The recently announced Kroger-Albertsons merger deal reflects the ongoing drive for scale in the grocery industry. But when it comes to retailer relationships with consumer packaged goods (CPG) suppliers, scale doesn’t mean everything, especially in the small- and midsize-business (SMB) arena.
That’s where mid-tier grocers are particularly important. According to Andrew Criezis, senior vice president and general manager of SMB at market researcher NielsenIQ, mid-level grocery retailers bring more to the table than meets the eye.
“When we talk about mid-tier grocers, the key is they’re regionally focused,” he told Supermarket News in a podcast interview, citing retailers such as Hy-Vee, Good Food Holdings and The Fresh Market as examples. “And I think there are some pretty interesting insights here.”
Even when SMB CPG manufacturers do break into the assortments at big chain retailers, the bulk of their sales volume — especially in grocery — still may come from mid-tier stores, Criezis explained. These brands’ deepest and most loyal consumer relationships also may be found in this retail segment.
“We ran a global survey and analysis called the ‘2022 Brand Balancing Act,’ which was laser-focused on SMB consumers and the market around the SMB segment of emerging brands. And what we discovered is that shoppers associate small and emerging brands as being local,” Criezis said. “There’s a very close connection to it, a high-percentage relationship.”
Regional and smaller grocers with loyal customer bases stand as bread-and-butter sales channels for SMB brands as well as destinations for positive consumer-brand interactions, Criezis noted. These stores also may offer brands high visit frequency and generate among their largest average basket sizes.
“We see more and more of these brands that are local, and consumers looking for local and engaging in smaller-format stores. And they expect to find those more local, niche brands within some of these regional, mid-tier grocery players,” he said. “So that’s where you see this strong connection that can breed a strong sales position if you play the structure and the cards correctly. The other thing we found out was that a quarter of our survey respondents buy emerging brands exclusively at independent retailers. So a pretty significant amount of emerging-brand consumers are going to these independent retailers or regional players