The Fall of the Great A&P: The Perils of Ignoring Consumer Insights

America’s first grocery store chain, The Great Atlantic & Pacific Tea Company (better known as A&P) has filed for Ch.11 bankruptcy for the second time in five years. A&P is the oldest food retailer in the U.S., and in the 1960s, it was also the largest. Now, store count is down by over 97% from around 16,000 stores to about 300 – and falling. How did A&P tumble from the iconic industry giant it once was?

To be sure, food retailers declaring bankruptcy is not uncommon. Low profit margins and annual changes in wholesale food prices make the grocery industry a tough environment to thrive in. Unlike other industries, the grocery sector’s inherent challenges leave brands very little room to become complacent. Understanding consumers becomes critical to a brand’s success.

Dissecting the A&P Brand

A&P’s brand identity was “one-store-fits-all,” with consistent layouts, convenient locations and affordable prices across its fleet of stores. This identity proved profitable for a good long while because it met shoppers’ needs in a way that other grocery chains did not, as evidenced by A&P’s impressive growth in the 1960s. However, A&P’s position as the grocery chain to beat caused the brand to get too comfortable with its model. A&P’s strategy worked so well, for so long, that the company neglected to notice and adapt to evolving consumer preferences.

Far from the one stop shoppers of the 1960’s, today’s consumer shops at 5 different types of stores to fulfill grocery needs. That might seem excessive, but the finding isn’t too surprising if you think of the number of places around you that sell food – plus the rise of online food shopping. With a more and more competitive landscape, grocery brands have taken on distinct identities to serve niche markets and stay competitive.

The New Industry Giants

In stark contrast to A&P’s unconscious missteps, the following brick & mortar and online grocery retailers have gained a stronghold and enjoyed considerable success by adapting their brands and businesses to meet the needs of consumers. By staying attuned to the pulse of changing consumer behavior, these businesses have been able to withstand the competitive environment and substantial market pressures.

Trader Joe’s & Whole Foods Market

Trader Joe’s has crafted a smaller store and shopping experience, with competitive prices and unique product offerings, while Whole Foods chose a more upscale experience, with a wide selection and premium prices. These two retailers have traditionally provided complementary goods, but this dichotomy might soon change. Whole Foods is introducing 365 by Whole Foods Market to rival competitors such as Trader Joe’s. Co-CEO Walter Robb explained the new format as a response to “tectonic shifts in the food marketplace” for better quality food, which has contributed to the company’s slowing growth.

Walmart & Target

Much like A&P, Hypermarkets like Walmart and Target serve the need for affordability, convenience and diverse product offerings. As two of the leading supermarkets in the country, these brands have won customer loyalty through identifying with the busy and/or price-conscious buyer and providing a pervasive “one-stop-shop.”

Costco Wholesale

Costco carries similar products as hypermarket brands, but stands apart by providing superior customer service and membership exclusivity. Costco spends next to nothing on advertising, yet has no problem growing and maintaining its membership at about a 90% retention rate.

Peapod

As the leader in online food retailing, Peapod is turning grocery shopping into a mobile-first activity. As Peapod CMO, Carrie Bienkowski, explains, “Over half of our orders are touched by mobile… and nearly a third of our orders are exclusively on mobile.” Ever aware of the consumer experience, Peapod has redesigned their app to better satisfy customers’ preferences and behaviors.

Despite a wealth of tools for understanding consumer behavior, many of the large, successful food retailers of yesteryear have failed to meet current consumer needs– and their businesses have suffered as a result. The modern grocery giants, with niche brand identities and strong adaptability, demonstrate the incredible value of consistently tapping into consumer insights. This active response to feedback and constant innovation has not only increased bottom lines, but has improved the overall grocery shopping experience. A&P will always hold a nostalgic place in the hearts of American shoppers, but the industry’s new commitment to understanding evolving consumer needs is certainly a welcome improvement.

By Sage Reisner, Summer Intern