Why Grocery Stores Are a Good Investment
1. There Will Always Be a Need for Grocery Stores
The most compelling case for grocery store investment is also the simplest: demand. Grocery stores sell food, an essential good that consumers need every day regardless of economic conditions. This evergreen demand has historically made the grocery business more stable than many discretionary retail categories.
That said, grocery is a competitive, low-margin business. From an investment perspective—particularly when investing in grocery-anchored real estate—tenant quality matters. Experienced operators with strong supply chains, brand loyalty, and proven execution tend to be best positioned to perform consistently over time.
2. Grocery Stores Are Resilient
Grocery stores have demonstrated a unique ability to withstand the e-commerce-driven disruption that has challenged much of brick-and-mortar retail.
Several structural factors support this resiliency:
- Individual consumer preferences. Many shoppers prefer to select their own produce, meat, and fresh items in person, making the in-store experience difficult to fully replace.
- Perishable inventory. Refrigeration requirements and spoilage risk make shipping certain grocery items complex and costly, favoring local fulfillment through stores.
- Entrenched routines and convenience. Grocery shopping is a habitual activity. As stores expand offerings to include services such as prepared foods, banking, pharmacies, and gasoline, they become even more central to daily life.
These characteristics have allowed grocery stores to retain market share even as online retail has expanded across other categories.
3. Grocery Stores Are Adaptable
Adaptability is another defining strength of the grocery sector. Over time, grocers have adjusted product mixes to reflect changing consumer preferences, including organic foods, private-label brands, and ready-to-eat options.
This adaptability was especially evident during the coronavirus pandemic, when stores rapidly implemented enhanced sanitization, one-way aisles, dedicated shopping hours, and expanded buy-online/pick-up-in-store and delivery options. Many grocers also invested heavily in digital platforms and last-mile logistics.
A prominent example is Amazon’s acquisition of Whole Foods, which combined an established grocery brand with advanced logistics and delivery infrastructure. These types of investments have expanded how and where customers shop, reinforcing the long-term relevance of physical grocery locations.
4. Utility and Profitability Dynamics
While grocery stores are known for thin operating margins, efficient supply chain management and increased sales volumes—particularly during recent years—have supported strong top-line performance across many categories, including fresh produce, perishables, and non-food items.
From a broader perspective, the ubiquity of grocery stores makes them valuable distribution nodes for last-mile fulfillment. This utility has drawn interest from large retailers and technology-driven companies seeking localized delivery solutions, further reinforcing the strategic importance of grocery locations.
How to Invest in Grocery Stores
For investors who find the fundamentals compelling, there are three primary ways to gain exposure to grocery store investment and investing in grocery centers.
1. Buy Stock in Publicly Traded Grocery Stores
Some well-known grocery chains—such as Publix, ALDI, Trader Joe’s, and Harris Teeter—are privately held and not directly investable. However, investors can purchase shares in publicly traded grocery companies.
These generally fall into two categories:
- Pure-play grocers: Kroger, Sprouts, Natural Grocers, WEIS Markets
- Diversified retailers: Costco, Walmart, and Amazon (including Whole Foods and Amazon Fresh)
Pros:
- High liquidity
- Low transaction costs
- Extensive public financial disclosures
Cons:
- Share price volatility driven by broader market forces
- Limited diversification when investing in a single operator
2. Invest in Companies That Lease Space to Grocery Stores
Another approach is to invest in the real estate that grocery stores occupy, typically through REITs or private equity firms.
REITs:
Real Estate Investment Trusts pool investor capital to acquire commercial real estate, including grocery-anchored shopping centers. Some are publicly traded, while others are private. Regency Centers Corporation (REG), for example, owns hundreds of centers, the majority of which are grocery-anchored.
Private Equity Firms:
Private real estate firms, such as First National Realty Partners, invest directly in grocery-anchored retail centers. This approach provides targeted exposure to necessity-based retail, with tenants that may include Aldi, Whole Foods, Walmart, ACME, and ShopRite.
Pros:
- Exposure to both grocery performance and underlying real estate
- Potential income, tax advantages, and appreciation
Cons:
- Not a pure grocery investment
- Performance can be influenced by broader real estate conditions and non-grocery tenants
3. Buy a Grocery Store or Grocery-Anchored Property Directly
For well-capitalized investors with significant operational expertise, it is possible to acquire a grocery business or a grocery-anchored property outright.
Pros:
- Full control over operations and strategy
- Direct participation in business and property performance
Cons:
- High capital requirements
- Operational complexity and intense competition
- Low margins that require scale and expertise to manage effectively
For most individual investors, this option is the least practical.
Conclusion
The convergence of long-term necessity, proven resiliency, and ongoing adaptability has made grocery store investment a durable component of commercial real estate portfolios. Whether through public equities, grocery-anchored real estate, or direct ownership, investors have multiple paths to gain exposure.
For those focused on CRE grocery investing, grocery-anchored shopping centers continue to stand out as a necessity-based asset class that aligns well with conservative, income-oriented, long-term investment strategies.
