The trade down is real, and the grocery reset is accelerating.

The Trade Down is Real. And It's Accelerating

In March, I touched on the growing pressures facing global supply chain and energy prices as a result of the ongoing geopolitical tensions with Iran and the broader Middle East. Well, things are accelerating.

The blockade of the Strait of Hormuz has sent shock waves through the food supply chain, now entering its 15th week. The result? Fertilizer prices are projected to rise 31%, fuel costs are running 17.9% year over year, and food-at-home inflation could top 4% by the end of the year.

What started as a tariff problem with an over-simplified on-off switch solution is now a twisted and tangled mess that is not going anywhere.

The April CPI report showed food-at-home prices jumped 0.7% month over month and 2.9% year over year, with five of the six major food categories posting increases. This represents the quickest jump in nearly three years, driven largely by rising energy prices and global supply chain pressures.

And the story gets worse: inflation has officially outpaced real wage growth. For those curious, this is not good.

The wage-inflation crossover is significant. A recent report found 42% of shoppers are increasingly switching to lower-priced retailers, up from 31% last fall.

This is a serious problem for retailers like Albertsons and Kroger, both known for higher prices and a high-low promotional strategy. And it is a massive tailwind for retailers positioned to win on price or value.

Walmart posted same-store sales up 4.1% in Q1 and is aggressively investing to capture and keep its new shoppers. Grocery Outlet saw foot traffic rise 2% in the first quarter, with monthly gains through March. And Stop & Shop recently implemented a price reduction initiative as part of a broader push to enhance affordability and experience.

The path forward is not complicated, even if the environment is. Brands and retailers need to lock arms, align on price, value, and assortment, and become excellent operators. At the end of the day, we are all working toward the same goal: putting products people love in stores they trust, at prices they can afford.

The Albertsons Co.

Albertsons spent May quietly investing in operational excellence. A proprietary AI produce inspection tool, a new and sophisticated retail media measurement framework, and an industry award for AI innovation. With more discussion and rollout of Merch United, Albertsons is building the processes and infrastructure for the future. Now it needs to show it can translate capability into action and sales growth.

There is certainly a lot of potential here. But as my college coach would tell me, potential means you have not done anything yet.

The Post-Merger Playbook Hasn't Changed

Thom Blischok, Chairman and CEO of The Dialogic Group, offers a post-merger prescription for Albertsons: move fast on premium private label, AI-enabled operations, localized assortment, and empowered regional leadership to close the competitive ground lost during the Kroger pursuit.

The regional flexibility piece, real autonomy on assortment, pricing, promotion, and merchandising, would mark a meaningful reversal of Albertsons' centralization push over the last several years. But that tracks with what we are hearing. The company appears to recognize that centralization may win on paper but falls short in serving the genuine diversity of its shopper base across regions.

With all due respect to Thom, none of this is particularly new or earth-shattering. Winning in today's CPG landscape must come through elevating own brands, effectively leveraging AI across total operations, and, for Albertsons specifically, winning the local game while leveraging size and scale.

The question for Albertsons remains: how do you build local relevance and personal connection while still operating as a national enterprise? Albertsons leadership is confident Merch United is the answer.

Enterprise Sales Events Getting a Makeover

Albertsons is overhauling its Enterprise Sales Events ahead of the October and January selling periods. In an email to vendors, GVP of National Merchandising Demetri Pantazes outlined the revamp's priority for a sharper customer shopping experience, greater consistency across divisions, a more proactive and streamlined planning process, and a clear emphasis on driving incremental units, transactions, and basket growth.

As part of the transition, Albertsons cancelled the mid-month vendor meetings but confirmed that both selling events remain on calendar. Vendor partners can expect outreach on updated priorities and timelines, with offers already received and opportunities still on the table.

Open Seats, New Faces, More Changes Ahead

Rumors continue to swirl around additional departures on the merchandising team, though nothing has been confirmed. The last few months have brought significant movement: Brian Winters departed to lead Fuel & Convenience, Matt Boyd was named SVP of Marketing & Merchandising for the Seattle Division, Austin Johnson stepped into the Senior Director of Merchandising role for the Seattle division, and Courtney Talbott-Hicks left for a VP position at Bed Bath & Beyond, along with the first major outside hire in a while, Monica Lightfoot.

