Retailer Case Studies: How Different Value Cores Are Achieved
The Customer Value Propositions of 5 Retailers, in Detail
In this section, we’ll dive deeper into specific retailers who exemplify different customer value proposition positions in the grocery market, focusing on 5 of the Value Core segments. If you want to add color to any of the datapoints discussed in this section, you will also find customer feedback letters, in the next section, written to each retailer in our case study here.
We have Sprouts, representing the Quality First Non-Conventionals. Sprouts’ market share ceiling in any geography is limited, evidenced by their low footprint penetration and per customer share of grocery budgets. They have a more focused assortment and a more limited population relevance, leading to shoppers who can afford to and are willing to pay more for top-flight, perishable, and organic quality and better-for-you items.
They have middling emotional connection with shoppers (a score of 50 is the market average, compared to Sprouts’ 52) and grocery sales per square foot that are a little bit below the industry median of $699, signaling that the customer value proposition may not be as efficient at generating sales and securing loyalty as other retailers.
Sprouts 5YR sales growth and especially 2025 growth are near the top of the industry, thanks to a skew toward better-for-you and organic focused assortment, which is a type of product growing faster than the larger conventional categories. But there are signs that much of that lead is buoyed by store count growth, relative to other stores (rather than buoyed by innovations in the customer value proposition or a clearly more relevantly differentiated value proposition). When comparing overall sales growth to store count growth, Sprouts lags the industry average on that gap. The average difference in total sales growth and store count growth rates, what we’re calling “organic growth” here, is 2.8% for the industry and only 1.7% for Sprouts.
Given these results, it is no surprise that Sprouts overall RPI Score – a measure of how well their customer value proposition positions them for long-term market share growth – doesn’t rank in the 1st Quartile overall. We’ll examine what about their value proposition is driving this in this section.
The Customer Value Propositions of 5 Retailers, in Detail
We also have Publix, representing Quality-First Regionals. They are probably the strongest example of this group, being the only one to make the 1st Quartile of our RPI overall, and their results are the fruits of their strong customer value proposition. Most notable is their near industry leading emotional connection with shoppers and sales per square foot, as well as not only their topline growth but organic growth. They differentiate enough on Quality to be relatively unique but don’t ask for as big a trade-off on Savings as Sprouts, all while providing a broader assortment to meet a wider range of shopper needs.
Kroger and Grocery Outlet represent the two savings groups. Kroger drives great penetration in their footprint and share of customer wallet, due to their solid position on savings and a broad range. However, they are facing growing pressure, especially over the past few years, from: more sharply defined Savings-First retailers like Grocery Outlet and Savings-First peers like Aldi and Walmart; and greater customer willingness to not merely shop retailers that are close to straddling the middle with their Quality/Savings equation. As a result, their growth is middling to below average.
Grocery Outlet, more limited in range and extreme in the trade-off they require on Quality, also appeals to a narrower group of shoppers who have fewer missions and products to spend money on. Because of this big trade-off on Quality, penetration, share of wallet, and even organic growth lag the market. Their topline sales growth is strong, but that can almost be wholly chalked up to store count growth.
Then we have a large, mega-regional supermarket banner, whose name we have disguised here, but the results are real. They represent the Undifferentiated. Sure, through location convenience, ok quality, and ok prices, as well as a broad assortment, they get people to take fill-in missions and sometimes larger shops. But growth is challenged. And, more worryingly for them, emotional connection is behind the market, signaling vulnerability to new entrants offering something more distinct (pretty much any national player or many other regionals like Publix, who are expanding their footprint).
The Levers of Price, Promo and Rewards
If Sprouts wants to broaden its reach, increase share of wallet, and drive more organic growth, driving better base prices is an obvious place to start. But when we look at the chart below, this isn’t a problem compared to its strategic neighbor, Publix. Rather, savings through promotions and private brands are clearly a disadvantage.
Kroger, on the other hand, has several foils against Grocery Outlet to salve its base price perception disadvantages. Especially with savings driven through private brand, promotion relevance, and loyalty. As Publix encroaches more and more on the midwestern Kroger heartland, savings perceptions shouldn’t be a major problem.
Our Undifferentiated regional supermarket has issues up and down the savings levers. Weak on base price while trying to distinguish on personalized levers of savings, but they clearly aren’t executing as well as they could there either, when compared to industry leaders on personalization, like Kroger.
The Levers of Quality
Sprouts shines on many quality attributes, especially natural/organic, growth swim lanes. However, these type of products still do not have as broad of an appeal as conventional, and a Quality-First regional like Publix has a solid footing in both areas. Perhaps in part because of Publix’s broader assortment, Publix is also able to have an edge over Sprouts in the perception that the assortment it offers is new and different. Kroger is slightly ahead of Sprouts here, too. This is troubling for a Quality-First Non-Conventional, whose core competency needs to be offering something new and different that you can’t find at regionals. If strong regionals are meeting this need, this makes it harder for Sprouts to cling to the already small basket sizes it gets.
Part of the edge that Kroger and Publix have over Sprouts here is likely due in part to the greater number of SKUs and the opportunity to offer something new and different. However, equally large regionals like our Undifferentiated struggle in the area of “new and different variety” too. What is more likely happening is that both Publix and Kroger are better collaborators and partners with their suppliers, driven likely in large part to marshaling the right data (a mix of their own customer data, rest of market data, and buyer acumen) to make the right decisions on what is both relevant, new, and different for their customers.
As mentioned already, Grocery Outlet is a bit too far off the map in their overall quality perception to be a major threat to the grocery landscape, outside of store expansion and peeling away from competitors a modest amount of visits and items in the markets they enter. On top of that, the product variety they do have for the shopper and the missions they are attracting is also questionable, scoring low on “right variety of products to meet my needs”. A range review, aligning better with their customer and the markets they are in, may be in order.
Select Levers of the Value Amplifiers
In pillars that help amplify the Value Core of Quality and Savings, Kroger and Publix are leaders, for different reasons. Kroger is strong in Digital attributes: online shopping ease, having an app that makes shopping easier, and having technology that makes experiences better. Publix is solid in these areas but especially strong in speed of shop, location convenience (likely driven by their extremely high store density in Florida markets and markets closer to Florida), as well as in the Operations attribute related to in-stock consistency.
These digital strengths, while serving a need for a better, easier, more convenient shopper experience both in-store and online, also are necessary enablers for their ability to stand-out on personalized levers of savings – like promotion relevance and loyalty program savings. We have seen time and again in our RPI study over the years that retailers stronger on the Digital pillar also have a leg-up at driving advantages in Personalized Promotions, and Rewards.
Kroger has hit hard times recently in their Operations perceptions, especially in-stock consistency. They clearly lag the market. Again, as Quality-First Non-Conventionals or Publix – who are strong at delivering a consistent experience – enter Kroger’s market, shoppers have reason to give these new players a try and keep patronizing them, due to a Kroger vulnerability.
Grocery Outlet and Sprouts also struggle to achieve a high penetration in the cities in which they operate due to a lack of store density and more out-of-the-way store locations, which shows up in the customer value proposition as a vulnerability in perceptions of “has convenient locations”.
