How the Nation’s Biggest Grocery Chains Are Responding to Soaring Inflation

Supermarket Prices Rising

The Food Marketing Institute reports Americans’ average weekly grocery bill is 4% higher than this time last year, with 72% of consumers noting specific items or brands have risen in price. Over the last 12 months, the cost of food at home has gone up by 10%, per the latest CPI data.

It seems consumers are starting to respond and alter their spending habits. The Food Marketing Institute’s study found 86% are making behavior changes, with 58% changing products or using substitutions, while 35% are buying more store brands. The same survey determined shoppers are sticking with go-to stores and shopping methods established during the pandemic.

America’s Biggest Grocers

The nation’s largest grocery-chain operator is the Cincinnati-based Kroger (KR), followed by Albertsons (ACI), which went public in 2020. Albertsons reported same-store sales growth of 7.5% in its most recent quarter, exceeding Wall Street expectations. In its comparable quarter, Kroger posted same-store sales growth of 4%.

During its most recent earnings call, Albertsons reported it hired both Credit Suisse (CS) and Goldman Sachs (GS) to evaluate its corporate strategy. Changes to the company’s balance sheet are reportedly being considered, as well as potential mergers and acquisitions. Despite stronger recent results, Albertsons’ valuation lags behind Kroger’s.

Albertson’s Observations

In terms of inflation, Albertsons executives say consumers have yet to opt for lower-cost options as a result of diminished spending power. The chain tends to have higher prices than some of its peers. Albertsons’ own brands made up around 25% of its sales last quarter.

In order to more easily pass price hikes on to consumers, Albertsons says it targets around 3% to 4% inflation each year. That’s well below last month’s 10% year-over-year increase to food-at-home prices. It’s the type of trend that leaves both grocery chains and consumers feeling squeezed.

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James Flippin ABOUT James Flippin James Flippin is the son of a financial advisor who grew up hearing and learning about bond yields, interest rates, the stock market, and the ins and outs of Wall Street. After stints as a licensing and business broker for Marcus and Millichap in New York City, James moved into broadcasting and became a reporter and anchor. He covered crime, politics, finance, and tech at NBC News Radio while working part-time as a producer for SiriusXM. James graduated from the University of Delaware with a bachelor’s degree in political science and economics. He's also an accomplished podcaster with over 10-years of experience.

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