Last updated on May 28th, 2024
by Diana Leza Sheehan / founder and principal consultant, PDG Insights
The grocery store aisles of the American West provide a unique picture compared to the rest of the country. Beyond familiar national brands, the diversity of its population and storied history of the region has shaped shopping habits and a demand for non-traditional ingredients, reflecting the region’s unique character.
In this report, part of Shelby Publishing’s Successfully Selling Regional Grocers series this month, we will explore the factors that differentiate the Western U.S. grocery landscape, highlighting the influence of geography, demographics and a growing emphasis on innovation.
Region of contrasts: Geography, demographics
Across states, we find one of the most varied geographic landscapes in the country. From the deserts of Arizona to the valleys of California, to the Rocky Mountains that divide parts of the region and the soaring skylines dotted throughout, the region presents a diverse range of climates and terrains. This diversity plays a crucial role in influencing food production, transportation logistics and what ends up on grocery store shelves.
Demographically, the West is a fusion of cultures and ethnicities. The Hispanic and Asian populations, which already are a significant force, continue to grow rapidly, driving demand for unique ingredients and brands. Health-conscious Millennials with a focus on organic and locally sourced products are also a significant demographic force. These factors create a dynamic market where traditional American grocery stores must compete with specialty stores catering to specific ethnicities and dietary preferences.
More importantly, with nearly 71 million residents according to the U.S. Census Bureau, the West region is highly populated. It accounts for 21 percent of the total U.S. population.
While its most populated state, California, has seen minor population decline, it still accounts for 55 percent of the total region’s residents, with about 39 million people. However, the region has seen sturdy growth in eight of the 11 states, led by population upticks in Arizona, Utah, Washington and Idaho.
Beyond Big Box: Multifaceted grocery landscape
National grocery chains such as Safeway/Albertsons, Kroger, Costco and Walmart hold a strong historical presence in the Western U.S. grocery landscape, offering familiar brands and competitive prices. In addition, dollar stores have strong footprints in both rural and urban markets throughout the region.
Aldi’s presence is limited to California and Arizona; however, the German discount retailer has been clear that the Western U.S. will be an area of focus in the coming year. While large national players are a critical element of the grocery retail landscape, it is the diverse and highly effective regional and independent grocery players that truly differentiate the Western region from other parts of the U.S.
Some of the premier regional retailers focused on the Hispanic market are based in California, Arizona and Nevada. El Super is a privately-owned regional player with more than 60 stores in California, Arizona, Nevada and New Mexico. In California, Northgate Gonzalez Markets and Vallarta Supermarkets have dozens of stores each in major metropolitan areas.
In addition, some of the best-in-class retailers focused on the Asian market are headquartered out of the western U.S. While national retailers such as H Mart have a strong presence in California, regional players such as 99 Ranch Market have a strong footprint, and smaller players such as Uwajimaya and Grand Asia Market are also illustrating best practices in assortment and execution.
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When looking at the natural/organic retail landscape, as well as regional players focused on upscale demographics, Sprouts Famers Market, Gelson’s Markets and Bristol Farms are just a few examples of chains breaking through across a diverse set of shoppers.
While Sprouts is a growing, national chain in the natural and organic sector, Gelson’s and Bristol Farms have been strong regional retailers that use their perimeter and prepared foods to differentiate themselves from mainstream national retailers in their markets. This large segment of the grocery landscape is incredibly fragmented, and often one of the areas where we see independents thrive and drive innovation.
Finally, there are smart independent regional chains that have built portfolios customized to meet the needs of multiple audiences in the region. Food City in the Phoenix market is a banner owned by The Raley’s Companies, which also operates banners Raley’s and Bashas’ focused on more mainstream consumers, and AJ’s Fine Foods, which targets higher income shoppers.
What shoppers want – exploring critical consumer themes
Consumer trends in the Western U.S. grocery landscape tend to be consistent throughout the country. Consumers continue to lean into natural and organic brands and products. Value is a function of both convenience, price and the X-factor that is tied specifically to a retailer’s ancillary offers and customer support.
Private label demand is strong across categories and states. The role of digital engagement drives loyalty for shoppers regardless of where they shop.
However, regardless of region, there are some variations on how existing and emerging themes translate to retailer and brand preferences and consumer preferences. Age, income, race and ethnicity – and even the access to specialty retailers versus national players across channels – will impact what matters most to consumers. When looking explicitly at the West, consumers prioritize similar things to the average U.S. consumer.
When considering where to shop for groceries, factors that influence their decision include pricing and promotional strategy, the quality and freshness of products and the broader product assortment offered at their local stores. However, according to a 2023 survey by PDG Insights, consumers living in the West are also slightly more likely to favor retailers that promote eco-friendly or sustainably sourced products or locally sourced products.
Two-thirds of shoppers in states in the Western region say they prefer grocery stores that emphasize sustainable and environmentally friendly practices, even if it means higher prices. Initiatives such as reduced or eco-friendly packaging, composting, water-saving technologies and renewable energy-powered stores all play a role in this process.
Additional research by PDG Insights explored the role of local sourcing to consumers. Nine of 10 West consumers intentionally bought local products in at least one category or department in their grocery store. This was most important in perimeter categories including produce, dairy and meats and seafoods.
Consumers say they prioritize local brands to help build up the local economy and lessen environmental impact. This is consistent with what we see among consumers in other U.S. regions. More than half of consumers say they will intentionally pick their grocery retailer based on the quality and quantity of local brands carried.
Private label is a critical piece of U.S. consumers’ product portfolio today, and shoppers in the West are no different.
Nine of 10 shoppers say they purchase private label products at least occasionally. However, 30 percent of shoppers in the West say they always buy private label products, second only to shoppers in the Southwest, where Walmart, H-E-B, Aldi and Kroger have strong private label offers.
Shoppers in the West are more likely to believe that private label products create an opportunity for retailers to differentiate themselves, and more than half will choose one grocery store over another based on private label assortment. Consumers in this region are more likely to look for natural and organic or socially responsible private label products.
Bringing it together
While broader trends in grocery are similar from region to region, there are unique aspects of the West that manufacturers and retailers need to consider. Sustainable, eco-friendly and natural and organic products continue to provide meaningful opportunities for retailers, driven by consumer demand.
Private label growth will continue to evolve and could provide a path for emerging brands to build relationships with retailers while driving scalable growth. There continues to be sizeable Hispanic and Asian populations that are growing in the region. Products focused on these consumers provide unique opportunities on both independent and regional grocers shelves.
While core markets such as California, Washington and Arizona are the largest states by population in the region, there are new markets – and possibly new retailers – in high-growth areas in other states, including Idaho and Utah, that could provide the chance for incremental growth.
Diana Leza Sheehan, CEO of Evanston, Illinois-based PDG Insights, empowers emerging brands and retailers to make more effective strategic decisions. By leveraging data, she unlocks cost-effective consumer insights to craft retail sales narratives and brand strategies. Her 25-plus year career in the industry across sales, insight and strategy provides a unique perspective for clients.
I love that as you shop from region to region you find diversity. What would be unique and ideal and is to find one store that targets all aspects; if there aren’t isn’t one.