Grocers continue long-term growth plans

Despite economic uncertainty, grocers continued to expand in 2023, with Aldi leading new store openings in the U.S.

March 20, 2024
  • Saul Lua

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Like a lot of American shoppers, I’m always looking for a deal. That’s why I keep track of sales and shop at whichever store has the best deals on what I’m looking for. However, food prices remain a major concern among consumers as the cost of groceries remains elevated.

As we covered in our latest Grocery Report, grocers powered on despite persistent inflation and economic uncertainty as they continued their expansion plans, opening new stores across the U.S. in 2023. While elevated grocery prices and increasing competition from the restaurant industry will pose challenges, the grocery industry continues to adapt.

Aldi leads new store openings

Aldi further solidified its position as one of the fastest growing grocers, leading new store openings once again. Aldi opened 109 new locations, totaling nearly 2.5 million square feet of new space – a 32.3% increase from 2022. Publix added roughly 1.9 million square feet of new space in 2023, with the opening of 38 new stores. Sprouts opened 30 new stores in the new cost-effective store model of smaller and more efficient stores, adding nearly 707,000 square feet of new space. Also, Grocery Outlet opened 29 new stores, totaling about 524,000 square feet of new space.

Recently, Aldi announced plans to invest more than $9 billion dollars over the next five years on its national expansion, with the opening of 800 new stores by the end of 2028.

Inflation slowly improving but remains a concern

After peaking in 2022, overall inflation and grocery inflation cooled in 2023, thanks to continued interest rate hikes by the Federal Reserve. By the end of 2023, “food at home” inflation fell below the Feds 2% inflation target – rising at an annual rate of 1.3% compared to overall inflation’s 3.3%. 

However, the cost of groceries remains elevated. The “food at home” index registered in December 2023 was 24.8% higher than its February 2020 level. In response to consumers concern over elevated grocery prices, national grocers such as Aldi and Kroger, are expanding and investing in their private-label brand offerings, appealing to consumers through lower price points. For example, Aldi launched a new 10-bottle wine collection, with most bottles retailing under $10, in September 2023 while Kroger launched a new Hispanic-inspired brand, Mercado, in October 2023, following its success with Smart Way.

“Food at home” inflation continues to cool, rising at an annual rate of 1.0% in February 2024, compared to overall inflation’s 3.2%.

Third-party players broaden grocery access for EBT SNAP recipients

The Supplemental Nutritional Assistance Program (SNAP), a federal program that provides food benefits to low-income families to supplement their grocery budget, saw a rise in participation due to the pandemic. Despite the end of the SNAP emergency allotments in February 2023, which was passed by Congress in March 2020, participation in SNAP rose. In FY 2023, there were 42.1 million participants in SNAP, a 2.3% increase from FY 2022 and up 18.1% from FY 2019.

In August 2023, Instacart furthered equity in fresh grocery accessibility by becoming the first third-party marketplace and e-commerce platform to accept EBT SNAP benefits as payment for on-demand grocery delivery in all 50 states and Washington D.C. Uber Eats announced in September 2023 that it plans to help reduce barriers in fresh grocery accessibility by accepting EBT SNAP benefits as payment for on-demand grocery delivery in 2024. Also, DoorDash has made strides in making fresh groceries more accessible as well, updating its app in June 2023 to accept EBT SNAP benefits as payment for on-demand grocery delivery at select grocers nationwide such as ALDI, Meijer, Albertsons, and Safeway.

Contact Saul Lua

Research Analyst, Retail