dunnhumby's Seventh Annual Retailer Preference Index (RPI) for U.S. Grocery
THE GROCERS BEST ‘BUILT TO LAST’
H-E-B Holds Top Spot In dunnhumby’s Annual Grocery Rankings; Other Regional Supermarkets Gain Momentum
Customers emerged from 2020 – 2022 placing more importance than ever on finding the right balance of savings and quality while placing less importance on saving time.
Pandemic surge in retailer digital capabilities and consumer digital adoption led to greater importance of personalized pricing, promotions, rewards. National and regional retailers are quickly closing the digital gap that Amazon had opened.
At the same time, omnichannel wholesalers accelerated their long-term momentum more than any other formats during this period. So, while national and regional grocery stores may have closed the digital gap with Amazon, omnichannel wholesalers such as Costco (#2 in the rankings), Sam’s Club (#5), and BJ’s Wholesale (#10) will remain fierce competitors.
Table of Contents

Erich Kahner
Author
Eric Karlson
Creator of Original RPI Model


Erich Kahner
Author

Eric Karlson
Creator of Original RPI Model
Executive Summary
- dunnhumby forecasts 2024 U.S. grocery market sales growth of 0% to 1%, one of only three years in the past 30 below 1% -- the slowest growth rate since the Great Recession of 2009. This is due to economic headwinds still facing the consumer, namely, slowing disposable income growth, lower savings rate, higher debt, cost to service that debt, and the drying up of pandemic related savings buffers.
- While the relative importance of customer needs in 2023 was similar to 2022, customers are re-evaluating their perceptions of retailers more than ever. Heightened competitive intensity, retailer responses to competitive moves and consumer attention to differences in retailer value propositions are creating a perfect storm contributing to these changes in customer perceptions. Knowing your customer, and your competitive positioning on these customer needs, will be critical to creating organic growth in 2024.
- To gain understanding of the U.S. grocery consumer, we rely on the grocery industry’s most robust statistical model, the grocery Retailer Preference Index (RPI). The RPI is the only approach that combines financial results with customer perception. The model is a prediction. Given customer perception of a retailer’s value proposition, it predicts which retailers will have the strongest financial results and strongest emotional bonds with customers over the long-term.
- We also illuminate how the consumer views the grocery market and how different retailers are meeting their needs, through the market in general as well as through the eyes of different consumer segments.
- Savings through low base prices and highly personalized promotions and rewards remains the strongest driver of better long-term retailer performance, followed by maintaining high Quality assortment. Time savings enabled by Digital experiences is the third highest driver of long-term success. This is very similar to the story last year.
- Time savings through brick-and-mortar experiences, while a highly relevant need, is a well-met consumer need by the grocery market, with relatively little competitive differentiation between retailers. So, it ranks last in driving differences in long-term retailer results.
- H-E-B is number one in our RPI ranking, meaning they have the strongest customer value proposition for the long-term. Since we began the RPI in 2018, H-E-B was topped all other grocers three times, more than any other retailer (besting Amazon, and Trader Joe’s which ranked #1 twice). This is due to their superior ability to deliver a combination of better savings and better experience/assortment, supported by time savings through superior digital capabilities.
- The rest of the 1st Quartile of our RPI rankings is composed of best-in-class regional supermarket banners and national, non-traditional formats like wholesale club stores, mass merchants, and limited SKU discounters.
- Retailers that appeal to the segment of shoppers whose needs are “Better-For-You" focused -- or whose needs are focused on digitally integrated experiences -- are best positioned for long-term growth, especially if these retailers focus on driving savings (rather than asking customers to trade off on savings over quality).
- Kroger is one retailer whose core customer base is over indexing with customers who exhibit better-for=you, digital and savings needs, positioning them well for growth. On top of this, they have also made improvements in customer perception of savings in 2023. As a result, Kroger and Fry’s – another Kroger banner – joined the 1st Quartile of our RPI ranking for the first time ever.
- Eight other regional supermarket chains were our biggest climbers in this year’s RPI rankings. Retailers that have competitive advantages in personalized savings and localization -- while minding the gap on base price perception -- benefited from the shocks and shifts from the time period of 2020-2022. The momentum for these retailers continues, helping them climb the rankings in 2023.
Insert slide 10 w/out a title

Source: Retailers ranked by RPI score, which is a result of dh’s RPI model. Customer perceptions input into the model were from dh RPI survey database, August 2023, n=10,641 US grocery shoppers. Each retailer’s perceptions are among past 4 week shoppers of the retailer. *Rankings subject to slight change
This is dunnhumby’s forecasted 2024 growth rate for the U.S. grocery industry. While we forecast a range of likely growth rates -- between 0% and 1% for 2024 – but anywhere in that range would be slowest growth rate since the Great Recession of 2009. See our Economic Forecast for more details.
