Spend five minutes with FMI’s The Food Retailing Industry Speaks 2026 report and you’d be forgiven for thinking the grocery industry has every reason to pull back.
The headwinds are stiff and broad: tariffs, inflation, geopolitical chaos, supply chain disruptions. There are organized retail crime rings, regulatory pressures, and rising labor costs. And all in the fight for generally razor-thin margins.
Admittedly, it’s an intimidating list – and one most retailers are very familiar with by now.
According to the report, about 90% of both retailers and suppliers reported negative impacts from international trade and tariffs during 2025. Two-thirds of retailers cited supply chain challenges, while 71% said federal regulations negatively affected their businesses. Even after a few years of moderating inflation, 75% of suppliers believe economic concerns and inflation will continue to influence consumer shopping behavior in 2026 and beyond.
Then there’s profitability.
Food retailers reported net profit margins of just 2.1% in 2025. Put another way, supermarkets keep about two pennies of every sales dollar after paying everyone else. Compare that with software companies, banks, or pharmaceutical firms, and grocery remains one of the toughest businesses in America. So here’s the question: If executives truly believed the future was bleak, where would they cut first?
Technology investments? Maybe the fresh category? Private label initiatives? What about community engagement? Quite the contrary! According to FMI those are exactly the areas where the industry is investing.
That’s what makes this report so interesting.
The Story Is in the Numbers
Read beyond the survey questions and the percentages begin telling a different story. Understandably, grocery execs are cautious about today’s operating environment, but they’re remarkably confident about tomorrow’s business model.
Consider where they’re placing their bets…
Fresh prepared foods and foodservice programs are now employed by 89% of responding retailers, making them one of the industry’s most widely adopted differentiation strategies. Local assortments appear in 87% of stores, while organic assortments have also become commonplace. Retailers also continue expanding space for winning perimeter departments, fresh grab-and-go offerings, and foodservice. According to the research, many are planning to devote additional shelf space to private brands.
These aren’t necessarily defensive investments – more like strategic moves.
The same pattern appears in technology spending.
Retailers increasingly rely on data analytics for assortment planning, replenishment, pricing, and promotions. Nearly one-third are already using artificial intelligence (AI) in those activities, while many are expanding its use in operational efficiency and loss prevention. Retailers also expect to allocate more labor – not less – to data analytics and online fulfillment.
Notice what’s happening here: Technology isn’t replacing human workers; it’s essentially re-deploying them.
Private brands tell a similar story.
Around 76% percent of retailers now use them as a key differentiation strategy, while many plan to increase both the number of private-label SKUs – and the amount of shelf real estate they occupy. That’s a notable shift from the days when store brands were viewed primarily as lower-priced alternatives. Today, they’re viewed more as exclusive products that reinforce customer loyalty and define a retailer’s identity.
Likewise health and wellness – it’s moving in the same direction.
Three-quarters of retailers emphasize nutrition, healthier products and wellness initiatives as core merchandising strategies rather than niche offerings. Community engagement remains another priority, with 77% identifying community ties as a competitive differentiator and more than nine in 10 establishing measurable charitable giving goals.
Tough Challenges Ahead, But the Future Looks Bright
Step back and look at the pattern and you see “better,” not necessarily “bigger.”
Leadership is putting capital into fresh foods instead of additional center-store aisles, and investing in proven technology that improves execution rather than flashy gadgets. They’re strengthening private brands, local sourcing, health and community engagement because those are advantages that are really difficult to duplicate.
That’s why, despite the times, this report ultimately feels more optimistic than pessimistic.
The headlines may be filled with tariffs, inflation and uncertainty, and executive surveys in the report reflect legitimate concerns about the economy. But, in the end, capital has a way of revealing what people really believe.
And where grocery executives are choosing to invest suggests they aren’t preparing for decline so much as the next round of supermarket competition.