The Policy Shift That Decimated Local Grocery Stores

  • Nov 26, 2024
  • Stacy Mitchell
    •
  • Charts & Graphs
    •
    Click here to download the graph and timeline of events.

    For decades — from the 1930s until the 1980s — the U.S. grocery industry was remarkably competitive, with independent grocers thriving alongside large chains like Kroger and Safeway. Independent stores consistently accounted for more than 50 percent of grocery sales throughout this period. Meanwhile the four largest chains collectively captured only about 20 percent of the market.

    This rich diversity served communities and consumers well. Virtually every neighborhood and small town had a grocery store, and many had several.

    Then, in the early 1980s, the government stopped enforcing the Robinson-Patman Act, a critical antitrust law that prohibits price discrimination by suppliers. The consequences were swift and far-reaching: independent grocers declined rapidly and a few large retailers gained dominance. Food deserts and higher prices followed.

    New data from ILSR highlights the direct link between the decline in Robinson-Patman enforcement and the collapse of independent grocers — a clear example of how policy decisions shape our communities and everyday lives.

    Download the graph and timeline of events

    Timeline of Robinson-Patman Act enforcement...

    and its impact on the independent grocery market

    1920s-1930s

    The grocery chain A&P is rapidly taking over the market, driving local grocers out of business. Lawmakers find that A&P is pressuring suppliers for preferential deals. Food manufacturers, afraid of losing their biggest customer, have no choice but to give A&P discounts while charging local grocers higher prices.

    1936

    Congress passes the Robinson-Patman Act, which bans price discrimination. Suppliers can offer volume discounts that are based on legitimate efficiencies, so long as they are made available to all retailers.

    1936-1981

    For more than 40 years, the Federal Trade Commission enforces Robinson-Patman. During this time, the grocery industry is highly competitive. Independent grocers flourish, vying with chains like Kroger and Safeway for shoppers. Virtually every neighborhood and small town has a grocery store, often several.

    1981

    The FTC stops enforcing Robinson-Patman as part of a broader rollback of antitrust policy.

    1980s

    Walmart seizes on the policy shift, demanding deep discounts from suppliers. Suppliers, to offset their losses, raise prices for small grocers, who begin losing customers and closing. By 2001, Walmart is the nation’s largest grocery retailer.

    1990s

    Chains like Kroger and Safeway follow Walmart’s lead. They centralize their purchasing (previously handled regionally) to maximize leverage over suppliers. Then, in the late 1990s, they embark on a wave of mergers to consolidate their buying power.

    1995

    A growing number of small towns and urban neighborhoods no longer have grocery stores. A task force studying the problem coins the term “food desert.”

    2000s

    Food manufacturers merge with one another in an effort to counterbalance the power of large retailers. Soon a few giant food conglomerates — including Kraft Heinz, PepsiCo, Tyson, and others — own most of the brands sold in supermarkets. They use their leverage as dominant buyers of crops and livestock to drive down the prices farmers receive, harming rural communities.

    2020

    Amid supply-chain disruptions that leave grocery manufacturers unable to meet demand, Walmart announces costly penalties for suppliers who fail to fill 98% of its orders. Suppliers comply by shorting independent grocers, who can’t keep basics in stock. More shoppers turn to Walmart, whose market share soars.

    2021

    Despite more than a decade of federal and state tax incentives designed to lure supermarkets to underserved communities, the number of food deserts has only increased, driven in large part by the closure of locally owned grocery stores.

    2022

    Americans face a steep spike in grocery prices, which is fueled in part by consolidation. With too little competition, large grocery chains and food companies find they can inflate prices and profits without losing customers.

    You May Also Like

  •