National grocery industry at a glance
Revenue: $491.2 billion
Wages paid: $47.6 billion
Employees: 2.3 million
Average wage*: $20,900
Profit: $8.4 billion
*Includes full- and part-time employees
Largest grocery chains and their U.S. market share
The Kroger Co.: 18.9 percent
Safeway Inc.: 7.9 percent
Supervalu Inc.: 6.2 percent
Source: IBISWorld Industry Report “Supermarkets & Grocery Stores in the U.S.,” December 2012
Grocery shoppers in southwest Ohio are paying lower prices than shoppers elsewhere because of the intense and growing competition among the region’s grocery stores, industry officials say.
The supermarket slugfest has intensified in recent weeks as industry heavyweights Kroger and Walmart duke it out with press conferences and ad campaigns over which retailer offers more value.
Meanwhile, regional grocery chains and locally owned independents are finding innovative ways to preserve their customers’ loyalty, and non-traditional food stores such as Target and Walgreen’s are expanding their grocery selections.
The grocery wars have brought jobs and investment to southwest Ohio. In January, Kroger opened a $15 million, 97,000-square-foot store in Austin Landing, employing 300. About 13 months earlier, Kroger added about 250 jobs when it relocated its south Centerville store to a new, larger “marketplace” supermarket across the street. And Fairfield-based Jungle Jim’s hired more than 300 employees to open its second location in late 2012 in Union Twp. in Clermont County.
And shoppers are taking full advantage of the increasing selection: about three-quarters of today’s consumers shop in five or more retail outlets in search of bargains, according to the Grocery Manufacturers Association.
“The good news for consumers is that competition drives down prices,” said Nate Filler, president and chief executive of the Ohio Grocers Association. “If you’re shopping for value, you’re going to find it.”
Filler called southwest Ohio “a hotbed of grocery activity.” But not every supermarket has survived the competition. Two Lofino’s Food Stores-owned Cub Foods supermarkets that had operated for about 25 years in Miami and Sugarcreek townships shut down in September 2012, and a Trotwood Cub Foods store followed suit in early 2013, costing the region a total of about 180 jobs.
And there may be more trouble ahead. One industry research firm suggests profits will be squeezed even further in the next few years.
“With per-capita disposable income expanding in a recovering economy, consumers will eat out more, particularly as individuals work long hours and seek the convenience of take-out meals,” the Los Angeles-based IBISWorld Inc., an independent industry research firm, wrote in its December 2012 industry report. “Also, competition from big-box retailers like Walmart is anticipated to intensify over the next five years as these stores increase their grocery product offerings and lure customers away from traditional grocery stores.”
Filler said supermarkets’ already razor-thin profit margin of about 1.2 percent will be tested in the coming months as the full impact of last year’s drought in many areas of the country will drive up commodity prices, including the price of beef.
“It’s not a great environment to foresee a lot of growth in the coming 12 to 18 months,” Filler said.
But that hasn’t stopped the high-profile openings of new grocery stores in southwest Ohio.
The new Austin Landing Kroger in Miami Twp. is less than two miles from the Springboro location of one of its strongest competitors in Montgomery County’s south suburbs, Dorothy Lane Market. But it’s also less than four miles from its fellow Kroger store in Springboro, and less than five miles from the Kroger Marketplace store in south Centerville, giving Kroger a saturating presence along the Centerville-Springboro corridor.
Kroger is the largest player in the traditional grocery market locally and nationally. The Cincinnati-based corporation operates 110 stores in the Cincinnati, Dayton, Springfield and northern Kentucky areas. And it has the largest market share of any single supermarket chain in the country, capturing 18.9 percent of the highly fragmented market with its 16 brand names in 32 states.
Last week, Kroger’s fourth-quarter profit easily beat Wall Street expectations on strong sales and revenues, and its stock price has jumped nearly 20 percent just this year.
Walmart, America’s largest retailer, would like to tap into some of Kroger’s grocery revenues. The retailer recently launched an aggressive print and broadcast advertising campaign in southwest Ohio that targets Kroger with full-page newspaper ads and television spots that show local residents and compare grocery tapes. The ads say shoppers can purchase identical items for about 15 percent less at Walmart.
Walmart “has been doing similar campaigns elsewhere in the country, targeting other competitors, and it has been very effective, apparently, because they keep doing it,” said David J. Livingston, an independent retail supermarket consultant and site-location analyst in Waukesha, Wisconsin.
The March 2013 issue of the Shelby Report, which tracks grocery market share in markets nationwide, showed Walmart made gains in a region that includes the Cincinnati, Dayton, Columbus and Huntington, W. Va. metropolitan areas. The Shelby Report said Kroger’s market share in the broader region dropped 1.4 percent to 41.1 percent between May 2012 and January 2013, while second-place Walmart’s market share rose 1.1 percent to 23.6 percent.
On Feb. 1, Kroger’s southwest Ohio division president, Sukanya Madlinger, announced a new lower-price initiative that she said was designed to help Kroger capture a greater share of southwest Ohio’s competitive grocery market. Livingston said he believes the Kroger lower-prices initiative was a direct response to Walmart’s campaign.
And there may be more Walmarts on the way. Bill Simon, head of Walmart’s U.S. division, said at an industry conference last week that the company will open 115 smaller-format stores nationwide this fiscal year, and an even larger number of super-centers — and he touted low prices and fresh food that those new Walmarts will deliver to customers, according to the Wall Street Journal.
Kroger spokeswoman Rachael Betzler said Kroger “is still the best overall value when you add in our new lower prices, weekly sales, fuel savings, personalized coupons mailers and the fastest checkout in town.”
Southwest Ohio’s grocery industry landscape includes other national chains such as Aldi and Trader Joe’s, regional chains such as Meijer and Earth Fare, and a host of locally owned independent grocers and specialty stores.
“We’re all feeling the pressure,” said Gabe Dodds, store manager at Northridge IGA in Moorefield Twp. near Springfield. Dodds said he battles the allure of one-stop big-box stores by focusing on the positive aspects of shopping at smaller community-based stores: attentive customers service, a short walk from the car to the grocery’s front door, meat that is cut in-store. But sometimes it’s a struggle just to make sure residents know that the store exists.
“We’ve been here 20 years, and some people don’t know we’re here,” Dodds said. He is trying different strategies, including social media and direct mail — “things that small community stores might not have done a few years ago” — to generate sales.
Norman Mayne, CEO of the three-store Dorothy Lane Market, said he has seen periods of intense competition come and go over the decades.
Inevitably, Mayne said, when any region has more grocery-store square footage than its population can support, “there will soon be fewer stores.” But DLM will continue to focus on service, quality and health-and-wellness issues, and on sourcing local products for its stores, Mayne said, and he believes Dorothy Lane’s future is bright.
The impact of the new Austin Landing Kroger store on on the DLM Springboro store’s sales has been minimal, and competition “makes a better merchant out of you,” Mayne said. “To sum it up, we’re doing just fine.”
Jimmy Bonaminio, creative services director at Jungle Jim’s International Market and son of founder “Jungle Jim” Bonaminio, echoed Mayne’s comments about the cycle of competition. “This has happened off and on over the years, but there is definitely a burst currently,” Bonaminio said.
But he’s optimistic about Jungle Jim’s ability to compete.
“We’ve got flexibility,” he said. “And we’re going to get creative.”