2024 projection. One of the slowest growth years for grocery in the past 30 years.
Insert slide 1 w/out title

This will happen despite 2023’s growth rate of 2.5%, which is already below the long-run historical average for grocery of 3.0%. Therefore, weak 2024 growth can’t be explained by coming down from a strong 2023. Also, inflation in 2024 should be around 2.0%, right in line with its long-run average. This means slowing inflation really isn’t to blame for 2024, in what will be one of the slowest grocery growth rates of the 21st century.
The reason for slow grocery growth – and the answers for how grocers can outcompete others – likely lies with the consumer. The “Resilient Consumer” has been a common conceit in headlines the past two years. Consumer spending has kept the US economy healthy despite economic shocks of high inflation and resulting increasing interest rates. However, in late 2023, excess savings from the pandemic finally dried up, and credit card delinquencies began to increase. Also, people seemed to have been trained to save less of their own income; in 2023, monthly personal savings rates remained between 3% and 5% of total income, well behind pre-pandemic monthly savings rate. Paltry savings and expensive credit are two headwinds for consumer spending next year. Layer on forecasted real disposable income growth of only 1% in 2024 -- also below its long-run average of 2.5% -- and the “Resilient Consumer” will have its biggest test yet.
Insert a picture of a shopper

Knowing your customer, and your competitive positioning on these customer needs, will be critical to scratching out organic growth in 2024. In this year’s Grocery Retailer Preference Index report, we do what we always do: identify which retailers are best positioned to win over the long-term, and explain why. We do this with our time-tested approach of modeling which customer perceptions are the most associated with long-term financial results and emotional connections with shoppers. But this year, more than previous years, we illuminate how the consumer views the grocery market and how different retailers are meeting the general population’s need as well as the needs of different consumer segments.
Grocery Growth and Economic Indicators
Insert Slide 2 w/out title

Approach
To answer these questions, we rely on the grocery industry’s most robust statistical model, the grocery Retailer Preference Index (RPI). The RPI is the only approach to ranking grocers that combines financial results with customer perception. It includes the largest 63 retailers in the industry that sell everyday food and non-food household items. The financial data we use in our model comes from Edge Ascential, and the customer perception data is sourced from our annual survey of ~10,000 American grocery shoppers. Also, while our opinion does not influence the results of the model, dunnhumby’s expertise in the grocery industry ensures that the model design and interpretation reflect lessons learned from decades of serving hundreds of grocery retailers, thousands of consumer-packaged goods companies, and billions of customers, globally.
The model is a prediction. Based on customer perception of a retailer’s value proposition, the model predicts which retailers will have the strongest financial results and strongest emotional bonds with customers over the long term. More specifically, it predicts a composite measure of success, which includes five-year compounded annual sales growth (momentum), U.S. sales market share (size), sales per square foot (efficiency), share of individual customers’ grocery budgets (efficiency) and strength of emotional connection with customers (bonds).
The model also provides a rationale for this prediction. It tells us which dimensions of the value proposition matter the most for driving financial results and emotional bonds. We call these dimensions “drivers” of the value proposition; customers might know them as their needs. With the customer perception data we have on each retailer, we can punch that information into our model to predict which retailers are best positioned to achieve the strongest long-term results.
The dunnhumby Retailer Preference Index (RPI) statistical model tells us which need states have the biggest impact on retailer outcomes. We then weigh customer perception of each need state by these impacts to arrive at an RPI score
Preference Drivers (customer perceptions of the value proposition – i.e. “Need States”)
Price, Promotions, and Rewards
Quality
Speed and Convenience
Digital
Operations
Retailer Results (financial outcomes and strength of bond with customers)
Emotional Connection
Would be sad if this retailer closed
Trust this retailer to do the right thing for me
Would recommend this retailer to friends/family
+
Retailer Performance
5 YR Grocery Sales CAGR (growth)
U.S. Grocery Sales Market Share (size)
Grocery sales per sq. foot (efficiency)
Customer share of grocery budget (efficiency)
Emotional Connection
Would be sad if this retailer closed
Trust this retailer to do the right thing for me
Would recommend this retailer to friends/family
+
Retailer Performance
5 YR Grocery Sales CAGR (growth)
U.S. Grocery Sales Market Share (size)
Grocery sales per sq. foot (efficiency)
Customer share of grocery budget (efficiency)
Model approach: Factor analysis of 30 performance perception ratings for all retailers in this study was performed to determine the Drivers. Linear regression was then applied, with Factors as independents and a composite metric for emotional connection and retailer performance as the dependent variable.
