Economic Report: Price Check on Every Product in All Aisles
By Mike Semmann, Wisconsin Grocers Association
Consumer Sentiment, Competition, and Consolidation Drive Wisconsin’s Grocery Industry
In 2025, Wisconsin’s grocery industry will continue to be highly competitive and complex with razor-thin margins, maintaining a focus on the consumer. Wisconsin’s grocers continue to stand at the ready to provide value through evolving consumer behaviors, a strong competitive environment, and increased consolidation.
The Consumer Price Index and food price inflation captured the public’s attention and became a high-profile component of the economic and political narrative over the last 18 months. Since the inflationary peak, food price inflation remains on a solid path and prices on staple items this past holiday season experienced areas of disinflation. Overall, inflationary pressures and the resulting increase in the cost of goods and services will likely persist, placing continued financial burdens on American households. This will have a lasting impact on consumer sentiment which has seen a temporary upswing following the 2024 elections, spurred by optimism about future business conditions. Clouds may be on the horizon as speculation about tariffs have economists’ expectations focused on the potential to raise consumer prices, which may temper enthusiasm. Middle- and low-income consumers, already strained by elevated costs, are likely to maintain their line of sight on value-oriented shopping.
Although pricing, promotion, and convenience strategies are important competitive tools, grocers who want to win the consumer sentiment battle in 2025 must also attend to market differentiation through good products and quality service. The ultimate measure is only when a grocer’s product and service offerings result in increased sales and additional customer loyalty. Arriving at the correct formula is the difference between success and failure in the low-margin grocery business. Differentiation is not a linear process; it is the result of trial and error, which may not favor some risk-averse owners, who are still weary after the pandemic.
Competition between grocery retailers is a clear advantage for consumers. According to reports, Wisconsin households enjoy the lowest weekly grocery expenses in the nation ($221), thanks to a combination of unique advantages that work together to keep costs down. These include the state’s relatively low cost of living, smaller average household size (2.31 persons), proximity to subsidized Midwestern agricultural producers, culture, and competition for the consumer’s dollar.
While the pandemic years slowed growth on new brick & mortar construction, the industry has seen some new store activity in 2024 with companies in the upper-Midwest and Wisconsin having planned openings of grocery stores with sizeable footprints.
As a result, the highly competitive U.S. grocery industry will continue to see corporate consolidation. The likely industry M&A activity will result as real (or even perceived) regulatory scrutiny eases and grocers will seek to reap the benefits of more optimal economies of scale. Changes in the regulatory environment will take time; however, at a minimum, regional players will continue to acquire distressed grocers, especially smaller operations with one or two stores.
The grocery industry has become much more complex, and for grocers who are able to implement changes that help differentiate themselves in the marketplace, 2025 will be a productive and profitable year.
Semmann is president and CEO of the Wisconsin Grocers Association | The Wisconsin Grocers Association represents over 500 independent grocers, retail chain stores, warehouses and distributors, convenience stores, food brokers, and suppliers in Wisconsin.
