Equity analysts at Citigroup Global Markets decided to conduct a survey to figure out how consumers are making their grocery shopping choices in the current environment. 

Not very surprisingly, it found that consumers are becoming more value conscious and will likely favor retailers with sharp pricing.

So who is the sharpest of them all?

“An overwhelming 72 percent of customers surveyed said that Wal-Mart had the lowest prices. Among the top three traditional supermarkets, Kroger was perceived by more consumers to be the lowest priced,” the Citi note stated. 

Citi conducted its online survey in two markets, Texas and Washington, because it said those are two states are where Kroger, Safeway, Supervalu, Target and Wal-Mart – the  five grocery retailers in its coverage universe – compete. 

The survey found that Kroger had the next best pricing message behind Wal-Mart, with 6.9 percent of customers saying that grocery chain had the lowest prices.

Meanwhile, 26.5 percent of consumers found Safeway to be the most expensive, while 24.5 percent of consumers found Supervalu to have the highest prices, it said.

To offset the tough economy, Citi said consumers are reining in their discretionary food purchases, and it has started to see signs of consumers trading down in terms of where they shop (like moving from Target to Wal-Mart), in terms of what items they buy (switching from steak to chicken), and in terms of choosing between branded and private label (buying more private label).

“We believe that consumers will continue to adjust the way they shop if food inflation remains high,” the report said.

(Photo: Reuters)