Grocery store construction: Grocers still seeing green

Report shows grocery store construction show green-light for growth

Even as consumers seem to be holding their breath as they wait for economic stability and certainty, many industries, including grocers, are forging ahead with confidence. The JLL Grocery Report 2024 shows grocers are exhibiting confidence and positive growth, even as economic pressures remain. That includes new store openings for major chains, regional acquisitions, e-commerce sales growth, and broader consumer access.

Key findings show reasons for optimism in grocery store construction

Key findings in the report illustrate this continued optimism among industry leaders, even in the face of threats like continuing inflation, economic uncertainty, increased competition and higher grocery prices. Let’s examine those findings to see exactly how grocers are moving through this economic climate and thriving.

Grocers exhibit agility, innovation, staying power

Even as consumers gritted their teeth while paying higher prices at the grocery till, the industry showed resilience and a steadfast focus on future growth. Here are a few ways we saw that strength and fortitude unfold through innovation.

• Grocers expanded their private label offerings, typically offered at lower price points and appealing to inflation-weary customers. Private label offerings saw growth at Amazon Basics and Aldi-brand. But Kroger led the way with its Smart Way label and its expansion into a Hispanic-inspired Mercado brand. Also of note, Albertsons announced it will be consolidating its myriad Signature brands into a single brand by early 2024 called Signature SELECT. Grocers have even begun movement into the wine market, expanding or starting private label offerings. We’re seeing this at Albertsons and Safeway, Aldi, Gelson’s Markets, and others.
• Third-party e-commerce platforms and marketplaces forged connections with grocers, empowering consumers to order grocery delivery on demand. This includes platforms like DoorDash, Instacart, and Uber. Grocers are also steadily growing sales with the help of e-commerce. According to eMarketer, e-commerce sales for grocers increased 18.4% over 2022. In addition, e-commerce sales are projected to increase 80% by 2027.
• Third-party platforms also improved access for EBT SNAP benefits recipients in 2023. This is a significant development as more than 42 million people depend on SNAP for their household’s well-being. Instacart and Aldi have led the way with EBT SNAP integration, which, since August 2023, can be used to purchase groceries for delivery in all 50 states and Washington, D.C.
• Grocers continued to focus on long-term growth, with Aldi leading the expansion with 109 new stores nationwide and 30 Sprouts store openings. Other grocers with noteworthy growth include H-E-B, Publix, and Grocery Outlet, all surpassing expansion from 2022. Meanwhile, the Kroger-Albertsons merger is on hold as the stores seek solutions to the Federal Trade Commission’s lawsuit to block the merger, which it claims will result in higher grocery prices and less competition.
• Regional acquisitions continued last year, with Aldi in the lead, acquiring 400 supermarket locations in the southeastern U.S. Meanwhile, Minneapolis-based Coborns announced the acquisition of Sullivan Foods, with 11 stores in Illinois. Heritage Grocers Group announced it acquired El Rancho Supermercado, which includes 28 stores in Texas and Kansas. And Dom’s Kitchen & Market and Foxtrot Market announced they were merging to form Outfox Hospitality.

Grocery-anchored retail a good bet

The success of grocery-anchored retail is further evidence of the sector’s staying power. Despite various market pressures, these hubs of community shopping remain a preferred choice for investors, buoyed by the steady performance of the grocery segment. The continued expansion and adaptation strategies deployed by grocery chains signal a robust outlook for growth, projected to maintain momentum through the remainder of 2024 and well into 2025.

Challenges to grocers remain

Even as the industry overcomes these pressing issues, primary challenges remain for grocers. In March 2020, grocery stores thrived, with grocery spending accelerating past dining out and delivery orders skyrocketing in the first weeks of the global pandemic. As our world returned to dining out a year later, consumers began spending more in restaurants and bars, surpassing grocery spending. Since then, inflation has disproportionately affected groceries, which may have prompted consumers to eat at restaurants more than cooking at home. According to the JLL report, grocery spending saw a 2.6% increase from 2022 to 2023, while dining-out spending climbed 11.7%. While the situation has improved with food-at-home inflation dropping below inflation overall, the economic pressure remains.

Are you green-lighting grocery store construction? Design and build can help.

If you’re an owner or developer exploring ways to make the most of this growth opportunity in grocery, the design-build construction model can help. Approaching your commercial construction general contractor needs with a design and build team means all project stakeholders work as a single team toward a shared goal: successful completion of your project. Contact us today to start planning and constructing the next grocery location in Rochester, Minnesota, La Crosse, Wisconsin, or elsewhere in the Upper Midwest.