It may not all be about price and savings these days but, for most grocery consumers, a good part of it certainly is. For some time, we've seen shoppers trading down from national brands to private label. Coupon clipping is back in vogue and retailers report a higher percentage of their revenues coming from items featured in weekly ads. Discounters from Aldi to Wal-Mart are gaining share of market as consumers look to keep more of what they earn in their pockets.
Retailers have been going all out to make the case that consumers can save more shopping in their stores. Even chains such as Wegmans that normally focus on the shopper experience are pointing to price cuts/freezes to address unfavorable price perceptions. Numerous grocers have used fuel reward programs to drive sales in stores. Coupons are being doubled and, in some cases, tripled.
Imagine then, our surprise, to learn yesterday that Citigroup was lowering its guidance on a number of large publicly traded grocers because of a developing price war. We've been under the impression talking to retailers on a regular basis that the war broke out a long time ago.
Deborah Weinswig, an analyst with Citigroup, wrote in a note to investors that price pressures will continue to ramp up. "We expect Wal-Mart to make an announcement regarding a new private label strategy as early as (the first quarter), and the company's private label penetration in food could ultimately reach 40 percent over the next three years."
While we may think that grocers have been battling for the hearts, minds and wallets of consumers for some time, Edward Kelly, an analyst with Credit Suisse, recently wrote, "Concerns about a food retail 'price war' are overblown."
Discussion Questions: Is a grocery price war about to break out in the U.S. or did the battle begin some time ago? Do you believe the current price competition in the marketplace amounts to a fundamental change in grocery marketing that will shape the business for years to come?