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June 10 , 2026
The Nebraska Cooperative Development Center (NCDC) has worked with communities in exploring cooperatively owned grocery stores for over 20 years. The grocery store consumer cooperative model has gained greater interest in Nebraska’s rural communities as business owners have retired, and no buyer has been found. NCDC guided four communities through the cooperative process that have successfully opened since May 2021 in Hay Springs, Lynch, Emerson, and Utica. Two other communities, Wauneta and Giltner, are working on their capitalization campaign and plan to open later in 2026 or 2027.
In each community, the motivation has been to keep the community vibrant, attract new residents, allow the elderly to remain at home, and to have food in the community. These motivations are emphasized in a 2021 Kansas State Rural Grocery Initiative report aimed at city leaders, which describes the benefits of grocery stores as economic drivers, community hubs, and sources of healthy food. The report also highlights three major challenges: narrow profit margins, competition, and finding new owners/operators.
The challenge is real. The total number of rural Nebraska grocery stores declined from 290 in 2016 to 204 in 2021 (US Bureau of Census). Understanding the challenges faced by the community and potential owners is important for the long-term success of rural grocers.
Understanding the Rural Grocery Store Environment
The environment and prospective strategies are briefly described below using the three major challenges identified by the Kansas State Rural Grocery Initiative report.
Narrow Profit Margin Challenge. The National Grocers Association has shared that the average grocery store profit margin is 1-3%, with rural independent grocers in communities with populations under 1,000 being closer to 1%. A recent VantaInsights marketing report states that grocery store profit margins are among the thinnest in all of retail – and in all American businesses.
In contrast, many grocery shoppers believe grocers earn 33% net profit, according to a 2022 report by the Feedback Group (an organization that provides actionable stakeholder feedback). This may lead shoppers to think the store is not doing everything that it can to keep prices down. In addition, this perception can be especially challenging in smaller rural communities if the community leaders are expecting an unrealistic return on any community investment.
Strategies to address the narrow profit margin include:
- Understanding business operations. These include departmental gross margins, shrinkage, and spoilage. High sales do not equate to profit if the margins are insufficient to cover the cost of goods, fixed expenses, or needed repairs.
- Explore a shared services cooperative. The North Dakota rural access and distribution co-op opened in 2021 as a shared services cooperative for grocers. Stores jointly purchase products to increase volume and reduce wholesale prices. One store serves as the hub and delivers to other stores. In a shared services cooperative, each business continues to operate independently and becomes a member of the cooperative. The stores report increased sales and profitability due to improved pricing and product variety. As a business, the shared services cooperative is operating at break-even.
Competition Challenge. Factors related to grocery store competition include:
- Robinson-Patman Act (RPA). Although the antitrust law prohibits price discrimination, it has not been enforced in four decades. The National Grocers Association is asking the FTC to use this tool to address grocery discrimination and for Congress to strengthen the law. The lack of enforcement has made it difficult for rural grocers to compete on a level playing field since big box stores can influence the grocery marketplace and get lower prices, preferable terms, exclusive offerings, and receive priority access.
- Dollar General moving into a community increases competition. A USDA Economic Research Service report (2024) found that Dollar Store entry affects rural grocery stores more than it does urban ones. The report stated that the likelihood of an independent grocery store closing in a rural census tract after a dollar store opened was 5 percent, about three times greater than in urban census tracts.
- Expanded Rural Deliveries. Walmart is now delivering in many rural communities, which also increases competition in the community. This increased competition was one of the factors that led to the Elwood cooperative grocery store closure.
Marketing Strategies to Address the Competition Challenge.
The competition factors can be overwhelming, but there are strategies grocers can take to address.
- Share the store's unique story openly with the community. Transparency, strong customer service, and community engagement can distinguish a local store from competitors.
- Provide community-needed services and products. Customer service and deli-prepared foods are identified as two of the unique benefits provided by a physical store (The FMI U.S. Grocery Trends). Cleanliness, ability to examine produce, ease of shopping, and clear signage were also identified as values of shopping in a physical store.
- Jenny Osner, Hired Man’s Grocery & Grill, Inc., located in Kansas, emphasized the importance of making a grocery store a place people want to shop and not a store where the community feels obligated to shop during a recent grocery store presentation.
Finding an Owner/Operator Challenge. It is often difficult to identify a grocery retailer willing to make the investment to purchase the store, given the risk of low profit margins and intense competition. This becomes more difficult when the store has not updated its refrigeration, equipment, or property.
Strategies to Address the Challenge of Finding an Owner/Operator:
- Transition planning. Grocery owners need to start planning a business transition in advance. Ownership transition is a key step in facilitating continued business operations. The Business Transition Models Guide walks owners and buyers through considerations in exploring different business models, ranging from sole proprietorship to community-supported entities.
- Community support. Communities can provide support by working with businesses on transition planning and providing support to upgrade the business facilities and equipment to help keep the business more viable in the long run.
- New business owners need to create a business plan, including financial projections, to help ensure that their risk is minimized.
In summary, to address these challenges, focus on three key strategies: maximizing profit margins through operational analysis and cooperation, leveraging unique in-store advantages against competition, and planning for ownership transitions early.
