Hello and welcome to Financial Face-off, a MarketWatch column where we help you weigh financial decisions. Our columnist will give her verdict. Tell us whether you think she’s right in the comments. We want to hear from you. Please share your suggestions for future Financial Face-off columns by emailing our columnist at lalbrecht@marketwatch.com.
The face-off
Grocery shopping these days feels more like a game of dodgeball, where shoppers try to avoid being pelted by high prices.
What can shoppers do to trim their grocery bills? One option is to shop around and try a different store. So how does Walmart WMT, +0.18%, the country’s biggest seller of groceries, compare to Kroger KR, -1.74%, the country’s largest supermarket chain?
Why it matters
Inflation is blowing up prices on everything from airline tickets to electricity. The cost of groceries in particular has been soaring. In August, grocery prices were up 13.5% compared to the previous year; that was the fastest annual increase since 1979. I’ve seen half gallons of organic whole milk selling for around $8 at my neighborhood store.
Grocery bills can eat up a significant chunk of a household’s monthly budget, and they affect people differently depending on their income level. The highest-income households spend the most money per year on food (an average of $13,973 in 2021), but the lowest-income households spend the largest share of their incomes on food — 30.6% — compared to 7.6% for the highest-income households, according to the U.S. Department of Agriculture.
Increased food costs have taken a toll on older adults. Some three-quarters of people ages 50 to 80 say higher grocery bills have affected them either somewhat or a lot, and “nearly a third say they’re eating less healthily because of increased food costs,” according to a recent University of Michigan National Poll on Healthy Aging.
It can be easy to overspend on food. “If you’re not watching your spending in this area, you could be eating your wealth away,” wrote personal-finance writer Michelle Singletary in a column on grocery budgets.
The verdict
Walmart. This chart explains why.
My reasons
There’s no question about it, Walmart’s prices beat Kroger.
“You’ll have less choice at a Walmart, but from a shopping basket standpoint, if you’re willing to switch to store brands or other brands, you’re going to save money at Walmart,” said Phil Lempert, a food industry analyst and creator of the SupermarketGuru blog.
Aside from low prices, Walmart has the added bonus of being a big-box retailer. At some locations it’s possible to pick up new socks for your toddler, a deck chair, or an Xbox console MSFT, +3.33% while doing your weekly food shopping.
One-stop shopping saves time and money, and with gas prices as high as they are, that’s not to be overlooked. “When the economy is tough, a factor like that is even more important,” said Jeff Campbell, a former Whole Foods Market leader who now writes about the grocery industry at The Grocery Store Guy.
Of course, Walmart’s retail breadth only helps you if the store is close enough. “If you’ve got to drive for an hour or an hour and a half to get to Walmart, the savings are not going to be comparable to what you’re paying in time and in gas,” Lempert said.
(Walmart and Kroger did not respond to requests for comment on this story.)
Is my verdict best for you?
On the other hand, Walmart’s rock-bottom prices come at a cost. Lempert and Campbell both said Kroger offers superior customer service to Walmart. They also say Kroger is a clear winner for store ambiance and the shopping experience.
“The first thing you notice when you walk into a Kroger store versus a Walmart store is the overall decor,” Campbell told MarketWatch. “It’s a nicer, cleaner-looking store with overall better customer service, more employees readily available to answer questions.”
A Kroger store is more likely to have aesthetic perks like softer lighting and hardwood floors (or a close approximation) in the wine section, Campbell said. “Walmart is very bare bones — very much, ‘We gotta do this as cheaply as possible so we can operate on rock bottom margins.’”
(Walmart has a gross profit margin of 25.1% compared to 19.96% for Kroger.)
Kroger will typically have a wider array of brands to choose from, and its produce department will be more bountiful, according to Lempert, whereas Walmart’s produce section will probably have fewer choices. Kroger is also more likely to carry more organic products and items that are marketed as “all natural,” Campbell said.
Kroger caters to a food-savvy customer, but it isn’t as high-end as a Wegman’s or a Whole Foods, Campbell said. “They don’t want to be known as the most expensive place in town,” he said. “They want to be known for quality as well as reasonable prices.”
Kroger is aiming to merge with Albertsons, and the companies say that will mean lower prices for consumers — though some observers disagree.
Nonetheless, a merger between Kroger and Albertsons would give the combined stores more buying power, more manufacturing facilities and more store brands, making the new entity one of the leading consumer packaged goods companies in the country, Lempert said.
“That’s when the fight really begins between Walmart and Kroger-Albertsons, when they really have that kind of power behind them,” he said. “Then you’re really going to see a price war.”
So stay tuned, because this Face-off may need a rematch.
See also: 5 reasons NOT to shop at Aldi — and one big reason why you should
We want to hear from you. Tell us in the comments which option should win in this Financial Face-off. If you have ideas for future Financial Face-off columns, send me an email at lalbrecht@marketwatch.com.