Grocery wars enter new venues
By Randy Tucker
Cincinnati Enquirer
Cincinnati — Bob and Linda Fultz consider themselves loyal Kroger shoppers. But that hasn't stopped them from taking some of their food dollars to other stores.
Gannett News Service
"Last night, I was downtown and picked up a bag of charcoal and a pint of Ben & Jerry's ice cream from Walgreens on my way home," said Bob Fultz, of Cincinnati. "I remember when I'd have to run out to the grocery store to get those items."
Harry Murray selects sugar-free foods at the Kroger store in Hyde Park, Ohio. As consumers are offered more options for food shopping at discount and warehouse stores, traditional grocers are touting their bigger selection and specialty foods, as well as lowering some prices.
Grocery shoppers have more options than ever where they can buy food. Discount stores, warehouse stores, convenience stores, drugstores, even online retailers are expanding food offerings.
As competition increases, the pressure on price also is growing. Traditional grocers are countering with price drops where they can, even as they try to convince shoppers that a bigger selection and more personal service may be worth a slightly higher price.
"There are so many options now for consumers to buy food that their loyalty to their local supermarket chain has steadily eroded," said Mark Hugh Sam, a Morningstar Inc. analyst who follows Kroger, which has 2,536 stores and is one of the nation's largest grocery chains. "Wal-Mart isn't the only factor."
Although supermarkets remain the primary grocery outlet for 72 percent of shoppers, according to a January survey from the Food Marketing Institute, that number has declined from 81 percent in 2002.
At the same time, patronage at discount stores, supercenters and other retail channels that sell food has continued to increase, with supercenters leading the way — 21 percent said supercenters were their primary destination for buying groceries, up from 15 percent in 2002.
Cathy Davis of Crittenden, Ky., shops at a Wal-Mart Supercenter. She saves so much money on food and other items, she says, that "I'd be stupid to shop anywhere else."
Wal-Mart's building boom puts pressure on conventional grocers to increase their size so they have room to sell general merchandise, which carries a higher profit margin. The size of the average Wal-Mart is between 150,000 and 200,000 square feet.
Kroger recently built its biggest store ever — a 104,000-square-foot store in suburban Cincinnati that features a Fred Meyer jewelry store, a Starbucks, a drive-up pharmacy window and a photo lab. There's also an adjacent mini gas station, a major revenue generator for Kroger, which now operates more fuel centers than any other retailer except Wal-Mart.
"The stores we're building today are larger on average than they were 10 years ago as part of our effort to meet the increasingly diverse needs of our customers," said Gary Rhodes, Kroger's corporate spokesman.
Kroger wants to keep its stores at a manageable and easy-to-navigate size because, unlike the supercenters, its focus and the backbone of its business is still food.
Although there are many reasons people shop at certain stores, price is always at or near the top of the list. Wal-Mart, considered the biggest threat to the grocery industry, sells food at prices 20 percent to 30 percent less than conventional grocers.
"I'm disabled, and I live on a fixed income, but I just bought a 27-inch, flat-screen TV," said Jim Crutcher, of Crittenden, Ky., who was shopping at a Wal-Mart Supercenter in Dry Ridge, Ky. "I wasn't really in the market for a TV. ... But the price was so low I couldn't pass it up. That's the thing about Wal-Mart. It lets you stretch a dollar so you can afford things you otherwise couldn't."
Kroger and other supermarket chains acknowledge their prices may never be as low as the supercenters' because they can't afford to sell food as cheaply.
Instead, they're emphasizing such things as clean stores, fresh produce, full-service meat departments and convenient locations. They've set up frequent-shopper programs to increase customer loyalty and, on selected items, match the deeper discounts supercenters offer.
And, they say, they carry a better selection of products, including hard-to-find specialty items, than Wal-Mart, which stocks only the most popular grocery items.
