Summer is officially here, and so is the pain at the register.

I hope you had a wonderful 4th of July holiday and were able to celebrate our country's 250th birthday 🇺🇸

Summer is officially here, and so is the pain at the register. Inflation hit a 2 year high and its effect is showing up in baskets, behaviors, and balance sheets. The concerning part is that this is starting to seem permanent rather than cyclical.

Oh, and Kroger bought Giant Eagle for $1.65B, while actively trying to escape the $600m merger breakup fee. Foran recently said organic growth was the plan for Kroger going forward. Turns out acquisitions are too.

Albertsons made another round of desk changes and departures, with an anxious feeling of more change to come and rumors doing nothing to calm the nerves.

Let's get into it.

Industry News

🛍️ The GLP-1 Effect on The Basket

GLP-1s continue to reshape merchandising and what lands in shoppers' carts. Publix now offers targeted GLP-1 shopping guides to help consumers navigate their changing nutritional needs, Meijer added over 120 high-fiber SKUs to meet growing demand, and sales of Costco's Kirkland Signature protein milk are booming.

For brands, this is a wake-up call. Products that don't deliver on protein, fiber, or nutrient density risk losing shelf space, as retailers increasingly prioritize offerings that match consumers' growing health focus.

💰 The Dynamic Pricing Crackdown Is Spreading

Connecticut just banned surveillance pricing, and New York is about to be next. This state-by-state crackdown is moving much faster than most realize, completely rewriting how personalized promotions are built and deployed. If you are still relying on legacy pricing models, you need to adjust your strategy now, before the next wave of regulations leaves you behind.

🏷️ Private Label Is Winning on Trust, Not Price

Store brands now live in 92% of U.S. households, up from 89% last year. And 94% of shoppers say they'd keep buying store brand even if prices dropped. This has to be music to retailers ears (or maybe a cha-ching sound), as both national and regional chains continue to invest big into private label brands. The top drivers? Taste and quality. I've been covering the rise of Private label for a while now, but we might look back at this period as a major inflection point.

This is great news for retailers and consumers looking for products they can enjoy at prices they can afford. But it also means that competition in the CPG industry is heating up more than ever. (Got a tin foil hat? I've got a dystopian theory on what this means for the future of CPG and large chain retailers.)

The Economy, Uncensored

Let's not sugarcoat it, the economy sucks and consumers are struggling. And the latest numbers back that up.

Everyday prices rose 2.9% YoY in May, the largest jump in 2+ years, on the heels of two straight months of acceleration. This trend is concerning, and it's compounding on top of what has already been a string of tough years for consumers.

Shoppers response has been exactly what you'd expect: 61% have changed how much food they buy, 47% have switched to private label, and 40% are trading down retailers more often

And beneath the surface, data points towards increasingly stressed shoppers. 29% of consumers are using 'buy now pay later' options for groceries, up from 25% a year ago (nothing to see here, just a wildly concerning consumer debt problem). Meanwhile, 70% of low-income parents worry they'll have to choose between bills and feeding their kids.

For brands, the pressure is everywhere at once. Retailers are locked in a pricing war, squeezing suppliers while simultaneously investing billions in remodels, AI, and private label- and early indications suggest this strategy is working.

The regulatory ground keeps shifting too. A federal judge struck down recently passed SNAP food restriction waivers in five states, pausing up to $830M in projected category losses for soda, candy, and energy drinks, with the USDA expected to appeal. California's "sell by" date ban went into effect July 1. Trump signed a regenerative agriculture executive order backed by $1B+ in federal investment, aimed at enhancing collaboration with U.S. farmers and ranchers to improve the food supply. Each of these actions are drastically reshaping the environment and what's driving demand.

What June made clear is that this economic pressure isn't going anywhere, and it's changing behavior in ways that feel structural, almost permanent, rather than a cycle to wait out.

Shoppers are resilient and smart, always have been. They're trading down retailers, mastering AI to hunt deals, and becoming expert budget-stretchers.

