From Our Print Edition

U.S. grocers are making unusually loud noise about lowering prices this year, but retail analysts and researchers tracking the industry’s transaction data say the real story is more complicated than the press releases suggest — and it starts with a consumer who has changed the way they shop.

Kroger, the nation’s largest traditional supermarket chain operator, announced its broadest round of price cuts in years in late May, a move CEO Greg Foran has framed as central to closing the gap with Walmart, Costco and Aldi. Walmart, in turn, has expanded the number of items on price rollback. Stop & Shop cut prices on New York-area staples, including bagels and smoked salmon, by 23%. Kroger followed with a $1.65 billion agreement to acquire regional chain Giant Eagle, a deal announced July 1 that could potentially add up to nearly 200 locations across Ohio, Pennsylvania, West Virginia, Maryland and Indiana.

All these companies convey a consistent message: they are targeting shoppers who, after years of inflation, have become highly cost-conscious and are comparing prices, trading down, or buying less to safeguard their household budgets.

‘Consumers are weary of high prices, and they are shopping around to reduce their grocery bills. Any retailer that wants to gain or defend market share needs to engage in this battle.’

“The main battleground for grocery is focused on value,” says Neil Saunders, managing director at GlobalData Retail, based in London. “After years of hefty inflation, consumers are weary of high prices, and they are shopping around to reduce their grocery bills. Any retailer that wants to gain or defend market share needs to engage in this battle at least partly.”

But Saunders, who has long been skeptical that price investment alone can fix a conventional supermarket’s competitive position, says Kroger’s cuts address only part of the problem.

“Kroger’s woes aren’t just related to price,” he says. “They are also related to a poor shopping experience, stores which are underinvested in, and a mediocre proposition. So, reducing prices helps, but it does not compensate for a weak value proposition elsewhere. Kroger can only win if it strengthens things across the board.”

PRICE LIMITATIONS

John Clear, a partner at New York-based AlixPartners who spent years as senior director of purchasing at Lidl’s U.S. division, argues that the price war unfolding in headlines obscures a deeper structural reality: some retailers are built to win on price and others simply are not.

“I would characterize Kroger and Albertsons and Ahold as being in a more unfortunate position than others in some ways because they have the size and scale of a national retailer,” Clear says. “But the difference — and the reason why we would say that it’s Costco and Walmart and Aldi and Lidl that can live and die more on price — is because of their operating model rather than scale.”

‘People cutting back did not necessarily redirect those dollars into clubs, discount, specialty, or online. The most likely destination is Walmart plus smaller value or dollar channels.’

Clear believes Kroger’s push is less an attempt to seize the low-price mantle from Walmart or Aldi than a course correction after years of drifting too expensive. “I think Kroger got out of line on price in the other direction, which is that they had probably overpriced themselves,” he says. “There’s a difference between owning price and making it your signature part of your business offering, which is what Costco and Walmart and Aldi do, to then being totally fine on price — like table stakes — not being kind of, quote-unquote, offensive to your customers on price, which I think Kroger, Albertsons and Ahold got a little bit out of whack on. Their index is stretched towards their national peers. So, this for me from Kroger is more like a strategic reset.”

Clear says the retailers built to win outright on price share one trait — simplification. “The whole point of what they do is they simplify the steps along every step of the journey,” he says. “When Aldi goes to source tomato ketchup, they’re sourcing one type of tomato ketchup for 10,000 stores. Whereas when Kroger goes to do it, they’re sourcing 15 different types of tomato ketchup that split that volume into different places.” He says fixed costs at leaner operators are spread across far more units moving through warehouses and stores, and shelf-ready packaging reduces labor needs — a cost structure conventional grocers are unable to replicate simply by opening smaller-format stores. “That’s kind of missing the point,” Clear says of chains experimenting with shrunken versions of their standard format. “You’re not taking the complication out of the system upstream. You’re just taking it out of the system at the store level.”

Clear’s research at AlixPartners found that fewer than 20% of shoppers across all grocery formats believe their primary store offers low prices — and the number is worse for traditional grocers than for clubs or discounters. “It’s a worse problem for traditionals because they have a delta,” he says. “Our takeaway is that it was more of a general issue for consumers who just think that they’re being priced out of the market generally.” He points to cumulative grocery inflation as the underlying driver: “CPI is like 35 or 40% higher now than it was five or six years ago. So that’s a significant increase in the price of groceries.”

TRANSACTION DATA SAYS…

Michael Gunther

Michael Gunther, senior vice president of research and market intelligence at New York-based Consumer Edge, which tracks actual credit and debit card spending, says the splashy price-cut announcements have so far produced only modest measurable change. “Year-over-year growth in average transaction size and average transactions per unique account did take a mild step down in June compared to May, but those shifts are consistent with ranges we saw earlier in the year,” Gunther says.

Consumer Edge’s data offers a clearer picture of where the trade-down dollar goes when a shopper pulls back from a traditional supermarket. “Compared with otherwise similar households that kept shopping supermarkets normally, the people cutting back did not necessarily redirect those dollars into clubs, discount, specialty, or online,” Gunther says. “The most likely destination is Walmart plus smaller value or dollar channels.” He cautioned that Walmart’s grocery sales cannot be cleanly isolated from its general merchandise and fuel businesses in card data, calling that gap “exactly where the trade-down dollar most plausibly goes.”

The firm’s data also shows shoppers spreading their purchases across more banners than they used to, though the shift has been gradual rather than dramatic. The average number of distinct grocery banners a household shops in a month rose from 1.38 in the year ended May 2023 to 1.43 today, and the share of households hitting three or more banners in a month climbed from 6% to 7%. “Most households still concentrate at one or two banners,” Gunther says.

