Digital Shift Buoys US Grocery Stores

Digital Grocery Remains an Attractive Option for Consumers

The US grocery sector has been a slow adopter of digital commerce, as consumers were resistant to purchase these products online. The pandemic, however, drove huge gains in awareness and, subsequently, usage and engagement of grocery store mobile apps. While that growth has decelerated significantly in the last few years, MAU growth of the US grocery cohort is on an upward trend, in line with the positive momentum of Instacart, a key service used by many grocery stores for delivery. Per ST data, total downloads and MAUs for the cohort rose 9% and 13% YoY, respectively, in 2Q24, driven by strength at ALDI and Costco. Walmart’s downloads and MAUs have grown consistently since 3Q22, likely aided by inflation which pushed consumers to seek value. Meijer has seen three consecutive quarters of double-digit declines in download growth, at an average of 23% YoY. Notably, while the cohort’s download growth has remained positive, Instacart’s downloads fell 18% YoY in 2Q24, suggesting that consumers may be pivoting to native grocery apps. This also suggests thatInstacart may have reached saturation in the US market and its positive MAU growth is likely driven by users who return to the app due to promotions. 

To combat macroeconomic pressures on consumers, grocers have also driven downloads and usage via loyalty programs, which provide shoppers with deals and rewards. Gamified features encourage users to open the apps more frequently. Albertsons’ loyalty program, FreshPass, launched in mid-2021 (a replacement for a prior program) and saw its membership grow 15% YoY in 1Q24 to 41.4mn (+63% from FY2020). Exclusive private label products are also a key factor in driving usage and engagement. ALDI’s outsized mobile app performance (downloads and MAUs up 43% and 28% YoY from 2Q22 - 2Q24) is likely linked to the fact that 80% of its sales are of private label products, while Walmart’s private label products lead in multiple categories; its Great Value product is in 86% of US households. Private label products are also crucial for the retailers to increase profitability, as they have a higher margin than national brands. 

Another metric to assess grocers’ ability to increase engagement is the average number of days per month consumers use the app. In 2Q24, the average was 4 days/month for the cohort, driven in large part by Walmart at 6.1 days/month, up 5% YoY – this is nearly 2x/week. Given its vast product selection and fulfillment options, Target is second at 4.9 days/month in 2Q24, although in QTD 3Q24, trends have accelerated 3% QoQ to 5.1 days/ month.   

Across the cohort, users are spending less time and having fewer sessions per week, with average session count and time spent per week falling 3% and 5% YoY, in 2Q24. Given that most grocery apps remember a consumers’ prior order, the decline in duration at many of the grocery apps could be due to consumers simply reordering prior items, which requires much less time. Only Walmart and ALDI bucked the downward trend, with time spent up 2% and 37% YoY, respectively, in 2Q24. Walmart had both the greatest number of sessions and longest duration at nearly 9 sessions/week and an average of 13 mins/week, respectively, again highlighting Walmart’s strength in its grocery assortment, its vast selection of general merchandise product and value pricing.  

US Grocery Ad Spend Continues to Rise

Total spend for each member of the US grocery advertising cohort rose an average of 8% YoY in 1H24 from 1H23, driven by the over 100%, 34% and 26% YoY spend growth at Publix, Target and ALDI respectively. Target also reallocated its spend in 1H24, increasing its allocation to ~5% each for Target 360 (new paid membership program) and Target Circle Rewards, the latter of which is its loyalty program that relaunched in Apr’24. These programs are an effort to better compete with Amazon Prime and Walmart+.  Ahold Delhaize, the parent company of multiple banners, including Giant Food and Hannafords, increased its allocation to Giant Foot by 7ppts to nearly 21% of total 1H24 spend, while pulling back dramatically (13ppts) from spend on the Food Lion banner; some of this spend shift could be due to regional differences (Food Lion is predominantly in the southeast of the US and Giant Food is in the mid-atlantic region). Still the largest percentage of total spend was allocated to Stop & Shop at nearly 40%. While the majority of Walmart’s ad spend goes to its parent brand, it has spent ~11% of its budget on Walmart Grocery in both 1H23 and 1H24. 

The surge in grocery spending has had a positive impact on growing the cohort’s resurrected and retained users, up 9% and 14% YoY, respectively, in 2Q24. ALDI has seen the largest gains, with new, resurrected and retained users increasing 30%, 28% and 43% YoY, respectively; this growth exceeded the growth in its 1H24 ad spend, suggesting a positive ROI on its ad investment. Despite Walmart’s size, it continues to grow, with resurrected and retained users up 4% and 14% YoY, respectively, in 2Q24, suggesting that more users are staying on its platform, likely due to ongoing pressure on consumer spending.  On the flip side, because these gains are likely driven by spend, it suggests that these retailers’ customer acquisition costs may continue to rise, compressing margins. Weakness in resurrected users at Meijer over the last 6 quarters indicates that its advertising is not resonating with its consumers; Meijer’s US ad spend rose 17% YoY in 1H24.

