Competition adds choices to shoppers' grocery lists

CINCINNATI - When Roberta Mand needs groceries, she has a world of choices in her own backyard.


For regular shopping, she goes to her neighborhood Kroger store. For steaks, she prefers the Costco Wholesale Corp. store. For a pecan-encrusted tilapia to take home for dinner, she's off to The Fresh Market. If she's hankering for sushi, she hits the Wild Oats Markets Inc. store a couple of minutes away.

"It just depends on what I'm looking for," said Ms. Mand, a mother of two who works from her suburban home and cooks five nights a week for her husband and kids. "I like variety."

These are spicy times for those who like variety in their grocery shopping choices, in price, selection and convenience. More retailers are using food to lure customers, intensifying competition while taking bites of the nearly $6,000 a year American households spend on groceries.

For most households, the days when nearly all grocery shopping was done weekly at a supermarket with a meticulously detailed list are fading into the past. Now there are club stores to buy in bulk at discount prices, supercenters for combining grocery with clothes and other shopping, specialty stores for gourmet choices and, for quick pickups of basic grocery items and snacks, not just convenience stores but expanded gas stations, drugstores, dollar stores and big-box retailers.

A recent annual industry report by Willard Bishop Consulting predicts that by 2010, less than half of what it projects as $1 trillion annual grocery and consumables sales will be in traditional grocers.

"Everybody in the world seems to be offering grocery items," said Jack Horst, grocery analyst for the Kurt Salmon Associates consulting firm,

David B. Dillon, the chief executive of Cincinnati-based Kroger, said the business is being transformed by "the fragmenting of where people buy groceries," and not just the emergence in the last two decades of discounter Wal-Mart Stores Inc. and of higher-end competitors such as Wild Oats and Whole Foods Markets Inc.

"Most places that are retailers now sell food in one fashion or another, trying to draw on that traffic element," Mr. Dillon said. "That meant that the relevancy to the customer became more important; connecting with the customer."

Kroger, the nation's largest traditional grocery store chain, has kept prices down overall while expanding its store formats. No-frills Food 4 Less discount stores operate in some markets and upscale Fresh Fare stores in others, with Marketplace stores - double the typical size of Kroger stores and offering such nonfood goods as bedroom furniture, office supplies and jewelry - in growing suburban areas in several states.

"Our strategy at Kroger is to recognize that customers differ in their needs," Mr. Dillon said. "I think we've addressed it by fragmenting ourselves a bit, because that's the way the customer wants it."

Traditional grocers have been remodeling stores, expanding selections and improving service. Supervalu Inc. plans to spend $1.2 billion in the next year on remodeling and new stores.

"It's not always everyday pricing," Jeff Noddle, Supervalu's chief executive, told analysts this month.

The big grocers and Wal-Mart have responded to growing demand by expanding organic and specialty food sections

"The conventional markets, seeing how successful Whole Foods has been, are copying us," John Mackey, the chief executive of the Austin, Texas-based natural foods supermarkets, told analysts last month. Whole Foods still sees plenty of room left, aiming to double sales, to $12 billion annually, by 2010.

Wal-Mart, now the national leader in grocery sales, continues expanding, with nearly 2,200 Supercenters, and also sells groceries in Sam's Club stores and Neighborhood Markets. Target Corp. has added grocery-selling SuperTarget stores, to nearly 200. Britain's Tesco PLC, one of the world's largest retailers, plans to test the American grocery waters this year with stores in California, Nevada and Arizona.

"Most of the competitors are fighting half a dozen or more wars," said Burt Flickinger III, the managing director of Strategic Resources Group. He said Kroger is one of the few grocers to have shown an ability to compete head-to-head with Wal-Mart; Kroger said last year it increased market share in 20 of 28 areas where it faced major Wal-Mart competition.


Facing increased competition for the American grocery dollar from big-box stores, specialty markets and other retailers, the nation's largest grocery chains have taken these measures:

New looks: Safeway Inc., for example, has been converting stores to a "lifestyle" format that includes hardwood floors, softer lighting and even cupholders on the shopping carts.

More selection: Groceries are offering more organic and natural foods, special store sections and their own branded lines, such as Safeway's "O Organics." Lakeland, Fla.-based Publix Super Markets Inc. is opening some Hispanic-aimed "Publix Sabor" stores.

Chains also are expanding private-label brands, which reduce costs and give their stores signature products. Kroger has three tiers, starting with price-focused Value products and topped by the Private Selection brand.

Better service: Supervalu Inc. mandates in certain stores that a new checkout line is opened if there are three customers waiting in a line. Kroger has a contract with IBM Corp. for shopper-friendly technology such as kiosks that allow customers to place deli orders for later pickup.

- Associated Press