The brands that meet them there, with a real value ladder, genuine quality signals, and a plan that speaks to where the shopper actually is will hold share and win. The ones waiting for things to normalize, will find themselves on the outside looking in.

The Albertsons Co.

Albertsons is building for the future while fighting old battles and a seemingly never ending org change. This ongoing transition can create significant distraction for unprepared brands, but it opens a massive opportunity for those who are. June brought more departures and desk changes for Albertsons, all in efforts to move the needle forward on Merch United and their strategy to become 'nationally great and locally strong'.

👥 The Org Change Continues

Albertsons announced another round of desk changes on the national merchandising team, with several tenured names leaving the company all together.

• Gary Milam now NCD of Beverage (Formerly Frozen Pizza, Snacks, Veggies, and Potatoes)

• Tim Ryan now NCD of Frozen Pizza, Snacks, Veggies, and Potatoes (Formerly Salty Snack)

• Brian Short now NCD of Salty Snack (Formerly Dairy)

• Miriam Welch now NCD of Dairy (Formerly Baking)

• Brian Estabrook now NCD of Condiments/Oils (Formerly Rice, Beans, and Canned Goods)

• Jacqueline Michlitsch now NCD of Baking (Formerly the Sr. Director of Operations, Shaw's Division)

⚖️ The $600M Break Up Fight Gets Uglier

A recent Albertsons court filings claims Kroger deliberately targeted its worst-performing stores for divestiture during the failed merger, prioritizing its own financial interest over getting the deal approved. And Albertsons says it holds a "highly damaging" internal slide that proves it (rut-roh). Kroger calls erroneous ("on both accounts!") and is fighting to keep an additional 34k (!) documents hidden.

Unless the two settle, sounds like this thing will go to a bench trial. The merger is dead, but the fallout certainly isn't. And judging by the Kroger / Giant Eagle acquisition, looks like Kroger is confident they wont have to fork over the cash.

🤖 Merchandising Intelligence Goes AI-First

Albertsons is scaling a Databricks-powered Merchandising Intelligence Platform, targeting full rollout by end of 2026. The new platform consolidates insights on the 4 P's and lets merchants ask questions in plain language. What does this mean? Well we could be entering an era where category managers come to the table with deal economics, demand insights, and a whole slew of insights they didn't have previously. If you're not prepared to show up with your own data and category story, you could get 'beat by the machine'.

⛽ The AI Gas Pricing Suit

Albertsons and Walmart were named in a California class action alleging they used an AI tool to inflate fuel prices by as much as $0.22/gallon. It's one of the first suits under California's AB 325, which bans shared pricing algorithms. Whether it holds up is yet to be seen, but the timing is interesting. Albertsons is investing big time in AI across the board, at the same time AI-driven pricing is catching heat. At this point, AI is both a growth lever and a liability.

Looking Forward

Albertsons continues to navigate their post-merger world. New United stores, a novel retail media model, and a powerful AI merchandising platform seem to be driving real momentum. At the same time, the merger litigation drags on, a gas pricing lawsuit adds noise, and ongoing organization and personnel changes create more chaos than calm.

Wherever AI lands, it's undoubtedly going to bring better data and insights to the decision makers. If you haven't already, now's the time to evaluate your insights strategy, and make the proper investments to ensure you have the team and capabilities to help drive the conversation with Albertsons.

Kroger

June was a busy month for Kroger. Q1 earnings delivered a real milestone, Foran is sharpening Kroger's value story, then, almost out of nowhere, an acquisition of Giant Eagle, a bold move from a CEO who came in preaching organic growth. Add in a new C-suite hire, more leadership shifts on the horizon, and a balance sheet carrying $5B+ in non-operational costs, and you've got a company with a lot going on.

📊 Q1: Ecomm Profitable. Stores Still Lagging.

Kroger's online business crossed a real threshold in Q1. Ecommerce turned a profit for the first time ever. Digital sales +19%, KPM +20%, and delivery under an hour drove a significant share of that growth.