Walmart Leads in Total Spend

Walmart is the largest spender in the cohort, making up nearly 36% of 2Q24 spend, which was down from 40% last year. Despite being the largest advertiser, Walmart’s total ad spend fell 4% YoY in 1H24.  After Walmart, Target and Kroger were the largest advertisers, with 24% and 16% of the total cohort’s spend in 2Q24, respectively. This was an increase of 1ppt and 2ppts YoY, respectively. Albertsons raised its spend 7% YoY in 1H24, increasing its share of spend to its namesake brand by 5ppts, while maintaining an nearly 40% allocation to Safeway.

Facebook is Channel of Choice but Losing Share

Of the US grocery advertising cohort, a majority of advertising spend is allocated to Facebook (26% in 2Q24), followed by Instagram and Snapchat (each at 15%). While Facebook remained the most popular channel, it is losing share (-10ppts YoY) to Pinterest and Desktop Display. Increased spend was also allocated to TikTok, while penetration of spend on YouTube declined. Given Pinterest’s audience (84% female and over 60% under 34 y.o.) and its reputation as a place for shoppers to explore, it makes sense that it is seeing increased share.  Per Sensor Tower’s Audience Insights data, Pinterest’s users are 95% more likely to be shopaholics than the general smartphone user.

Looking at the brands individually, Walmart spent 29% and 24% of its budget on Facebook and TikTok, respectively in 2Q24. Walmart’s shift to TikTok (+18ppts YoY) suggests that it might be targeting a younger consumer, who is more influenced by social media personalities than traditional advertising. Target also increased its spend on TikTok, comprising 19% of its 2Q24 budget, while pulling back significantly on its OTT spend (at 6% from 19% in 2Q23). This is in contrast to Wegmans, where nearly 89% of its ad budget was allocated to YouTube. Similarly, Ahold Delhaize skews heavily to OTT, making up 32% of its 2Q24 spend. 

Because grocery stores tend to be very regional, decisions about channel allocation may be due to specific demographics within a given area. Additionally, certain grocers, such as Whole Foods, have an elevated reputation, which might result in locations with a higher average income. This is evident using Sensor Tower’s Audience Insights data, which suggests that Albertsons’ top ad viewers were more likely to be fine diners, live event goers and frequent flyers by 242%, 171% and 167%, respectively, versus the general population. In contrast, Kroger’s ads are more often viewed by fast foodies, wholesale shoppers and home cooks by 135%, 126% and 115%, respectively, vs the general population, implying that viewers of Krogers ads may be more budget conscious than Albertsons ad viewers.  Whole Foods, owned by Amazon, attracts digitally savvy and potentially affluent consumers. Additionally, nearly 45% of its audience is between the ages of 25-34 yrs. old, a key demographic.

Key Takeaways

• Per ST data, total downloads and MAUs for the cohort (Mobile apps include Albertsons, ALDI, Costco, Food Lion, Giant Food, Hannaford, Hy-Vee, Kroger, Meijer, My H-E-B, Publix, Stop & Shop, Target, Walmart, Wegmans and Whole Foods) rose 9% and 13% YoY, respectively, in 2Q24, driven by strength at ALDI and Costco. Walmart’s downloads and MAUs have grown consistently since 3Q22, likely aided by inflation which pushed consumers to seek value

  • In 2Q24, the average consumer used the cohort’s (Apps include ALDI, Costco, Kroger, Meijer, Target, Walmart and Whole Foods) mobile app 4 days/month, driven in large part by Walmart at 6.1 days/month, up 5% YoY – this is nearly 2x/week

• Total spend for each member of the US grocery advertising cohort (The US advertising cohort includes the following advertisers and grocery-related subsidiaries: Ahold Delhaize, Albertsons, ALDI, Costco, Amazon (only includes Amazon Fresh, Amazon Go, Amazon Prime Grocery and Whole Foods), H-E-B Grocery, Hy-Vee, Meijer, Publix, Target, The Kroger Co., Walmart and Wegmans) rose an average of 8% YoY in 1H24 from 1H23, driven by the over 100%, 34% and 26% YoY spend growth at Publix, Target and ALDI respectively

  • Target also reallocated its spend in 1H24, increasing its allocation to ~5% each for Target 360 (new paid membership program) and Target Circle Rewards, the latter of which is its loyalty program relaunched in Apr’24

• Of the US grocery advertising cohort, a majority of advertising spend is allocated to Facebook (26% in 2Q24), followed by Instagram and Snapchat (each at 15%)

  • While Facebook remained the most popular channel, it is losing share (-10ppts YoY) to Pinterest and Desktop Display