Squeeze on Indie Grocers Hurts Communities

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The weight of the pandemic’s biggest grocery inventory strains may have lifted, but grocery retail’s biggest players continue to put a squeeze on small and independent grocers in ways that hurt local businesses and ultimately consumers, the National Grocers Association‘s Chris Jones said in recent roundtable.

During the virtual discussion hosted by the American Antitrust Institute (AAI), Jones, SVP of government affairs and counsel for NGA, said big retailers’ increasing asks of their suppliers—nearly 100% fill rates, for example—place suppliers in a bind, effectively forcing them to serve their biggest customers at the expense of smaller and regional grocers. That can impede access to healthful foods and needed household goods in underserved areas where small grocers are a lifeline for their communities, he said.

“These large buyers act as gatekeepers in the marketplace,” Jones said, sounding a warning similar to the one he offered in comments made earlier this month during a Federal Trade Commission public meeting. “Even to this day, [smaller grocers] are experiencing really low fill rates on a lot of popular items.”

Consumers are eager to support local businesses, he said, and many prefer to shop smaller grocery stores rather than big-box retailers, but when smaller grocery players can’t get access to the inventory they need because suppliers effectively are forced to serve their largest accounts first—lest they fail to meet fill rates and rack up penalties—local grocers and the customers they serve suffer. “You’re losing out on the products that you need for your family,” Jones said. 

Grocery retail’s accelerated expansion of omnichannel capabilities has created additional competitive challenges for independent grocers, said Jones—and not just because of the expense associated with adopting robust e-commerce technologies. 

At the beginning of 2020, he said, an NGA survey found that 64% of NGA members had adopted some form of e-commerce (most often click-and-collect/curbside service). But as small and large retailers alike ramped up their omnichannel offerings to meet the demands of consumers looking to minimize their in-person shopping during the pandemic, the financial risk was lower for deep-pocketed big chains. “The biggest players have the ability to sustain losses [from e-commerce] and be the last man standing,” Jones said. “That makes me nervous as an advocate for the independents.”

Federal regulators need to take a harder look at anticompetitive practices in retail and scrutinize proposed grocery mergers and acquisitions more closely, said Jones and other panel participants. “You have to create a level playing field so that it doesn’t perpetuate this cycle of consolidation with further benefit to [the biggest retailers],” he said. A national food policy, like that being developed in the U.K., also could help promote food equity and ensure a competitive marketplace, panelists said.

Currently, said Diana Moss, president of the AAI, small businesses are losing ground to “dominant firms and entrenched chains.” Further, she said, when smaller producers feel pressured to sell ownership of their business to maintain operations or to consolidate to have more buying power, product diversity can be negatively impacted. 

The first defense in justifying major acquisitions and consolidations, she said, is that the players need to be bigger to compete. “We would like to see antitrust agencies push back on that,” said Moss.

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Source: winsightgrocerybusiness.com

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