to be the case that years ago, you’d appeal to any demographic (as a grocer),” Lempert said. “Now people choose based on where they feel comfortable and what’s convenient.”
The German grocer Lidl opened its first Charlotte-area stores last summer. Pictured here is a shopper at the Lidl store in Indian Land.
Charlotte’s newest grocer, Phoenix-based Sprouts, plans to open April 4.