Specialty Grocers Losing Market Share

Gourmet shops can’t compete with big companies’ ability to cut costs and invest in new tech.

March 05, 2020

ALEXANDRIA, Va.—Specialty grocers are struggling to convince shoppers to pay more to shop at their stores, reports the Wall Street Journal. As mainstream chains are selling more fresh, natural and organic foods at lower prices, stores like Lucky’s Fairway and Earth Fare are filing for bankruptcy.

Discounters like Aldi and Lidl are opening more locations, and Kroger is now one of the nation’s largest sellers of organic produce and meat. Whole Foods, acquired by Amazon nearly three years ago, is staying in the game thanks to discounted prices on hundreds of items.

But the smaller grocers, without a comparable reach or revenue, can’t afford to slash costs or invest in new tech-based services. Sprouts Farmers Market and Natural Grocers by Vitamin Cottage’s stocks declined by 30% and nearly 50%, respectively, during the past year.

Smaller grocers are feeling the pressure from larger ones. Sales growth is slowing and organic has been commoditized. But some companies are still trying to stand out from the competition. 

Steven Mortensen, an adviser to private-equity firm Yucaipa Cos., an investor in grocery chains, noted that, “You not only have your cost of goods, but you’re trying to provide a higher level of customer service to differentiate yourself.”