Frozen & Refrigerated BuyerTarget Beefs Up Grocery Supply Chain as Consumer Spending Shifts

Target Beefs Up Grocery Supply Chain as Consumer Spending Shifts

The retailer is bringing its supply chain for fresh and frozen foods in house to better forecast demand and plan inventory

Target is looking to take a bigger bite of the $1.5 trillion U.S. grocery market, in part by bringing its supply chain for fresh and frozen food in house.

The Minneapolis retailer has opened three new food-distribution centers over the past two years and plans to add another next year in Thornton, Colo., growing its grocery logistics network to nine temperature-controlled facilities nationwide.

Target is making the changes to its grocery supply chain as consumers grow more skittish with their discretionary spending and as rivals such as Walmart and Amazon.com expand their food offerings. Target has posted sluggish sales over the past three years as high inflation dampened customers’ spending, and the retailer disappointed some shoppers with its product selection, antitheft measures and pricing.

Rick Gomez, chief commercial officer at Target, said the company’s new warehouses are meant to help place goods close to stores to keep shelves stocked with the items customers want.

“While we’ve made big strides with in-stocks, we know that high in-stocks on average are only part of the equation,” Gomez said during an investor meeting earlier this month. “There’s still an important opportunity for us during peak shopping periods, including Sunday afternoon and weekday evenings, because these are times where being out of stock on a key item can cost sales on related items or even the entire trip.”

Target for years relied on grocery wholesalers to stock its fresh food selection. As the retailer’s grocery sales grew over the past decade, Target opted to build out its own logistics network for perishable goods to better forecast demand and plan inventory.

Target said it now uses its own food-distribution centers to service its stores across the continental U.S., giving the company better end-to-end visibility and helping it make more accurate buying decisions and move faster to keep goods in stock.

“Consumers’ tastes are constantly changing, and once they get something they really like, they’re going to go back and buy it” again, said Rob Handfield, a supply-chain management professor at North Carolina State University. Target appears to be planning its network “to be on top of those trends and be more agile to replenish,” he said.

Sales in its food and beverage division—which include perishable grocery items as well as snacks, candy and revenue from Starbucks coffee shops inside some stores—grew to $6.5 billion for the quarter ended Feb. 1, which the company said was up by low single digits from a year earlier. Food and beverage sales accounted for about one-fifth of the retailer’s total quarterly revenue.

Target also is working to capitalize on a surge in demand for online grocery shopping.

E-commerce grocery sales have grown over the past five years after shoppers grew accustomed to placing orders for pickup and delivery during the pandemic. Online grocery sales in the U.S. grew 31% in February from a year earlier to $10.3 billion, according to consulting firm Brick Meets Click.

Target was the ninth-largest grocer overall in the U.S. by market share last year with 2.5%. It was the fifth-largest in terms of online sales, behind grocery giants such as Walmart, Amazon and Kroger, according to data firm Numerator.

Food and beverage sales accounted for about one-fifth of Target’s revenue in the latest quarter. Photo: Zeng Hui/Zuma Press

Walmart, Amazon and Kroger have been investing in their grocery supply chains as well.

Walmart, the country’s largest grocer, has about 4,700 stores across the U.S., with locations within 10 miles of 90% of the American population. It has rapidly grown its online delivery and pickup businesses, in part by filling many orders through its stores rather than at warehouses to speed up fulfillment.

Amazon is testing new grocery formats that pull together its various fulfillment networks for its Whole Foods Market premium grocery business and its mass-market Amazon Fresh stores with the goal of creating one-stop shopping for products ranging from organic produce to Tide detergent.

Kroger has been working with technology provider Ocado Group to build automated fulfillment centers around the U.S. to speed up online grocery delivery.

Write to Liz Young at [email protected]

Appeared in the March 13, 2025, print edition as ‘Target Beefs Up Grocery Area, Brings Supply Chain in House’.