The Customer: Like most people, Joe and Jane have a lot of responsibilities. They are employees, spouses, friends, and parents. Money and time are not limitless, but they also have their health and happiness to consider, as well as the health and happiness of others. With either a few clicks of an app or five to ten minutes in a car, they can visit one of several different retailers to buy food items or common non-food items like health, beauty, pet, paper and cleaning products.
Many of these retailers sell most of these things. So, Joe and Jane are well-practiced in the subtle art of balancing all of their grocery needs while balancing their grocery budgets. With the money they saved on non-food products from a low-priced mass merchant, they can spend more to get the produce and meat quality they want from an upscale supermarket. They can also go to a limited SKU discounter for their dairy items since they can get in quickly and save even more money. The local supermarket that their grandparents used to shop has great sales on cereal and soup one day, and another day they need eggs in a pinch so they do not mind paying an extra buck because of the store’s convenient location.
Sometimes they throw produce in their cart while on a non-food mission at a supercenter; and sometimes (though not as often) they throw non-food items in their cart while they are on a food mission to a supermarket. They spread their grocery budget across four retailers, giving one store half of their budget and the others the rest.
Joe and Jane, they are like most people.
There are five drivers of the value proposition, revealed by an analysis of the 30,000 customers we have surveyed between October 2021 and November 2022. In a customer’s own words, they would be called: Price, Promotions, and Rewards, Speed and Convenience, Quality, Digital, Operations. We use these terms to make it clear that this is the perspective of the customer, one of the unique aspects of the RPI model.
Customers seek to maximize their benefits and minimize their costs, across all of their need states. Retailers have a variety of levers they can pull to deliver their customer value proposition
Customer Value Proposition
Benefits
Costs
Customer Value Proposition
Benefits
Speed and Convenience
- Speed to shop the store
- Speed to checkout
- Location
Quality
- Product quality
- Better-for-you/natural and organic offering
- Customer service
- Store cleanliness/ ambiance
Digital
- Online shopping
- Shopping app
- Tech that makes shopping experience better
Operations
- Out of stocks
- Prices are accurate/consistent
Price, Promotions, and Rewards
- Base prices
- Mass promotions
- Personalized promotions and loyalty
- Private brand and bulk packs
Speed and Convenience
- Speed to shop the store
- Speed to checkout
- Location
Quality
- Product quality
- Better-for-you/natural and organic offering
- Customer service
- Store cleanliness/ ambiance
Digital
- Online shopping
- Shopping app
- Tech that makes shopping experience better
Operations
- Out of stocks
- Prices are accurate/consistent
Costs
Price, Promotions, and Rewards
- Base prices
- Mass promotions
- Personalized promotions and loyalty
- Private brand and bulk packs
Saving customers money matters most to driving better long-term results for retailers; among benefits, customers are least likely to trade-off on making products better and most likely to trade-off on saving themselves time
While all drivers factor into a strong value proposition, we know which drivers are more or less important for driving long-term results. Given limited retailer resources, this is critical knowledge, since it helps us understand where retailers need to focus to provide the best return-on-investment.
“I don't make enough money to purchase healthier foods because they are more expensive. I try to get as much as possible without going over the budget I have for food/other household needs but with inflation it’s impossible especially for larger families who don't get any type of public assistance. I would try to purchase more healthier options. I would also purchase more meats or fresh foods rather than boxed meals/frozen meals.”
- 25–34-year-old shopper from the Mid-Atlantic region, two-child household
While all drivers factor into a strong value proposition, we know which drivers are more or less important for driving long-term results. Given limited retailer resources, this is critical knowledge, since it helps us understand where retailers need to focus to provide the best return-on-investment.
During the first year of the pandemic, anything that helped people avoid time in public increased in importance, while product prices and quality took a back seat
“Price, Promotions, and Rewards” is the most important priority for most customers, followed by “Quality” and “Digital.” Since we’ve run our RPI model for six years now, we know how customer needs have shifted from 2018-2022, and we can determine how the pandemic and record inflation has impacted the competitive landscape and each retailer’s position in it.
