The grocery industry is set for significant changes in 2025, with private brands poised to dominate, says John Clear, Senior Director with the Consumer and Retail Group of Alvarez & Marsal. Private label market penetration in the U.S. is nearing 25%, shifting from a value-focused niche to a core strategy for grocers like Sprouts and Aldi.
“Private brands have become essential,” Clear said. “Their rise is a direct response to evolving consumer behaviors. This trend will reshape production demands and force consumer packaged goods (CPG) companies to adapt, including potential partnerships with private label manufacturers.”
Retailers embracing innovative private label strategies will likely outpace competitors in the changing grocery industry landscape.
The Repercussions of the Failed Kroger-Albertsons Merger
Clear noted that the failed Kroger-Albertsons merger has intensified challenges for traditional mid-market grocers. As market growth polarizes, players like Walmart and Costco dominate the high end, while specialty grocers such as Trader Joe’s and Sprouts seize the low end.
“The middle is losing ground,” Clear said. “Mid-market grocers are stagnant or declining. They must evolve better to understand consumer behavior or risk further market share erosion.”
Clear predicts this polarization will continue throughout 2025, leaving mid-level grocers struggling to retain relevance in the grocery industry.
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Regional M&A to Shape 2025 Grocery Industry Landscape
Large-scale grocery mergers may be a thing of the past, but regional mergers and acquisitions (M&A) will gain traction in 2025, Clear forecasts. Southeastern Florida’s regional grocers, facing intense competition from Walmart, Aldi, and Costco, will likely consolidate to survive.
Clear also expects Kroger and Albertsons to focus on regional deals, with Albertsons divesting underperforming brands and Kroger expanding its footprint. Companies like Schnuck’s and SpartanNash are also poised for potential acquisitions.
“This year’s M&A activity will reflect strategic regional plays,” Clear said. “Grocers must consolidate or innovate to remain competitive in the grocery industry.”
Adapting to Survive
Clear emphasizes that grocers must align with evolving consumer needs in 2025. Strategies centered on private brands, understanding market polarization, and regional consolidation will determine success.
“Failing to adapt to consumer behavior and market dynamics will only accelerate challenges in the grocery industry,” Clear concluded.