Traditional supermarkets are struggling. Kroger hopes its Giant Eagle merger will help

Becki Toth began her life in the same western Pennsylvania township where Giant Eagle is headquartered. She’s bought her groceries there her whole life.

“I've always had good experiences there, and they've always been really close to my house,” she said.

Giant Eagle is a regional grocery chain that’s been around for 90 years. It has about 200 stores, mostly in parts of Ohio and Pennsylvania.

While Toth has stayed loyal, other folks have left — not just Giant Eagle, but the whole genre of traditional supermarket that includes Safeway, Albertsons, Publix and Kroger.

”That's a format that has been losing ground for quite some time in the food retail landscape in the U.S., and at a pretty dramatic rate,” said Ricky Volpe, a professor of agribusiness at California Polytechnic State University, San Luis Obispo.

Volpe said today, it’s mostly baby boomers who shop at these supermarkets. He says they went from commanding about 80% of the market in the U.S. in the 1990s to about half today. And it’s still falling.

Case in point: Giant Eagle is now the second-largest chain in Cleveland and Pittsburgh, ceding the top grocer title to Walmart. The primary reason: Walmart’s cheaper.

“My vat of iced coffee that I started buying like four years ago was $5 when I started buying it, and now at my Giant Eagle it is $7,” Toth said. “It's stunning. And what's even more stunning is that if I get it at Walmart, it's still $5.”

Toth will shell out the extra $2, because Walmart is half an hour away, and Giant Eagle is down the street.

“I just don't want to spend my one wild and precious life driving to Walmart,” she said. “If they were side by side, I probably would go for the cheaper option because, I mean, it's 2026, and I teach musical theater for a living. So I'm not rolling in it.”

The traditional supermarket is losing ground with two groups: the price-sensitive shoppers of Walmart and Aldi, and the quality-conscious folks who go to Whole Foods and Sprouts.

“The only avenue towards growth in that sector has been through mergers and acquisitions,” Volpe said.

Because if Kroger approaches a production facility and wants to negotiate lower prices, the facility is more willing to give a break to a company with 2,000 stores than one with 200 stores.

“Some of those reduced costs from larger volume are from bargaining power,” said William Masters, a professor of food policy and economics at Tufts University. He said as Kroger buys more stores, it gains more bargaining power, which lets Kroger sell stuff cheaper than Giant Eagle ever could.

“I got curious and I did a side by side shopping basket,” Masters says. “And it is appreciably cheaper at Kroger, simply because Kroger's store brands are consistently less expensive.”

Kroger also has more fulfillment centers, and more trucks going more places that can get filled more efficiently and drive shorter distances.

“So the cost per unit of stuff is just a lot lower, so there are genuine scale economies,” Masters said.

That’s the bet Kroger’s making by merging with Giant Eagle. And it’s a bet Becki Toth wants to see pay off.

“I think everyone in Pittsburgh is really hoping that this merger means that just day-to-day costs of operating the Giant Eagle company are going to go down, and then maybe food prices will go down a little bit,” Toth said.

Any Econ 101 student will say that makes sense, said Volpe at Cal Poly. Only problem is, Walmart has already mastered that game.

“That is why they have been the number one grocery store in the United States since 2000,” Volpe said.

But Volpe said Kroger can compete with Walmart by offering higher quality products, cleaner stores and a better customer experience.

“These things incur costs,” Volpe said. “So it's actually increasingly common that the Krogers [that are] geographically close to Walmart, are actually higher quality supermarkets and [have] higher priced goods.”