Competition in Charlotte’s increasingly crowded grocery store industry has its perks for customers, including lower prices and more options as new companies enter the area.
But cheaper alternatives also mean some grocers are forced to lower their prices to stay competitive while some stores are stealing market share from existing ones. All of that weighs on grocery store margins that are already razor thin.
As an unintended consequence of grocery store wars, some supermarkets unable to keep up are closing locations in Charlotte altogether.
Harris Teeter recently announced plans to close one of its stores in Ballantyne, for instance. Harris Teeter also is closing its 201Central beer and wine store in Huntersville in February. Citing Charlotte’s cutthroat grocery industry, the longtime organic grocer Healthy Home Market said this month it is closing its two remaining area stores.
And Charlotte’s newest grocer, Germany-based Lidl, looks to be slowing its U.S. expansion, according to a recent report.
Supermarket analyst Phil Lempert says this is all indicative that Charlotte may have too many grocery stores. But it might not be a problem if the city maintains its influx of young professionals.
“Today yes,” Lempert said of having too many stores. “If Charlotte’s population growth continues and attracts more food-obsessed millenials – no.”
Earlier this month, Lidl released a study with UNC-Chapel Hill which found that when Lidl enters a new market, competing grocers respond by lowering their food prices by an average of about 9 percent.
Grocers that compete most closely with Lidl, such as Aldi, tend to set their prices even lower to remain competitive when a Lidl comes to town, the study found.
Katrijn Gielens, an associate professor of marketing at UNC who led the study, found “without a doubt” that Lidl is putting price pressure on competitors, including Aldi, Food Lion, Walmart, Publix and Kroger, which owns Matthews-based Harris Teeter.
That’s weighing on their profitability, Lempert said.
“No question that Lidl hurts (competitors’) bottom line. They are putting pressure on CPG (consumer packaged goods) brands to lower prices, and they are pushing their own store brands to have a better chance to compete with Lidl,” he added.
‘You may be in trouble’
While retailers saw a record number of store closures last year, Gielens noted that grocers have been mostly shielded since online shopping isn’t growing as quickly for supermarkets. Still, there are a number of reasons why grocers are having to “rethink” what to do with their stores, she said.
Customers, especially young people, tend to spend more on experiences than products. That’s why stores like Harris Teeter have added wine bars and fancy “grocerants,” the moniker for in-store restaurants.
Shoppers will pick grocers that offer the lowest prices, on the other hand, to free up cash for spending elsewhere. Private label brands, made by the supermarket itself, are cheaper for the customer and more profitable for the grocer – think Whole Foods’ 365 brand, for example.
“If you can’t offer something that’s slightly different, whether it’s price or selection, you may be in trouble,” Gielens said of grocers’ fate.
Charlotte’s rapid growth of new grocers tends to be concentrated in fast growing, affluent areas. You’d never guess driving through one of Charlotte’s poorer neighborhoods that the city has too many grocery stores.
Publix, the Florida grocer that entered the Charlotte market in 2014, and Harris Teeter have been building new stores within blocks of each other throughout booming parts of Charlotte, including Cotswold, South End and Ballantyne.
The Harris Teeter that’s closing in Ballantyne (at 16405 Johnston Road) is less than a mile north of another Harris Teeter on Lancaster Highway, and just over two miles south of another on John J. Delaney Drive.
“Competition in the grocery industry is nothing new to Harris Teeter or any of our neighboring retailers. Competition makes us all better, so the real winner when competition heats up is the consumer,” spokeswoman Danna Robinson said in an email to the Observer.
Meanwhile, last summer Lidl opened its first North Carolina stores, including several in the Charlotte area. Adding another layer to grocery price competition is Amazon, which bought Whole Foods last summer for $13.7 billion. And organic grocer, Sprouts, announced plans earlier this month to open its first Charlotte-area store in April.
Traditional grocers like Harris Teeter are starting to offer more organic and natural products to compete with companies like Whole Foods and Sprouts.
Since they’re bigger, they’re able to lower prices on popular products, luring customers from smaller grocers like Healthy Home Market, said the company’s owner John Bauer. He also cited an inability to keep up with Charlotte’s grocery wars as reason his company is shutting down.
“HHM has been in business for 38 years and did not see an effect when Whole Foods and Earth Fare came to town just a short time ago,” Bauer said. “We have, however, seen an effect when the traditional grocers offered natural and organic products.”