Investors in grocery-anchored shopping centers might want to do extra due diligence on their anchor tenants going forward: according to our sister publication Supermarket News, the sector will likely face some major consolidation next year.
With consumer spending winding down, supermarket operators will be forced to aggressively slash prices to lure in shoppers, further weakening the chains that are already struggling. On the other hand, the outperformers, including Whole Foods, Kroeger and Winn-Dixie, might be able to expand through acquisitions. According to one market analyst:
There is an argument to be made that you are going to see more merger-and-acquisition activity from Safeway and Kroger just to get growth to overcome the macro challenges. Major price wars [could] create a tinderbox, where all it takes is a little bit of flame to light the conflagration, and that will lead to significant M&A activity.
Traditional supermarket operators have come under increased pressure in recent years as discounters Target and Wal-Mart, dollar stores and drug store chains started adding groceries to their merchandise selections.