Before the pandemic, “Price, Promotions, and Rewards” and “Quality” were the dominant customer needs, much like today. Along the way, we saw certain drivers gain and lose prominence in the value equation for customers. In 2020, “Speed and Convenience”, “Digital”, and “Operations” rose in importance while “Price, Promotions, and Rewards” and “Quality” fell. This shift benefited traditional regional grocers, who had a unique combination of convenient locations, smaller stores and one-stop shopability. Their vulnerabilities to more focused national players on either “Money” or “Better” didn’t hinder them as much in 2020. During this period, grocery delivery surged in relevance, and Amazon was a prominent go-to for many since they already had a relationship with tens of millions of customers.
“Price, Promotions, and Rewards” is the most important priority for most customers, followed by “Quality” and “Digital.” Since we’ve run our RPI model for six years now, we know how customer needs have shifted from 2018-2022, and we can determine how the pandemic and record inflation has impacted the competitive landscape and each retailer’s position in it.
Before the pandemic, “Price, Promotions, and Rewards” and “Quality” were the dominant customer needs, much like today. Along the way, we saw certain drivers gain and lose prominence in the value equation for customers. In 2020, “Speed and Convenience”, “Digital”, and “Operations” rose in importance while “Price, Promotions, and Rewards” and “Quality” fell. This shift benefited traditional regional grocers, who had a unique combination of convenient locations, smaller stores and one-stop shopability. Their vulnerabilities to more focused national players on either “Money” or “Better” didn’t hinder them as much in 2020. During this period, grocery delivery surged in relevance, and Amazon was a prominent go-to for many since they already had a relationship with tens of millions of customers.
“Now that I work 100% remotely and am not leaving my house every day for a commute, I am overjoyed to not have to leave the house for grocery shopping either and I take full advantage of ordering online for delivery/shipment to my door. I buy all groceries online for delivery with the exception of perishables which I now don't have to go out for more than once a week.”
- 35–44-year-old shopper from the Midwest, $25k-$50k per year household income
“Working from home means I can grocery shop at my leisure since I no longer sit in traffic for a commute. This means the ability to go to different stores for different items and I no longer plan an entire day just for grocery shopping.”
- 55–64-year-old shopper from the Western region, $150k-$200k per year household income
During the second year of the pandemic, customers focus shifted back toward saving money, and they rewarded retailers who provided better omnichannel experiences
In 2021, as the economy opened back up and vaccines provided people with the confidence to move about, “Speed and Convenience” gave back some of the importance it gained, and people resumed some of their savings hunting behaviors. “Digital” continued to gain momentum though, indicating that the 2020 shock to consumer behavior resulted in some rewiring of habits in favor of the digital channel.
In 2021, as the economy opened back up and vaccines provided people with the confidence to move about, “Speed and Convenience” gave back some of the importance it gained, and people resumed some of their savings hunting behaviors. “Digital” continued to gain momentum though, indicating that the 2020 shock to consumer behavior resulted in some rewiring of habits in favor of the digital channel.
“The biggest challenge is having the same budget, but everything that we normally buy is way more expensive! The price of groceries has gone up exponentially in the last year which makes it hard to stay on budget. I am having to make a lot more food from scratch as a way to save money and still have healthy options.
- 35–44-year-old shopper from the Western region, $75k-$100k per year household income, 3 child household
During 2022, customers shifted their focus back toward saving money or seeking a good overall value (balancing product quality with better prices) while trading off on time savings, and a digital experience and operations
In 2022, “Price, Promotions, and Rewards” gained even more importance, and “Speed and Convenience” dropped, as consumer confidence in the economic future hit record lows and people demonstrated a willingness to drive the extra mile or hunt the extra minutes for a good deal. 2022 was all about finding the right products at the right prices and less about saving time.
In 2022, “Price, Promotions, and Rewards” gained even more importance, and “Speed and Convenience” dropped, as consumer confidence in the economic future hit record lows and people demonstrated a willingness to drive the extra mile or hunt the extra minutes for a good deal. 2022 was all about finding the right products at the right prices and less about saving time.
Due to this extended period of uncertainty, customers are more conservative with their grocery budgets than ever while also seeking ways to make their experience more seamless; they’re trading off more than ever on dependability and time savings
What have these ups and downs amounted to?
“Price, Promotions, and Rewards” and “Digital” are more important than ever. The rise of “Digital” likely has staying power.
What have these ups and downs amounted to?
“Price, Promotions, and Rewards” and “Digital” are more important than ever. The rise of “Digital” likely has staying power.
45% of grocery shoppers are omnichannel today, versus just 39% in 2019. This amounts to 9.4 million more omnichannel households, with a combined grocery budget of $4.9B
The pandemic increased the percentage of American’s shopping online for groceries from 39% to 45% of the country – a six percent rise – and, despite record inflation, over half of those people that migrated online during 2020 remained online grocery shoppers in 2022.