Gunther’s data also complicates the narrative that the Kroger-Giant Eagle deal is purely a price play. “This acquisition comes at a challenging time for traditional grocers,” he says. “Our report earlier this year showed traditional supermarkets shedding 40 basis points of share while both specialty and discount grocers gained ground. Specialty banners like Trader Joe’s are outperforming, and discounters like Aldi are pulling in trade-down traffic, so traditional supermarkets are getting squeezed from both ends.” He noted Giant Eagle’s customer base skews older than the category average — a demographic that Gunther says, “has held up better against the macro and inflationary pressure weighing on younger shoppers.”

Saunders was similarly measured on the deal’s pricing implications. “The acquisition of Giant Eagle gives Kroger a little more economies of scale, but it doesn’t help enormously,” he says. “It means very little in terms of pricing and the wider business. Of course, for Giant Eagle customers it’s a good thing, because as part of Kroger, Giant Eagle will have much more buying power and can find operational savings that can be invested in lowering prices.”

SUPERMARKETS FEEL THE HEAT

The shift away from traditional supermarkets is showing up unevenly across demographic groups, according to Consumer Edge. “Over the past year share has shifted away from traditional supermarkets, mostly in favor of specialty grocers,” Gunther says. “Those shifts are most pronounced among 18-to-24-year-olds and also high-income consumers with household income of $150,000 or more.”

That finding echoes what GlobalData has tracked among Aldi’s shopper base, where visit frequency among households earning $125,000 or more grew sharply in 2025 — the largest gain of any channel among well-off shoppers. Saunders says there is little reason to expect that migration to reverse. “From past periods of economic distress, we do not see a revision to previous patterns of behavior once things normalize,” he says. “This is partly because habits become entrenched, and because, in our data, we see a lot of satisfaction with the shopping experiences people have migrated to. This also applies to the higher-income consumers who defected to Walmart.”

John Clear

‘Premium frozen can be a real differentiator, even in a tough market.’

Clear says younger shoppers are abandoning the concept of a single “anchor” grocery store altogether. “That doesn’t really exist anymore for the younger generations, which has automatically then spread the money around,” he says. He added that younger consumers are less loyal to national brands and more open to shopping at clubs, discounters and mass retailers, all of which carry deeper private label assortments. “All of that means that they actually are now seeking what they want as the best value and best price, agnostic of brand,” Clear says.

Saunders was more direct about what traditional grocers need to fix to win those shoppers back. “The blunt truth is that traditional supermarkets in the U.S. are not delivering the experience consumers want,” he says. “Their formats are also at odds with the way many younger consumers shop for food, which is more piecemeal and fragmented. Some of the losses are recoverable if traditional players invest more in stores and experience.”

THE COLD CASE HOLDS UP

While center-store categories have shown signs of softness, frozen and refrigerated departments have been comparatively resilient. Gunther, drawing on Consumer Edge’s point-of-sale data, says general food volumes were running 1% to 3% below year-ago levels in 2026, weighed down by weakness in bakery and cookies and crackers, while frozen volumes were roughly flat, with strength in frozen meat, poultry and seafood offsetting softness in frozen meals. Refrigerated volumes were the strongest of the three, running 1% to 2% above last year, which Gunther attributed largely to falling egg prices. “We haven’t seen significant evidence of trade-down at the department level in 2026, except for refrigerated, which can largely be attributed to egg dynamics,” he says.

Neil Saunders

Saunders says frozen offers retailers genuine room to differentiate on both price and quality — if they invest in it. “Consumers like frozen as it’s convenient and it reduces food waste, which is a very important way of saving money,” he says. “A retailer like Target has invested a lot in frozen private label and has some very nice options. The same is true of Costco. What consumers don’t want is ultra-processed frozen goods that don’t look or taste great. They want something more elevated. Premium frozen can be a real differentiator, even in a tough market.”

‘The blunt truth is that traditional supermarkets in the U.S. are not delivering the experience consumers want.’

Clear made a similar case, pointing to Aldi and Trader Joe’s as chains that have balanced frozen’s low-price heritage against rising expectations for quality and protein content. “The challenge with frozen is people expect a lot from it,” he says. “Customers expect it to be pretty cheap because that’s how everyone’s been brought up — frozen meals are cheap. And now people are beginning to expect more of this kind of high quality and protein to come from it as well, which naturally makes it more expensive.” He says sections of the frozen aisle without dominant national brands, such as frozen entrees, remain open for retailers willing to invest in differentiated private label. “It’s not necessarily a low-margin category,” Clear says. “That makes it a lot more ripe for people to move into.”

Clear also pointed to prepared foods — often merchandised alongside or near refrigerated and frozen sections — as an underappreciated growth lever, particularly among shoppers younger than 45. “They are buying prepared foods at a much higher rate in grocery stores than older generations,” he says, framing the trend as a substitute for restaurant and takeout spending rather than a cannibalization of other grocery purchases. “It’s one of the last remaining moats that traditionals still have.”

HOW LOW WILL PRICES GO

Asked what single development would determine whether 2026’s price competition produces a lasting realignment of market share or just a temporary squeeze on margins, Saunders pointed not to Kroger, Albertsons or any conventional chain, but to the two retailers he considers to be setting the industry’s pace. “It will be a move by either Walmart or Amazon which is designed to expand their market share,” he says. “Both retailers are setting the tone and pace in grocery, and the market will respond to their moves.”

For now, the public statements from Kroger, Walmart and their peers suggest an industry racing to reassure an inflation-weary shopper that relief is coming. Whether that shopper — increasingly stratified by age, income and format loyalty — believes it may be the more important question.