As I was finishing this month’s edition of the Big VIP news broke that the Kroger-Albertson’s merger had been blocked by a US District Judge in Oregon. Shortly afterwards, Albertson’s filed suit against Kroger for “billions of dollars” in damages related to the failed transaction which was first proposed over two years ago. (See links to stories above)

While I’m not here to argue whether the merger was a good idea or not, it is undeniable that the nature of grocery shopping in America has changed significantly over the past 4 years. In the earlier incarnation of Big V as a family-owned traditional grocery chain, competition was largely relegated to other local and regional grocers. Chains such as A&P and Kroger had wider footprints, but the industry was one of the most bifurcated in retail. It’s this legacy of customer loyalty to local grocery operators that drove Kroger and Albertsons to both retain the local banners of the chains they acquired, such as Jewel in Chicago and Ralph’s in Los Angeles.

In the 21^st century, however, groceries can be found at a wide variety of shopping destinations in a way that has disrupted the business models of traditional chains. Specialty grocers like Whole Foods and The Fresh Market court gourmet and health-conscious shoppers; while Aldi and Lidl continue to expand rapidly with discount concepts that are gaining market share in an era where grocery prices have risen 25% since the pandemic.

Perhaps the most disruptive presence in the grocery space has been the increasing prevalence of supercenters and warehouse clubs with national economies of scale, led by Walmart. In fact, Walmart long surpassed Kroger as the nation’s largest grocer with nearly 60% of their US revenue coming from food sales, which equated to $247.3 billion in 2023, nearly $100 billion more than Kroger. The nation’s largest warehouse club, Costco, sees roughly 40% of sales ($96 billion) from grocery. Even Target, whose grocery ambitions are much smaller than Walmart’s has taken a $24 billion slice of the pie away from traditional full-service grocery.

Ultimately, these changes within the grocery industry position Big V’s power center focused portfolio as a strategic advantage in the coming years. Grocery-anchored real estate was long seen as a stable place to grow value, since food is a constant necessity in good and bad economic environments. But as you can see above, the retailers that are increasingly winning more of America’s grocery dollars are also no strangers to our portfolio, either as tenants or shadow anchors. Our assets should continue to provide the convenience and relevance to American consumers for decades to come.

Mike Jordan