The pandemic increased the percentage of American’s shopping online for groceries from 39% to 45% of the country – a six percent rise -- and, despite record inflation, over half of those people that migrated online during 2020 remained online grocery shoppers in 2022.
Format and channel proliferation has been the long-term trend in grocery retail, starting over 100 years ago and continuing through to today
“Price, Promotions, and Rewards” has always been the most important need in our model, and it likely has been the most important customer need for much of the past 100+ years. The story of who has won and lost is also a story of the consumer’s insatiable appetite for a better deal. Absent a robust RPI dataset prior to 2017, we can simply trace the rise and fall of formats over the decades to identify the staying power of “Price, Promotions, and Rewards.”
Until the digital format, newer formats entered into food retail with value propositions that saved customers more money than any previous format
While price differentiation is clear between formats, quality differentiation, outside of limited SKU discounters and specialty formats, is less apparent for shoppers
Over time, Americans have seen disposable income steadily rise, which has reduced the strain of food on household budgets. Despite this, retail formats that deliver better prices on food continued to take share
Throughout modern grocery history, formats and retailers who brought ever lower prices slowly but steadily gained share, reshaping the grocery landscape. They carved chunks of share away from those that were not as competitive on price. They did so even as consumers’ real disposable incomes steadily grew and food as a percentage of household budgets fell.
While price sensitivity likely declines as household income increases, grocery prices still matter just as much as product quality for even the highest income ranges
In other words, while people grew richer in real dollars and food became less critical to balancing the budget, they still shifted their business to retailers that saved them money. People love saving money on groceries, even those who are wealthier.
“The biggest challenge is the cost of the groceries. We like to buy high quality food, but we need to stay within our budget.”
- 45–54-year-old shopper from the Western region, $100k-$150k per year in household income, 3 child household
“The grocery store I like best doesn't have the best prices, especially for paper products, cleaning products and other household items, so as prices have risen I am forced to shop at different stores. This is something I do not like.”
- 55–64-year-old shopper from the South, $150k-$200k per year in household income
Before 2020, mass pricing levers drove most of a retailer’s competitive position; after the pandemic and a year of inflation, personalized levers have 3x as much impact relative to mass levers
So, if you are a regional supermarket, make no mistake, supercenters, club stores, limited SKU discounters are your main competition for your customers grocery budgets, even their food budgets. If you are mostly focused on outgunning other supermarket chains, you may win a battle but lose the war.
For more detail on which levers you can pull to most successfully save customers money, see our RPI Special Report: Inflation Edition, published in September 2022.
With the prominence of “Price, Promotions, and Rewards” as immutable as a law of physics, this implies that that the rise of other needs are limited by the trade-off they require on prices. If eCommerce costs more than a brick and mortar only experience, it has a ceiling. Customers and retailers are savvy though, and both have appeared to recognize the synergy provided by “Digital” and “Price, Promotions, and Rewards.” There is a shared lever to both, not the most prominent lever in either but capable for fulfilling both need states at once: personalization of pricing and rewards. Considering the rise in importance of “Digital” over the past few years, it is no coincidence that this lever explains most of the rise in importance of “Price, Promotions, and Rewards” during that same time.
A more seamless experience unlocks better personalization. Leaders in leveraging digital for better personalization are Kroger Co. banners
Better base prices enable more effective personalized promotions / rewards. Leaders in driving the best combination of base prices and personalization are Fry’s, ShopRite and Food Lion
Mass pricing, largely driven by base price, is still most important to customers in fulfilling their need for savings, but personalized levers have risen in importance. With the staying power of seamlessness, this increased need for personalization has staying power as well. It is worth repeating though that, if you are a retailer trying to appeal to the majority of your customers, your base prices have to be competitive or the ROI of any promotions – personalized or otherwise – will be stunted.
H-E-B, Market Basket, WinCo and ShopRite join a host of national and super-regional retailers in the 1st Quartile, with the strongest customer value propositions
H-E-B. Costco. Amazon. These three retailers headline a group of fifteen retailers whose value propositions are currently most aligned to what matters most to customers. They provide the best combination of customer benefits while minimizing customer costs. As a result, they are best positioned to grow over the long-term.
H-E-B. Costco. Amazon. These three retailers headline a group of fifteen retailers whose value propositions are currently most aligned to what matters most to customers. They provide the best combination of customer benefits while minimizing customer costs. As a result, they are best positioned to grow over the long-term.