Two National Vice President seats remain open: Meal Ingredients and Household & Personal Consumables. And word is that a handful of NCD positions may be coming available soon, with outside hires potentially in the mix. Susan and the new leadership team have made one thing clear: Boise is home base, and a return to corporate headquarters is non-negotiable.

Looking forward

Albertsons enters the back half of 2026 with some momentum. New leadership energy, a clearer strategic vision around Merch United, and the early infrastructure of something that could work. But the org is still in motion, key seats remain empty, more changes are looming, and the competitive clock keeps on ticking. For vendor and brand partners, now is the time to stay close, stay flexible, and show up as a solutions-oriented partner.

At RecorGroup, we are watching this closely and positioning our brand partners as assets and allies to Albertsons' future. And honestly, the brands and brokers who understand what Albertsons is building right now will be the ones with a seat at the table when it starts to execute.

Kroger

Greg Foran is roughly 90 days in, and so far it has been a tale of two companies for Kroger. The business fundamentals are strong. Ecommerce crossed $16B in FY25 with a $400M profitability improvement on the roadmap. Identical store sales are growing. But several senior leaders announced departures in May alone, key seats remain open, and a re-org is likely taking shape.

Operationally sound, organizationally in flux. And for brands, this means both risk and opportunity.

Big Exits at Kroger. And More Coming

Kroger is navigating a significant wave of senior departures, as Greg Foran settles into the CEO role. Tim Massa, EVP and Chief Associate Experience Officer, is set to retire September 18 after 16 years with no successor named. Valerie Jabbar, SVP of Retail Divisions, retired in May after an incredible 38-year tenure that began as a store clerk at Fry's. And Jamie Lancaster, Global VP of the Kroger Capability Center, announced his exit after 18 years, just the latest in a string of long-tenured leaders moving on.

The exits extend beyond retirement. Joe Kelley, former SVP of Retail Divisions, landed as COO at Associated Wholesale Grocers, which means serious institutional knowledge headed straight to a growing competitor.

Tapping a back-to-basics focused CEO like Foran was no doubt going to lead to a wave of departures and turnover, so I would say none of this is a surprise. Open roles and a hiring freeze do not happen in a vacuum, and the expectation is that earnings will be the moment Kroger reveals its hand on structure.

Ecomm Crosses $16B, Profitability in Sight

Kroger's fiscal 2025 annual report told a story of real growth in ecommerce. Ecomm sales crossed $16B, up from $13B last year, driven by accelerating customer demand for delivery. Identical store sales ex-fuel grew 2.9%, a solid result for a business in the middle of a major leadership transition. And a strategic review of the ecommerce operation has identified a path to $400M in operating profit improvement for 2026.

In a channel that has historically been a margin drain across retail, Kroger's path toward profitability is a meaningful shift across the board. For brands leaning into Kroger's digital shelf, expect the conversation to evolve to tighter cost expectations, stronger ROI scrutiny, and a retailer that is increasingly asking whether your brand is contributing to the business or just riding the platform.

What We're Watching at Kroger

A few things are worth keeping an eye on for the back half of 2026.

Kroger is testing a new pricing program in Indiana with the expectation that a broader pricing strategy rollout will follow. The initiative is centered on sharper everyday competitive pricing while preserving promotional activity that actually drives volume. It is a balancing act, but a positive sign that Kroger is serious about closing the value perception gap we have covered in recent updates.

On the operational side, expect Kroger to lean further into its offshore Center of Capability model, particularly around supply chain and potentially expanding into merchandising capabilities. This is obviously a cost play, but it also has real implications for how decisions get made, how quickly, and who brand partners are actually talking to.

Looking forward

Kroger is in the middle of a genuine reset. A new CEO, significant talent turnover, and a business whose ecommerce business is getting stronger. The ecommerce profitability trajectory is real, the pricing strategy initiative is encouraging, and Foran's back-to-basics focus has a clear logic to it. But key seats are empty, a re-org appears imminent, and the offshore merchandising expansion could be a challenge. The upcoming earnings call will be the moment to watch.