Wal-Mart, which overtook K mart and Sears to become the nation's largest retailer, now seems to be angling toward Safeway and Kroger in the grocery business.
In October, Wal-Mart Stores Inc. acquired a small Arkansas grocery chain, Phillips Companies, and is expanding its Supercenter stores, which devote half of their space to groceries.
Wal-Mart is also stepping up its efforts to sell ground beef, freshly baked bread, heads of lettuce, and other fresh foods at its Sam's Clubs, the company's fast-growing warehouse-style stores.
Moreover, last summer, Wal-Mart struck a deal with Mexico's biggest retailer, Cifra S.A., to open warehouse-style stores in Mexico that would sell a range of products, including stationery, electronics and food.
For now, food is a small part of Wal-Mart's overall sales. But given Wal-Mart's track record of rolling over competitors and its unabashed willingness to throw around its weight with suppliers, many food retailers and some food processors are already nervous.
"You'd have to be asleep not to be concerned," said Craig Schnuck, chief executive of a 59-store Schnuck's Market grocery chain based in St. Louis. "No one has ever been as big as Wal-Mart is."
What supermarket executives seem to fear most is that Wal-Mart will use its clout with suppliers to demand price breaks not available to mere grocers. Some also acknowledge that Wal-Mart's fabled skills in distribution could allow the chain to offer lower prices on many grocery products.
To combat Wal-Mart in areas like St. Louis, traditional supermarket operators are sprucing up their offerings of fresh fruits and meats and emphasizing service.
Schnuck said his company was also exploring ways to make its operations more efficient.
Some food executives are worried that Wal-Mart will become so powerful that it will demand special prices on big wholesale orders.
"There are a lot of manufacturers that are concerned about special deals," said Charles McCarthy, president of the sales division of the Campbell Soup Company. "There is always pressure from the power buyers like Wal-Mart once they have a lot of your business."
Wal-Mart is also building a line of its own "Sam's American Choice" food products in crisp, attractive packaging. The company is selling its own version of cola, cookies and juice in some stores. Last year, the company acquired McLane Co., a grocery distributor.
"I believe that it is their intention to be one of the largest food retailers in the country by the end of the century," said Ryan Mathews, editor of Grocery Marketing, published by Gorman Publishing in Chicago.
Wal-Mart executives declined to discuss their plans to expand food and grocery sales.
But Robert F. Buchanan, a retail analyst with Alex. Brown & Sons in Baltimore, said there was little doubt that Wal-Mart was "moving big into food."
Food retailing accounted for $362 billion in sales last year, according to Alex. Brown, compared with $84.6 billion in discount department store sales last year. Buchanan said that building up grocery sales will play an increasingly large role in the company's stated goal of reaching $100 billion in sales by the end of the decade.
Some in the food industry are concerned that Wal-Mart will gain too much power as it expands into an important new area of food retailing. In Canada and Europe, where there is a far greater degree of consolidation in food retailing, a few large retailers hold a great deal of influence over the food industry. "It makes negotiating more difficult," said McCarthy of Campbell.
Already, some of Wal-Mart's recent moves are sending uneasy ripples through the food industry. In November, Wal-Mart told manufacturers that it would no longer deal with the brokers who act as middlemen between manufacturers and retailers.
Wal-Mart says cutting out the brokers will improve communications and allow the company to react quicker in ordering. The company argues that the sheer volume of its business -- it had sales of $32.6 billion last year -- mandates that it has direct ties to its suppliers.
Some food retailing executives have a different interpretation. "It's Wal-Mart flexing its muscles and saying we are a national, dominant retailer and we decide the rules of a game, and not you," said Brian Sharoff, president of the Private Label Manufacturers Association in New York. "At one time retailers were viewed as passive. This is not passive."
Grocers are also worried that Wal-Mart's decision to stop working with brokers will give it a price advantage.
Food processors pay brokers small commissions for selling their products. Grocers say that manufacturers dealing directly with Wal-Mart could pass the savings on to the chain in the form of discounts.
Federal law bars food makers from cutting out middlemen simply to avoid paying a commission and then passing along the savings to a supermarket in the form of additional discounts.
"We are concerned that people might find a way to get around that," Schnuck said. "I just want to be given the same opportunity that the other guy is given."
The supermarket industry has commissioned a study, due out early next year, on whether discounters are getting special prices not available to other retailers.
Some retailing experts say they think Wal-Mart's primary food-retailing efforts will be done through its Supercenters, which range from 97,000 square feet to 211,000 square feet.