Market Segmentation Helps Big Brands Dominate Grocery Sector

The U.S. grocery store segment is dominated by three primary national chains, with each having subsidiary franchises that address potential customers based on income, location, shopping purpose and even whether the shopper has children.

Ahold Delhaize, The Kroger Co., and Albertsons Companies are the top three, with Albertsons and Kroger soon to merge.

Those three names aren’t typically what you find on the signage of your local grocery store, however. The three other brands specialize and stand out when serving certain demographics, as reported by Placer.ai.

The Lion’s Share

For Ahold Delahize’s Food Lion, 14.5% of its captured market trade area consists of “Rural Average Income Households.” It serves almost twice as many average-income rural households as its Hannaford brand, and more than three times as many as its sister chain, The GIANT Company.

“With the uptick in people who moved to rural areas during the pandemic, Food Lion’s popularity among that demographic may help explain why the brand is maintaining its pandemic visit gains, even as the rest of the grocery sector slows down,” Placer.ai noted.

Fred, Ralph & the Family

For The Kroger Co., the largest of the three holding companies, its product offerings come in multi-department stores (specifically, the Fred Meyer banner), which sell apparel, home fashion, hardware and other items in addition to standard foodstuff.

Its supermarkets — standard neighborhood food and drug stores — are the company’s primary grocery format, serving those who live within a couple of miles of the location.

According to Placer.ai, Kroger Co. benefits through a retail media network that allows advertising partners to showcase their campaigns across various banners.

Kroger’s Food 4 Less and Foods Co. serve slightly more households with children than the potential market trade areas of Ralphs. In turn, those stores cater to shoppers in a more family-friendly way.

But the share of households with children in Food 4 Less and Foods Co.’s captured market “is even higher than it is in the potential market, and significantly higher than the share of households with children in Ralphs’ captured market,” Placer.ai said.

And the share of households with children in Ralph’s captured market is actually lower than it is in Ralph’s potential market — so Ralph’s trade area includes fewer families to begin with, and an even smaller share of those families shop at Ralphs.

“Families on a budget may be a significant factor driving strength among The Kroger Co.’s price-impact warehouse store,” the report concludes.

A Roster of Familiar Names

Albertsons Companies Inc. is the country’s second-largest grocery store operator after The Kroger Co., operating around 20 well-known banners across the country. Safeway receives the largest visit share (43%) in the Albertsons family, followed by Albertsons (17%), Jewel-Osco (11%) and Vons (10%).

Safeway tends to attract more visitors from higher-income areas than Albertsons on a nationwide level, Placer.ai reports, adding that, “while this trend holds true in California, Oregon, and Wyoming, the reverse pattern emerges in Arizona and Wyoming, where the Albertsons banner attracts visitors from higher-income neighborhoods.”

As Placer.ai explains, “By operating two different brands in the same markets that cater to different income levels, Albertsons Companies attracts a wider range of shoppers while offering locals greater grocery choice.”