Nebraska’s grocery industry is at a crossroads as economic conditions shift and legislative policies evolve. Ansley Fellers, executive director of the Nebraska Grocery Industry Association, highlighted for The Shelby Report key concerns facing independent grocers, including competition from dollar stores, rising labor costs and wholesale pricing challenges.
Nebraska’s economy is experiencing modest growth, influenced by high interest rates and labor market constraints. The state’s job market remains tight, with low unemployment but persistent shortages in sectors such as manufacturing and healthcare.
According to the University of Nebraska-Lincoln’s Bureau of Business Research, real wage growth is expected to benefit the economy, but high interest rates could slow overall progress in 2025. However, growth is expected to accelerate in 2026.
The Nebraska Economic Forecasting Advisory Board raised revenue projections for the current fiscal year at its Feb. 28 meeting. The board increased projected general fund receipts by $175 million due to an anticipated rise in corporate income tax receipts, partially offset by declines in other tax categories.
The revised total revenue projections for fiscal year 2024-25 now stand at $6.435 billion, an increase of $100 million.
For FY 2025-26, the forecast remains largely unchanged at $6.955 billion, while FY 2026-27 projections have risen by $28.5 million to $7.25 billion.
Independent grocers, competitive pressures
Fellers noted that Nebraska’s independent grocery stores play a crucial role in rural communities, where “it doesn’t make a lot of sense” for large supermarket chains to operate. However, independents face growing competition from dollar stores, which continue expanding into small towns.
“Dollar stores are going in places that surprise even the people that live there,” Fellers said. “In some cases, in a town of just a couple thousand people, where there’s already a grocery store, there’s maybe two dollar stores, which is wild – and that’s challenging.”
The Center for Rural Affairs conducted a study in September 2024 that showed Nebraska lost 30 percent of its independent rural grocery stores between 2016-21. (See related article on page 8.)
Fellers said NGIA’s numbers are consistent with that study, adding that she believes the numbers are leveling off a bit.
“With the discussions about thinking a little more creatively, about how you can manage these stores, maybe thinking about technology … and also getting the next generation interested and engaged in doing this kind of work … however we can make it look more enticing and really give people more options, we are in it. And I think it’s helping. “
Addressing wholesale, labor costs
Independent grocers also contend with higher wholesale costs, particularly in rural areas where transportation expenses add to overall pricing challenges. Fellers emphasized the importance of exploring cooperative purchasing strategies to help small grocers manage costs.
She noted the success of the Rural Access Distribution Co-op in North Dakota. Independent grocer Diana Hahn spoke at the NGIA Grocery Industry Summit in September to explain the RAD model.
“There was a great deal of interest,” Fellers said. “Now it’s just a matter of having the ability to get off center.”
A bill introduced in the state legislature may help with that.
“Part of the legislation that was introduced here was to provide incentives to stores to be creative in [managing wholesale costs],” Fellers said. “The cooperative angle of having that hub-and-spoke model – maybe we have a store in a community of a little bit larger size that could be the hub, and then collectively purchase with several other stores in the region and get that secondary delivery.”
Labor costs remain another pressing issue, with recent minimum wage increases and paid leave mandates impacting small businesses.
Nebraska’s minimum wage is set to rise to $15 per hour in 2026, with additional increases tied to the Midwest Consumer Price Index. Proposed legislation aims to cap the youth wage at $13.50 and introduce a training wage for new employees to provide relief for small businesses.
Legislative efforts
Lawmakers are considering various bills to support independent grocers, including LB 375, the Grocery Reinvestment Option Bill, which would provide grants for cooperative purchasing agreements and online retail operations.
Other proposed measures aim to clarify paid leave requirements for small businesses and reduce unemployment tax burdens.
“We are definitely at a tipping point where if we don’t offer these little businesses some amount of flexibility and some amount of reprieve, I think we will see that drop in independent businesses happen a lot faster than we otherwise would,” Fellers cautioned.
“We definitely support any sort of incentives getting out there, but if we can’t keep their costs down on the front end, we can’t chase it with incentives.”
Despite these challenges, there is renewed interest in preserving independent grocery stores. Initiatives such as the NGIA’s Nebraska Grocery Industry Summit, held in partnership with the Nebraska Cooperative Development Center, aims to connect retailers with resources to sustain and grow their businesses. Fellers said the summit is targeted to independent retailers, but wholesalers, manufacturers and “anyone we think might be interested” are invited.
[RELATED: Amid Mounting Issues, Nebraska Legislation Seeks To Support Rural Independent Grocers]