Commerce Riff with Sri & PVSB - September 29, 2026

It's September 29th, 2026, and this is the Commerce Rift brought to you by the CPG guys. Ten minutes of the news stories that matter in commerce this week. I'm your co-host, PVSB. Papa Raj, the father of Pop Stars, co-founder of ThinkBlue Consulting, is unable to join us as he is traveling back from his daughter Lara's appearance last night on the season opener of Saturday Night Live. Fifty episodes in, and this week, Costco proves the warehouse model is still printing money. Fuel costs threaten to reignite grocery inflation. Kroger lays out its AI roadmap fresh off the grocery shop stage, and research on GLP1s keeps reshaping how CBGs think about the center of the store. Costco reports higher fourth quarter profit on resilient consumer spending. Costco closes out its fiscal year with a strong beat. Fourth quarter profit came in at $3 billion or $6.75 a share, up from $2.61 billion a year ago, ahead of the $6.54 analysts were modeling. Revenue climbed to $95.72 billion from $86.16 billion, also topping estimates. CFO Gary Milchip put it simply: members are spending and still willing to trade up into discretionary categories when the value is there. Comparable sales rose 9.4% for the quarter, 11% in the US, 5% in Canada, 7% internationally, with digitally enabled comps up nearly 20%. That's music to Mark Williamson's ears. Strip out gas and FX and adjusted comps were still up 6.7% company wide. The gas business deserves its own call-out. CEO Ron Vacras said Costco's fuel offering had a record year, with U.S. member gas purchase penetration hitting an all-time high, a direct byproduct of the run-up in prices tied to the war in Iran. When gas gets more expensive everywhere, Costco's per gallon value proposition gets sharper, and members lean in harder. On pricing, Costco reinvested $184 million of tariff refunds into lower prices on staples, produce, meat, beverages, and even some home furnishings. And that's only about a third of the total refunds it expects for the current quarter, with more reinvestment planned. Membership fees grew to $1.85 billion, and the company opened 28 warehouses this fiscal year, with 33 more planned for fiscal 2027. Grocery inflation is primed to rise, sticking with fuel prices because they're about to become a much bigger story for the grocery aisle. At an FMI briefing this week, industry economists warned that grocery inflation, which has actually been cooling, is about to turn back up because of the same energy dynamics boosting Costco's gas business. The numbers so far look tame. Grosser inflation ran at an annual rate of 2.2% in August, down from 2.7% in each of the prior three months per the Bureau of Labor Statistics. But Cal Poly agribusiness professor Rick Volpe said the retailers and manufacturers have been making explicit efforts to hold the line on price throughout 2026 to stay competitive. And he doesn't think that can last. His forecast food inflation ticks up in Q4, landing around a 2.7% annual place for the full year. The mechanism is diesel. Prices hit a record above $6 a gallon this month, according to JP Morgan. And since the Iran war began at the end of February, the run-up in gas and diesel has already cost U.S. consumers more than $113 billion per tracker out of Brown University's climate solutions lab. Volpey noted the transportation piece. Moving goods from distribution centers to stores flows through a shelf price fastest, while higher costs for cold storage and warehousing take longer to show up. FMI's Andy Herrick added a forward-looking wrinkle. Farmers are heavily diesel dependent and are about to make next season's planting decisions, which could keep pushing costs up well into 2027. Kroger details its AI strategy at Grocery Shop 2026. And speaking of Grocery Shop, Kroger used the stage in Vegas last week to lay out its AI playbook in detail. EVP and Chief Digital Officer Yale Cosette framed it as an evolution, not a pivot. The company has used data science for years to forecast demand and connect shoppers to relevant savings, and its newer investments are about stitching business and operational signals together to make decisions faster. Cosette described the AI journey in three stages: assisted, augmented, and autonomous, and was clear that full autonomy isn't the goal everywhere. The goal is using the right level of AI based on risk repeatedly and the need for human judgment, he said, with governance sitting at the center of every stage. On the customer side, Kroger's AI shopping assistant is already helping people plan meals, find recipes, and build a cart around a budget and dietary needs. With conversational search layered on top, internally, the company is rolling out AI literacy training to more than 400,000 associates and building agent tools meant to cut through the notification noise so frontline teams see only what actually matters. The bigger vision is what Cosette called grocery as a managed service, a shift from shoppers building weekly lists to shoppers sharing goals and preferences and letting AI agents handle planning, shopping, and fulfillment. Kroger's pitch on why it wins that future is the same pitch it's making today. Deep knowledge of shopping patterns plus real visibility into inventory and fulfillment. Lastly, GLP1 drug use keeps reshaping the grocery basket. Worth revisiting some research that's still driving a lot of CPG strategy conversations. A Cornell University enumerator study found that households with at least one GLP user cut grocery spending by roughly 6% within six months of starting the medication, and the effect is even bigger in higher income households, closer to 9%, or about $690 in annual grocery spending versus $416 for the average affected household. Category hit hardest is exactly what you'd expect. Calorie-dense processed items. Savory snacks alone saw an 11% decline, with reductions across chips, baked goods, and cookies ranging from about 6.7% to 11.1%. There was a modest offset bump in produce and yogurt purchases among GLP1 users, but the researchers were clear the basket's getting healthier, mostly by subtraction, people cutting the unhealthy stuff rather than addition. With something like 15 million U.S. adults now on GLP1 medications, CPG has been moving fast to adapt. Hershey's CEO has called the impact on her business mild so far, but others aren't waiting to find out. Nestle has launched both a pre-meal boost drink and its vital pursuit brand aimed at weight management consumers, while Conagra started labeling a slate of healthy choice meals as GLP1 friendly, the first major brand to put that language right on the pack. With Morgan Stanley projecting the global obesity drug market to reach $105 billion by 2030, expect a lot more portfolio repositioning like this before the picture fully settles. That's a wrap on episode 50 of the Commerce Riff. If you haven't caught our recent guests, go back and listen to our conversations with Walmart Data Ventures Mark Hardy and industry thought leader Sarp Tunkey. Both are well worth your time. If anything we covered today sparked a thought, drop it in the comments. We read them all. And if you're not following us on LinkedIn, Instagram, TikTok, Facebook, and YouTube, well, now is the time. Thanks for 50 episodes of Riffing with Us. We'll see you next week.