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The Honolulu Advertiser
Posted on: Friday, December 2, 2005

Cheaper gas latest lure for grocery stores chains

By Dan Sewell
Associated Press

An increasing number of grocery stores now offer cheaper gas to frequent shoppers as competition between chains, discounters, like Wal-Mart and Costco, and specialty stores heats up.

KIICHIRO SATO | Associated Press

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CINCINNATI — The days of gasoline price wars aren't over. They've moved from service stations to grocery stores.

"Ten cents is 10 cents. It adds up," said Vikki Weisbrod, a nurse in suburban Fairfield, Ohio, who often saves $2 on a fill-up of her minivan through a Kroger Co. discount of 10 cents per gallon for frequent shoppers. "It's convenient, so why not take advantage of a chance to save some money on gas?"

Most of Kroger's competitors in Ohio markets — such as Giant Eagle, bigg's, Meijer and Wal-Mart — also have offered gasoline promotions. The gas discounts, usually tied to total shopping purchases or use of loyalty cards, vary in different markets.

The fuel promotions are one of the latest forms of competition in the grocery industry, where traditional grocery chains led by Kroger battle Wal-Mart Stores Inc., Costco Wholesale Corp. and other big-box discounters on one side, and upscale specialty food stores such as Wild Oats Inc., Trader Joe's Inc. and Whole Foods Inc. on the other.

Wal-Mart took less than 15 years to become the nation's largest grocer since its aggressive entry into the grocery business in 1988, and rival Target Corp. has complicated matters with its own aggressive expansion of grocery aisles.

"It's not a simple business," said Jason Whitmer, research analyst at FTN Midwest Research. "It's not just putting discounts in the weekly circular or giving double coupons."

Kroger — the country's largest grocery chain, with more than 2,500 stores under banners including Fred Meyer, Fry's, Smith's and Ralphs — has rolled out a variety of weapons to battle its multifront competition.

It launched a rewards MasterCard, which awards points for purchases that build up to gift certificates, and expanded use of its customer loyalty card.

Some Kroger stores have also added bargain-priced nongrocery items such as televisions, deck furniture or toys, meant to make store visits "like a treasure hunt," said spokesman Gary Rhodes.

Pleasanton, Calif.-based Safeway Inc., the nation's third-largest supermarket chain, is remodeling hundreds of stores.

In Hawai'i, Safeway has completed two $1 million facelifts on its Hawai'i Kai and Kapolei stores. The Kapolei store plans a "grand opening" of its new look tomorrow. The two renovations were the first conversions to Safeway's "Lifestyle" format that the supermarket chain plans to roll out statewide — and nationwide.

Second-ranked Boise, Idaho-based Albertson's has tried lower prices on high-volume items, opening Extreme Inc. discount stores and slashing costs, but the struggling company has put itself on the market.

The success of chains such as Trader Joe's proves people are willing to spend extra time and effort on groceries, if they think the quality is high, said consultant Wendy Liebmann of WSL Strategic Retail.