As I noted on Tuesday, Kroger is doing well not despite the weak economy, but because of it. The supermarket chain aims itself squarely at the budget- conscious,and since more of us are thinking of ourselves that way lately,Kroger is benefiting. At the same time, high-end markets like Whole Foods are hurting bad. And those in the middle? They're hurting too.

In a note posted on Barrons Wednesday, Jeffries & Co. analysts Scott A. Mushkin and Bakley Smith said the whole industry "looks to be headed for a difficult period," but specifically cited Safeway and Supervalu, which owns several chains including Albertson's and Jewel-Osco. Those two companies, the analysts said, are "poorly positioned for the current macro-climate." They each "have pricing issues that need to be addressed and will struggle to maintain market share," as well as to maintain margins as consumers flee to Kroger, Wal-Mart, and other bargain-oriented grocers.

It probably doesn't help that, even as Supervalu has cut prices to maintain market share, it also has introduced a big, expensive program to offer ready-to-eat meals in its stores, which it says will save consumers money over restaurant fare. That may be true, but it's also more expensive than traditional groceries. It may work out well in the short run, but the implementation is costly, and if the downturn proves short-lived, consumers may return to restaurant-eating, and Supervalu will be forced to revamp its stores again.

Earlier this year, Supervalu introduced a line of store-brand organic and "natural" products, which, while priced about 15 percent below the average cost oforganics, are still comparatively pricey. Over the long term, shoppers may flock to the products. For now, it's unclear how many are bypassing anything labeled "organic" in favor of anything signaling "cheap." In July, the company posted a 9.5 percent increase in quarterly profits, but warned of hard times ahead.

Also in July, Safeway ratcheted down its sales forecast for the year, citing the fact that consumers were either buying cheaper items orshopping elsewhere. On a conference call with analysts at the time, CEO Stephen Burd said, "I don't think any of us feel the economy is going to improve any time soon, at least not consumer confidence. In a soft economic environment, people who have been selling price and value, they're going to do better."

He didn't mention which "people" were going to do better, but he meant his rivals Kroger and Wal-Mart. So far, it seems he was exactly right.