The Kroger Co.’s abrupt departure from the Raleigh-Durham, N.C., market was caused by an “unaccommodating competitive environment” in the overstored region, grocery industry expert Burt Flickinger, of New York-based Strategic Resource Group, told Progressive Grocer, with Lidl’s hard-discount format, Wegmans Food Markets’ entrance into the area, and expansion plans undertaken by BJ’s Wholesale Club and Walmart proving particularly difficult to counter.
As a result, according to Flickinger, Cincinnati-based Kroger ended up being “caught in the crossfire” of these rival grocers’ salvos.
In addition to having been trampled underfoot by what the expert calls “the four food retailers of the Apocalypse,” all of whom stand to benefit from Kroger’s retreat from the area, the grocer faces a similarly uncertain future in Virginia and parts of West Virginia, where it’s encountering similar competitive pressures, he noted.
Far from being a bust in the United States after an underwhelming introduction to the country, Lidl is poised to conquer now that it’s got “dynamic new leadership” from Europe in place, observed Flickinger, who added that the grocer offers the best quality at the lowest price in the areas where it operates. In fact, he put forth the opinion that Lidl has the potential to “blow the [Raleigh-Durham] market wide open.”
Also proving itself a “much more formidable foe” in the region is Food Lion, currently being “reinvigorated” by new Ahold Delhaize USA CEO Frans Muller, said Flickinger.
Kroger’s exit is also a heads-up to other grocers operating in the market that they’ll need to up their game. For instance, Flickinger warned that Publix Super Markets “can’t be competitively complacent outside its home markets in Florida.”
As for Southeastern Grocers, which recently emerged from Chapter 11 bankruptcy protection, he noted the retailer’s challenge in restructuring, and cautioned that if its banners can’t compete successfully, it won’t be able to last in its namesake region.
Beyond the Raleigh-Durham area or even the Southeast, Kroger’s decision to close up shop in one place signals to its rivals elsewhere that the company isn’t invincible – that, in fact, as Flickinger pointed out, it’s “vulnerable across a number of U.S. markets.” His picks for chief contenders: Albertsons Cos. and Ahold Delhaize USA.