As the Twin Cities supermarket battle heats up, who is No. 1?

The pandemic not only increased grocery profits as restrictions forced people to eat at home, it also intensified an already competitive market in the Twin Cities.

It's difficult to tell which supermarket chain takes the top spot in the market. Cub says it is at the top of a Nielsen market survey. Target edged out Cub, according to Chain Store Guide, which measures market share in a different way.

Regardless of who's No. 1, the race for market share shows no sign of slowing. "There's more money chasing grocery now because of its success during the pandemic," said C.E. Pugh, chief executive of National Co-op Grocers.

As stay-at-home restrictions took hold, restaurants in Minnesota could only offer takeout, and even when restrictions eased they had to follow social-distance guidelines. Plus, the work-from-home era opened by necessity.

As a result, supermarkets saw big gains. U.S. grocery sales increased 10% last year, according to the U.S. Census Bureau.

"That's a phenomenal increase," said Burt Flickinger, managing director of Strategic Resource Group in New York. "Normally, it's 1 to 2% growth."

Now, grocery stores are flush with cash, ready to expand or upgrade to keep customers coming back, whether it's in person or through online orders.

And the Twin Cities supermarket battle has heated up again.

The new ballgame includes Target and Walmart as stronger competitors after the pandemic; dollar stores and drugstores eating up a share of the market; and Costco and Aldi as more than "alternative" grocers.

"They are no longer the 'alternative,' but rather the largest and most well-capitalized grocery incumbents in many markets," said Scott Moses, managing director at PJ Solomon.

Since the 1990s, Cub Foods has dominated the Twin Cities market, at its peak holding a 40% market share. But Target, Walmart, Costco and newer competitors such as Hy-Vee and Fresh Thyme are eating into that share, the surveys show.

In fact, a dozen stores get enough sales to show up on the market surveys from the local Lunds & Byerlys and Kowalski's to Trader Joe's.

Chain Store Guide — which among its measures are total purchases made, giving megastores such as Target and Walmart the advantage — gave Target an 18.3% market share. Cub, including its franchisees such as Jerry's Foods, had 18.1%.

A broader look from Metro Market Studies in Tucson, Ariz., gives Cub a 25.7% market share, with Walmart at 18.8% and Target at 8.8%. Metro Market compiles data from Chain Store Guide, Nielsen, Progressive Grocer, union store records and public company reports.

Target declined to talk about its market-share data.

Cub said Nielsen is the industry standard, and at the end of 2020, it ranked the chain No. 1 in the Twin Cities market.

"Market share can be subjective, and results can differ depending on the survey's methodology, such as what types of products to include and the physical boundaries grocery stores need to be located within," said Darren Caudill, the chain's vice president of sales, in an e-mail.

Cub has stayed competitive despite being on the market. Its old parent company, Supervalu, was acquired in 2018 by United Natural Foods Inc. (UNFI). Immediately, UNFI said it wanted to sell the corporate-owned Cub stores but so far has not found a buyer.

Since then, Cub sales have improved under new leadership, said Flickinger, the supermarket analyst. Yet major players have jump-started expansion plans that were mostly delayed during the early part of the pandemic, adding even more pressure for the Cub chain. More than a dozen stores should be added to the market by 2022.

Hy-Vee plans to open three new stores by fall. Lunds & Byerlys is opening one store in Minneapolis' Nokomis neighborhood on May 20 and another in Apple Valley in 2023. It also will expand a store this year and next. If Aldi follows through with plans to add three or four Twin Cities locations by the end of 2022, it will surpass Cub's 78-store volume for the first time.

While Costco hasn't announced any more stores, nationally it has looked at shuttered Macy's, Herberger's and Bon-Tons as possible new locations, Flickinger said. The company generating the most buzz — Amazon — isn't saying a word. Building on its online Amazon Fresh food delivery, the company has been opening up physical stores with the same name, building on its Whole Foods business. Bloomberg reported that new Fresh stores will carry Amazon's newest technology, making some of them cashierless by tracking purchases as shoppers move around the store.

Unnamed grocery stores being developed in Eagan, Burnsville, Coon Rapids and Arden Hills could be Fresh stores, according to reports. An Amazon spokeswoman says any reports are "rumor and speculation" at this point.

If Amazon Fresh does enter the Twin Cities market, analysts expect it to be a game changer.

"Amazon is the best capitalized retailer in the world. Its market value is worth more than all the other grocers combined, including Walmart, Target, Costco, CVS, Walgreens, Dollar General, Kroger and Albertsons," said Moses, of PJ Solomon. "Mathematically, it has the ability to make much larger, truly extraordinary investments in price, wages, advertising and technology."

Amazon Fresh stores have already opened in California and Illinois and nearly 30 more are in the works.

"We'll see a lot of these stores pop up quickly," said Phil Lempert, retail food analyst and founder of Supermarketguru.com. The stores average 30,000 to 40,000 square feet, smaller than a Cub but larger than an Aldi.

"Every competitor is vulnerable from traditional stores to supercenters like Walmart," he said. Still, Lempert said that after Amazon's newness wore off in the California market, many shoppers returned to their former favorites such as Ralph's.

Retailers from co-ops and to Target, Lunds & Byerlys, Kowalski's, Coborn's and Cub are counting on consumers' buy-local commitments that have grown since the pandemic.

"We learned how to compete with Walmart, and we'll do the same with Amazon," said Pugh, the National Co-op Grocers' CEO.

If Amazon expands its grocery footprint in the Twin Cities, grocers' online and delivery innovations developed during the pandemic will need to continue and improve. Online grocery ordering moved from 3 to 10% last year and is expected to climb further, according to Supermarket News. Most consumers chose to pick up their online orders in store, but they spent more when the order was delivered, according to 1010 Data in New York.

As a result of the changes during the pandemic, Target accelerated plans to roll out fresh and frozen grocery items for order pickup and delivery and it has paid off, said Rick Gomez, Target's chief food and beverage officer.

"Guests who first shopped for fresh and frozen food items through order pickup and drive-up last year made about one extra trip each month and increased their spending between 20 and 30 percent" on food and beverage items, he said.

A continuation of pre-pandemic trends of updated produce and prepared foods sections will continue in the coming years as well, said Greg Houck, associate principal at Cuningham Group Architecture in Minneapolis, which works with supermarkets on store design.

Even the once popular salad bar is being reimagined since the pandemic.

"We've had to ask ourselves if the consumer will be apprehensive about open food bars," said Chief Executive Tres Lund of Lunds & Byerlys. "We're looking at side greens and side proteins being repackaged differently."

While supermarket retailers expect 2020's pantry loading could slow sales again in the packaged goods aisles, most analysts believe the changes both by grocers and in how people work — and a rediscovery of cooking — will make 2021 another good year for grocers.

John Ewoldt • 612-673-7633