Opportunities
The Nebraska Grocery Industry Association (NGIA), Center for Rural Affairs (CFRA), NCDC, and Rural Prosperity Nebraska (RPN) have been working together from research to education and introducing new models over the last five years. This includes the annual Nebraska Grocery Industry Summit and research exploring business transitions. Through a Center for Rural Affairs grant, NCDC, in collaboration with CFRA, launched the Rural Grocery Learning Cohort, designed to help store owners strengthen operations, build community connections, and plan for long-term sustainability.
The 2026 Cohort includes 40 grocery store owners across the state who are learning together how to strengthen their businesses. New cohorts will be created over the next three years, with efforts to continue to connect prior cohort members.
Upcoming Events -
- August 19 - Grocery Financial Workshop in Kearney, Nebraska. This session is being designed for grocers to learn from each other and share best practices on financials to operations.
- August 20 – Fourth Annual Nebraska Grocery Industry Summit in Kearney, Nebraska. Sponsored by NGIA, this one-day workshop brings grocers and grocery industry experts together. Details will be shared soon at https://nebgrocery.com/.
- January 2027 – Grocers will be able to apply to the next Rural Grocery Cohort.
Rural grocery stores are economic drivers, community hubs, and sources of food in our rural communities. NCDC, along with NGIA and CFRA, will continue to explore ways to continue to keep these critical anchor institutions sustainable into the future.
NCDC assists groups and communities that are exploring or have formed a cooperative business since 1999. NCDC can guide a cooperative effort from visioning to implementation. Services include facilitation, providing resources, technical assistance, and education.
For more information, visit NCDC.unl.edu.
Charlotte Narjes
Associate Extension Educator
Associate Rural Prosperity Nebraska Extension Educator/Director NCDC
Department of Agricultural Economics
University of Nebraska-Lincoln
cnarjes1@unl.edu
Sources:
Bennett, Treva (March 17, 2025), Nebraska Grocery Industry Faces Challenges, Opportunities Amid Economic Shifts, The Shelby Report, https://theshelbyreport.com/2025/03/17/nebraska-grocery-industry-faces-challenges-opportunities-amid-economic-shifts/
Bennett, T,(June 8, 2022), The Feedback Group: Shoppers Believe Grocers Earn 33% Net Profit https://theshelbyreport.com/2022/06/08/the-feedback-group-shoppers-believe-grocers-earn-33-net-profit/?static=true
Marchesi, K., Steinbach, S., Lopez, R, Dollar Store Entry Affects Rural Grocery Stores More Than Urban (May 6, 2024) Dollar Store Entry Affects Rural Grocery Stores More Than Urban | Economic Research Service https://www.ers.usda.gov/amber-waves/2024/may/dollar-store-entry-affects-rural-grocery-stores-more-than-urban
McKee, G., Narjes C., Schlake M., Kaskie S., Tuller J., Westra J., Houlden C. (June 2024) Ownership Transition in Rural Nebraska Grocery Stores: A Multi-Ownership Perspective June 2024. https://ncdc.unl.edu/sites/unl.edu.ianr.nebraska-cooperative-developmen… Grocery Survey Report 061424 formated.pdf
McKee, G., Kaskie S. (Sept 2024) Food Deserts in Nebraska: A revised methodology and Analysis, September 2024. https://ncdc.unl.edu/sites/unl.edu.ianr.nebraska-cooperative-developmen… desert results_Sept 2024.pdf
National Grocers Association (n.d.) Competition Laws – National Grocers Association https://www.nationalgrocers.org/advocacy/competition-laws/
Rural Grocery Initiative (Sept 2021) Grocery Store Considerations for City Leaders. https://www.ruralgrocery.org/learn/publications/guides/Grocery_Store_Co…
The Food Industry Association U.S. Grocery Shopper Trends 2026 – The Evolving Physical Store (2026) https://www.fmi.org/our-research/research-reports/u-s-grocery-shopper-trends?utm_term=grocery%20trends&utm_medium=ppc&hsa_acc=2746209564&hsa_cam=23860504515&hsa_grp=197718500298&hsa_ad=809566013516&hsa_src=g&hsa_tgt=kwd-591011539824&hsa_kw=grocery%20trends&hsa_mt=p&hsa_net=adwords&hsa_ver=3&gad_source=1&gad_campaignid=23860504515&gbraid=0AAAAApuwCICk9GqsLYze4b1LaiWNiQlSK&gclid=EAIaIQobChMI_8G02ojulAMVg6TCCB1sZTInEAAYAiAAEgIRKfD_BwE&utm_campaign=[%27grocerytrends%27,%20%27Grocery%20Trends%202026%20Search%20ad%20-%205/20/26%27]&utm_source=[%27Ads_G%27,%20%27adwords%27
Tuller, J., Houlden, C., Kaskie, S, McKee, G, Narjes, C, Westra, J, Schlake, M, (N.D.) Business Transition Models, https://ncdc.unl.edu/sites/unl.edu.ianr.nebraska-cooperative-developmen…
VantaInsights. (2024) Grocery Store Profit Margins: Industry Benchmarks & Data 2024 | VantaInsights https://vantainsights.com/insights/grocery-store-profit-margins.