Dive Brief:

• In a lengthy interview with The Shelby Report, California Grocers Association president Ron Fong discussed the unique challenges and opportunities that face the Southern California market, home to 60% of the state’s population.
• Fong noted that all eyes are on Aldi as it continues to grow after a year in the SoCal market. “I can pretty much guarantee that all of their competitors have them on their board, watching them and trying to figure out how they can compete in the marketplace,” Fong told The Shelby Report.
• Fong also said Hispanic retailers are growing quickly by buying up stores vacated by Fresh & Easy, Haggen and other failed operators.

Dive Insight:

In the fragmented, fiercely competitive American grocery market, there’s arguably no tougher place to do business than Southern California. With a dizzying mix of legacy players, specialty formats, discounters, dollar stores, club stores and ethnic markets — oftentimes within a few miles of one another — the region is a microcosm of the national industry.

“Grocers feel that they need to be in the California marketplace, because it’s like that song: If you can make it here, you can make it anywhere,” California Grocers Association president Ron Fong told The Shelby Report.

The biggest test for SoCal retailers right now is Aldi, which moved into the state a year ago and now operates 34 stores in the region. The discounter offers a tough-to-beat combination of fresh products, low prices, and top-notch execution, and should give competing retailers headaches as it expands.

Hispanic and other ethnic markets on display in the region are also worth keeping an eye on. According to Fong, these stores are thriving in markets where other retail formats have failed. With their low prices, fresh products and community focus, Hispanic retailers like Northgate Gonzalez and Cardenas Markets are winning over a vastly important demographic. Given the increase of Hispanic shoppers in America, grocers around the country could learn a thing or two. It will also be interesting to see if, as these markets grow, these ethnic groceries are able to draw consumers from beyond their core demographic.

With more than 1 million jobs added since the recession, the Southern California economy is booming, leaving lots of money up for grabs for supermarkets. Where consumers spend those dollars could have significant implications beyond the sun-soaked region.