Report: Specialty, Discount Grocers Outperform As Supermarkets Lose Ground

Consumer Edge released its U.S. Grocery Outlook 2026, showing that shoppers are changing where they buy groceries. Specialty grocers are gaining market share while traditional supermarkets are losing ground.

Overall grocery spending declined about 3 percent year-over-year on a 12-month basis ended Feb. 28. However, Consumer Edge’s transaction data shows consumers are not simply spending less – they are becoming more selective and shifting dollars toward retailers that offer either strong value or a more differentiated shopping experience.

Trader Joe’s leads the pack

Trader Joe’s stood out as the category’s top performer, growing more than 3 percent year-over-year and outperforming the grocery sector by 6 points.

The brand is gaining traction across income levels and age groups, including double-digit year-over-year growth among Gen Z shoppers. It also continues to outperform peers on customer loyalty, with a 35 percent retention rate four quarters after first purchase — higher than both ALDI and Wegmans.

Many shoppers who buy groceries at competitors still spend a significant portion of their grocery budget at Trader Joe’s. For example, Sprouts Farmers Market shoppers allocate 48 percent of their specialty grocery spend to Trader Joe’s, and Wegmans shoppers allocate 47 percent.

Specialty grocers win across income levels

The specialty grocer subsector, comprised of retailers such as Trader Joe’s, Whole Foods and Wegmans, is seeing growth from low-, middle- and high-income households. The pattern signals broad consumer appeal across income groups.

Traditional supermarkets, including names like Publix and Safeway, are seeing pullbacks from every income group, with the sharpest declines among lower-income shoppers.

Discount growth plateaus

Discount grocer share has leveled off after several years of gains.

Retailers such as Aldi, Lidl, Food 4 Less and Grocery Outlet gained share of the overall grocery market from early 2022 through mid-2024 as shoppers traded down. However, that growth has plateaued since mid-2025.

Whether the trend continues will depend on the trajectory of food inflation and whether shoppers continue to shift spending toward specialty grocers.

Sprouts expansion intensifies competition

Sprouts Farmers Market has grown its Texas store count by more than 12 percent annually over the past three years. The grocer now operates 477 stores across 24 states, with at least 40 more planned for 2026.

In Austin, where Whole Foods was founded, the share of Whole Foods shoppers who also visit Sprouts climbed from 29 percent in March 2024 to 33 percent by February 2026.

Distinct identity wins

Michael Gunther, SVP of research and market intelligence at Consumer Edge, said the data reveals a grocery landscape where shopper choices are increasingly deliberate.

“What’s happening in grocery isn’t just about price. Shoppers are making more deliberate choices about where they spend their money, and they’re gravitating toward retailers that give them a clear reason to be loyal — whether that’s unbeatable value at a hard discounter or a curated, private-label experience at a specialty grocer,” Gunther said.

Gunther said the middle of the market faces the greatest challenge going forward.

“Traditional supermarkets are caught in the middle, and the data suggests that pressure isn’t going away,” Gunther added. “The grocery retailers best positioned for 2026 are those with a distinct identity and a customer base that keeps coming back.”