Last updated on June 7th, 2024
by Diana Leza Sheehan, founder and principal consultant, PDG Insights
The grocery industry across the United States is a complex ecosystem, but the Southeast boasts a unique landscape shaped by regional preferences, strong community ties and a dominant player: Publix.
In this report, part of Shelby Publishing’s Successfully Selling Regional Grocers series this month, let’s dive into the reasons behind its differentiation and highlight the key players that define it.
Southeastern consumers: Not-so-mixed melting pot
Including more than 11 states, the Southeast accounts for 25 percent of the U.S. population – about 85 million people – and it continues to grow. The region is the largest in the country by population, but also has some unique population variables that can make retailer growth challenging.
Growth within the region is coming from largely populous states such as Florida, Georgia, North and South Carolina and Tennessee. Metropolitan areas including Atlanta, Charlotte and Jacksonville continue to grow, but we do see some shifts to rural and suburban areas as well, just like in other parts of the country.
[RELATED: Population Surge Helps Lift Dynamic Grocery Industry In Florida]
In the Southeast, there is a large Black population that is different than in other regions. In fact, in Alabama, Georgia, Louisiana and Mississippi, more than 30 percent of the state’s population identifies as Black, according to the latest U.S. Census data. In Florida, more than one in four residents said they are of Latino/Hispanic heritage.
One of the more unique demographic elements of this region is the education and income level of its consumers. On average, Southeastern residents are less likely to have a four-year college degree. We also see that in most Southern states, residents are significantly more likely to live at or below the poverty line.
Overall, the median household income is significantly less than in other parts of the country, led by Mississippi and Louisiana, which have the nation’s lowest median household income rates.
As we saw in other regions, the suburban and rural population density in the Southeast, paired with varied diversity of the population and how widely it changes from state to state and city to suburb creates interesting opportunities and challenges for national grocery retailers. However, it opens the door to independents that operate in these markets.
Publix, Aldi, Piggly Wiggly and more
Founded in Florida in 1930, Publix has cultivated a reputation for exceptional customer service, high-quality products and a commitment to employee satisfaction.
With more than 1,300 throughout the Southeast, Publix is the largest employee-owned grocery retailer. For decades, the company has focused on being the premier local grocer in the Southeast. Its emphasis on employee well-being has fostered a sense of community within its stores, making them a beloved local institution.
Publix success relies on several key strategies. Its focus on perimeter departments, particularly bakery and deli sections, resonates with consumers. Offering a strong private label portfolio is one way to focus on competitive price alternatives. Its strategic store locations and commitment to clean stores help solidify its position as the go-to grocer.
In 2023, the discount grocer Aldi sent shockwaves through the Southeast retail food landscape when it entered into agreements with Southeastern Grocers to acquire several of its banner stores – Winn-Dixie and Harveys Supermarkets.
Under the proposed merger agreement, Aldi will acquire all outstanding SEG capital stock in an all-cash transaction, which encompasses all SEG grocery operations under the Winn-Dixie and Harveys Supermarket banners. This includes about 400 stores in Alabama, Georgia, Louisiana, Mississippi and Florida, where 75 percent of the stores are located.
[RELATED: SEG Selling Banner Stores To Aldi, Fresco Retail Group]
This move signaled Aldi’s intent to become a major player in the region. Aldi’s appeal lies in its focus on efficiency and value. A limited-selection, private-label-heavy approach allows the grocer to offer significantly lower prices on everyday items. This strategy caters to low-income shoppers, a demographic with a significant presence in the Southeast.
Beyond the dominance of Publix and the national chains, the Southeast boasts a vibrant network of independent grocers. These smaller chains bring a unique flavor to the region, often specializing in specific markets or offering innovative shopping experiences.
To provide a few examples, consider Earth Fare, the North Carolina-based chain focusing on organic and natural foods. It caters to the growing health-conscious population in the Southeast.
Piggly Wiggly is an iconic, century-old brand that maintains a significant presence in the Southeast. Stores are independently owned, often in smaller towns and cities and cater to local preferences and sense of nostalgia for longtime residents.
Larger chains such as Kroger, Ahold Delhaize USA, Walmart and Target recognize the distinct character of the Southeast grocery market and adapt their strategies accordingly.
Similar to what we see in other regions, these retailers tailor their product offerings to regional preferences but ultimately follow similar strategies to those used in other regions. They are effective but not necessarily differentiated.
The independent and regional retailers that are well established continue to serve as the key players to beat, though with the Aldi acquisition of Southeastern Grocers, this is the region to watch in 2024.
What shoppers want: Exploring critical consumer themes
Consumer trends in the grocery space tend to be consistent throughout the country. Shoppers continue to lean into natural and organic brands and products. Value is a function of 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. And the role of technology – shopper-facing and behind the scenes to improve operational efficiency – continues to differentiate both independent and national retailers.
However, regardless of region, there are some variations on how themes translate to retailer and brand preferences and consumer preferences. Age, income, race and ethnicity and even access to specialty retailers versus national players across channels will impact what matters most to consumers.
[RELATED: Grocers In West Virginia Prove Resilient]
When looking at the Southeast, consumers prioritize similar things to the average U.S. consumer.
According to a 2023 survey by PDG Insights, 63 percent of shoppers in the Southeast say they prefer grocery stores that emphasize sustainable and environmentally friendly practices, even if it means higher prices. More than half say they would like to see initiatives like reduced or eco-friendly packaging and food waste reduction practices implemented.
Other research by PDG Insights explored the role of local sourcing to consumers. In the region, 83 percent of 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 seafood.
Nearly half (45 percent) of Southeast consumers feel grocers need to prioritize sourcing local produce and products as part of broader sustainability initiatives, and they prioritize local brands to help build up their local economy and lessen their environmental impact. This is consistent with what we see among consumers in other regions in the U.S.
As with other regions, private label products are a critical piece of consumers’ product portfolio today, and shoppers in the Southeast display similar preferences. Nine of 10 shoppers say they buy private label products at least occasionally. In the region, 72 percent say they buy these products always or often, suggesting a strong pattern of usage.
More importantly, 49 percent of shoppers in the region believe they are buying more private label products this year versus last year, and 61 percent plan to continue to buy a mix of national brands and private label products in the future.
When deciding what retailer to shop with, 90 percent of Southeast consumers say that is important for retailers to innovate in private label to keep their interest and loyalty. This creates a tremendous opportunity for differentiation.
Blend of tradition, innovation
The Southeast grocery landscape provides a unique mix of tradition, innovation and fierce competition. Publix is the established regional player, while Aldi’s recent moves promise to shake things up in the value segment.
Independent grocers will find ways to succeed with localized assortment and niche offers, while national chains adapt with strategic localization and convenience.
Getting grocery right in the Southeast will be imperative for national players given its importance, yet the regional players will continue to innovate and ensure a competitive marketplace that ultimately benefits shoppers.
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.
