Walmart is aggressively cutting prices in its grocery department, and that’s having a ripple effect across the entire food industry.
The price cuts have made Walmart one of the cheapest options in the country for groceries.
It has also helped draw out one of the longest stretches of food-price deflation in history, as Walmart’s rivals respond by also slashing prices.
“Walmart dominates in food in the US with (for the most part) the most attractive prices in food retail nationally,” Barclays analysts wrote in a recent research note.
The effect of this price war has been a drain on supermarkets’ profit margins. US grocers’ operating profits declined 5% last year, according to Moody’s data cited by the Wall Street Journal.
It has also been blamed for ending Kroger’s 13-year streak of quarterly same-store sales increases.
Kroger has been cutting prices to keep up with Walmart, but it still has further to go.
Walmart’s groceries cost about 4% less than Kroger’s, according to a recent price check by Barclays.
Analysts compared prices on a basket of 78 identical items at Walmart and Kroger stores in Nashville, Tennessee, to determine which retailer was cheaper.
Walmart offered lower prices than Kroger on 74% of the items checked.
Barclays found the biggest price differences between the two retailers on nonperishable and frozen items, where Walmart had a 5.6% price advantage over Kroger.
Kroger was cheaper than Walmart in the “fresh” category, however, which includes proteins, dairy, and vegetables.
Kroger was 3.3% cheaper in that category, but mostly because of steep discounts on a few items including eggs, apples, green grapes, baby carrots, bell peppers, and chicken breasts. Excluding those items, Kroger’s “fresh” products cost 15% more than Walmart’s, according to Barclays.
The analysts said Kroger may have a hard time catching up to Walmart on price.
“While we feel Kroger has clearly proven over the years that it is a superior operator, the magnitude of Walmart’s investments may prove difficult to overcome,” analysts wrote.
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