Research Briefing: Regional vs. national retailer distribution

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Regional retailers combine to compete with national retailers 

Breaking News: Two Chicago food retailers, Foxtrot and Dom’s Kitchen & Market, have recently merged and will operate under the new moniker of Outfox Hospitality. Foxtrot runs bodega-sized convenience stores while Dom’s Kitchen & Market focuses on larger supermarket-sized stores. Both retailers focus on regional operations and are following a recent trend of grocers merging in effort to compete with nationwide retailers: Aldi is acquiring Winn-Dixie and Harveys Supermarket, and Krogers is acquiring Albertsons. 

Questions: How are regional supermarkets competing with national retailers? What makes brands choose regional retailers over national ones? What sets regional retailers apart from national ones?

Answers From Research:

National premium grocers like Whole Foods can be stand-out partners for specialty brands, according to Modern Retail+ Research, especially because startup brands are often priced higher than legacy brands in order to achieve higher margins. This becomes a challenge for those startups when they appear on shelves next to lower priced brands at more affordable grocery stores like Kroger and Sprouts. In premium grocery stores, however, startups sit among other premium brands in a similar price range. With less pricing competition on the shelf, a startup can focus on its branding and product differentiation to capture customers. 

However, because of its status as a more premium environment, Whole Foods, for example, doesn’t excel at showcasing brands to the masses. This is where mass grocers like Kroger, H-E-B and Sprouts emerge as strong retail partners for greater scale and broader market penetration.

H-E-B and Sprouts grocery stores are located only in certain regions of the U.S., but they’ve committed to distributing startup brands across all of their stores, both in-store and through online delivery. Sprouts carries seven of the startup brands we included in our report; H-E-B carries three. While Kroger and its subsidiaries, on the other hand, are located across the country, it limits the distribution of three of the seven startup brands it carries to certain regions of the U.S. Of the seven startup brands Kroger carries, six are sold both online and in-store. 

Want to learn more: Modern Retail+ Research’s report on CPG Distribution examines how CPG startups are choosing retail partners and retailer distribution strategies.

READ MORE ABOUT CPG DISTRIBUTION

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