Brick and mortar is a different story. Identical sales grew just 1%, down from 3.2% the year prior. Foran said it plainly: 60% of Kroger's stores need to improve. The market didn't exactly like it, Kroger's stock dropped 8% on earnings and hit a 52-week low.

For brands, the implication is pretty simple. The digital shelf is now profitable and every dollar you invest will face tighter scrutiny. And with 60% of stores underperforming, Kroger will undoubtedly pressure supplier partners to lean in more, working with those who can drive unit velocity in the locations that need it most.

🎯 Foran's Reset: Simpler Value, Better Stores

After walking 100+ stores, Foran's verdict was pretty blunt. Kroger's value proposition is too complicated. His fix: simpler, more consistent everyday value, not racing to the bottom, but giving shoppers a price they trust on every trip. "Customers need to trust that they're getting a fair deal every time they walk into our stores."

He also called out the footprint gap directly. While competitors are adding stores, Kroger is trimming the fat. But seems like that might be changing as Foran indicated new stores are on the horizon.

🦅 Kroger Buys Giant Eagle for $1.65B

I think it's safe to say that nobody saw this coming. Yet here we are. Kroger is dropping $1.65B to acquire Giant Eagle's 197 stores, ~$9B in annual sales, and new footholds in Western PA and Northeast OH, where Kroger has little or no presence. Expected to close in 2027, with some store divestitures likely.

While Giant Eagle does share similar DNA with Kroger (pharmacy, private label, retail media, alternative formats), this doesn't exactly move the differentiation needle. The price was apparently right and the geography makes sense. Credit Foran for staying nimble. Maybe this is a play to keep up with competitors growing store count.

Watch the divestiture list closely and keep in mind that integrating a new division while fixing 60% of their own stores is a very full plate for Kroger (bold move, Cotton.)

💸 The $5B Bill You Need to Understand

Kroger is trying to navigate over $5B in non-operational costs. These are straight sunk expenses that do not move the needle in any way, yet they will very directly impact your business. Here is where the money is going:

• $1B+ in failed Albertsons merger fees, plus $600M in active litigation and a $125M C&S termination fee claim

• ~$3B in Ocado write-downs and termination payments (more than half a year's operating profit, btw)

• $1.1B opioid settlement liability being paid out over year.

• $102.5M DOJ Clean Air Act settlement for refrigerant compliance failures

• A 130-basis-point pharmacy headwind from federal drug pricing policy, plus $3.8-4.0B in annual capex.

Suppliers are one of the few levers Kroger can pull to offset costs it can't control elsewhere. Just know when you feel increased pressure to spend more, this is part of the reason why.

Looking forward:

Kroger is a company with real momentum, but big challenges still lie ahead. Ecommerce is profitable, the value reset is underway, Giant Eagle adds geography and scale, while 60% of stores are underperforming, and the balance sheet is carrying a heavy burden that didn't come with any upside to the business.

The brands that do well with Kroger in the back half of 2026 will be the ones who show up understanding this. Not just with a great item and a solid promo plan, but with category insight, operational excellence, a willingness to drive velocity in the stores that need it, and a clear plan for the digital shelf now that it actually has to pay.

The Bottom Line

The consumer is under real pressure. Inflation is at a two-year high, households are facing real difficulties, and the trade-down is accelerating across brands and channels. Kroger and Albertsons are both in the middle of meaningful resets, organizationally, strategically, and culturally. Regional and independent grocers keep picking up ground. And the digital shelf keeps moving, with AI, social, and retail media converging faster than most brands are prepared for.

That's the environment right now. It's definitely complex, but it's not unwinnable (that's a word, right?)

The brands that come out ahead will be the ones who show up prepared, with a clear insights-driven value story, a real understanding of the challenges each retailer is actively navigating, and a willingness to be a genuine partner, not just another vendor.

At RecorGroup, this is exactly the environment we were built for, and we're working hard to make sure our brand partners are positioned to take advantage of it.

Have a great week!

Cheers,

Taylor