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Food Titans – Prepare for Battle

Touch the Soil News #725

We have all been taught that competition is good thing. Today it is not just about a better product or a better way to do things – it is often all and only about the money – regardless of the economic consequences to the nation and its working people.

The ongoing consolidations in the grocery business, for example, have created huge Titans that are preparing for an economic battle. It is no longer about the big swallowing the small. It is about the big battling the big. When big battles big, the fallout can be more dramatic and happen more quickly.

For example, it took many years for Walmart, Kroger, Albertson’s and a few others to stamp out the majority of the little neighborhood grocery stores. The impact of that type of carnivorous activity has decimated the main streets of thousands of rural communities.

The economics of being in the grocery business has taken a turn for the worse the past two years. A combination of competition and soft purchasing power on the part of consumers is making it difficult to fill the financial sails of the nation’s largest grocers. As such, the grocers are turning on each other with aggression. The problem is that the clobbering of just one of the Titans has huge impacts to employees, suppliers and farmers that sustain a particular Titan.

Following are America’s seven (7) largest grocers by number of stores:

Walmart – 4,800 stores

Kroger – 2,460 stores

Ahold Delhaize – 2,265 stores

Albertson’s/Safeway – 2,200 stores

Aldi – 1,600 stores

Costco – 500 warehouses

Whole Foods – 430 stores

 

Now, for the real kicker. It’s not enough that the Titans want to devour each other, new Titans are coming into the grocery fold with billion-dollar boxing gloves.

  1. German grocer ALDI is putting up $5 billion to build 900 new grocery outlets and upgrade 1,300 existing stores over the next few years. This move could easily put them in the No. 2 spot (in terms of locations) ahead of Kroger and behind Walmart.
  2. German Grocer LIDL (not on the list above) is opening its first stores this June with plans to build out over 300 locations in the next couple of years.
  3. Amazon is in the process of creating a physical presence by building out “food” convenience stores while expanding home grocery delivery service. Estimates are that Amazon could have a 600 store presence within 12 months – exceeding the number of locations of Whole Foods and Costco.

 

The emerging battle of the grocery Titans means that employees, suppliers and farmers will have to do more for less. Americans now spend about $1.6 trillion annually on food. The opening of thousands of new grocery outlets by ALDI, LIDL and Amazon doesn’t mean people will eat more or spend more to accommodate the expansion of the number of grocery store locations. The likelihood is high that the new jobs created by these new grocery store locations could be offset by even larger numbers of job losses and everyone has to cut back to stay in business.

It is not that convenience and lower prices don’t have merit. However, concerns over the loss of jobs and push back on suppliers and farmers are not without merit either.

Following is a short video clip of a consumer comparing ALDI with Walmart. The video is a homespun variety, but the outcome is shocking. As you can see, things may get ugly as the billion dollar boxing gloves start duking it out almost immediately.

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