Food Lion chain shops in Baltimore's market Low-price grocer plans local expansion

May 10, 1998|By Lorraine Mirabella | Lorraine Mirabella,SUN STAFF

When the latest area Food Lion appeared in February, tucked away in a freshly paved strip shopping center in Perry Hall, only a fluttering banner of flags announced the grocery store's arrival.

There were no marching bands in the parking lot, no media blitzes, no store-sponsored weddings or big-prize giveaways. Customers got a free loaf of bread on the way out.

After years of catering to rural communities on the Eastern Shore and on the fringes of more densely populated areas, Food Lion is changing course and creeping into Baltimore's suburbs. It's moving quietly and without fanfare.

But the presence of the $10.2 billion company -- employer of 80,000 people in 1,157 supermarkets in 11 states -- will be hard to ignore.

Food Lion, known for plain vanilla stores and an everyday low-price strategy, is the first national supermarket chain to expand into the Baltimore market in years. It comes at a time when even deeply entrenched chains are battling among themselves and with nongrocery competitors for consumer loyalty and dollars. The expansion is the most extensive from a nonunionized chain in a heavily unionized market -- and is being closely watched by food unions.

Food Lion executives refused to be interviewed, part of their policy of avoiding the media since ABC News' infamous "tainted meat" expose in 1992.

But the Salisbury, N.C.-based company, with three-quarters of its stores in Virginia, the Carolinas and Florida, is clearly in the midst of a major expansion. It has announced plans to use the proceeds from its September divestiture of 61 unprofitable stores in the Southwest to grow in its Southeast stronghold and the mid-Atlantic. The company plans to open 75 stores this year and remodel or expand another 133.

"Food Lion's strategy for 1998 is centered on growth," Tom E. Smith, president and chief executive officer, said in the company's annual report released last week. "Growth is important to leverage the dollars already invested in our business."

Food Lion has nine stores in the Baltimore area and another eight under construction or planned. That could grow over the next few years, sources say. A year ago, Food Lion -- which has a 1.2 million square-foot distribution center north of Hagerstown near Greencastle, Pa. -- operated just three area stores.

The company plans to cluster stores in middle- and working-class neighborhoods outside the Baltimore Beltway that have at least 20,000 residents in a two-mile radius.

"They will go to a particular area and come up with the weekly expenditure toward groceries, then do a study to see where the dollars are going and how they can steal them away," said a source connected to Food Lion, who asked not to be named. "Convenience is the No. 1 criteria for most shoppers today. If Food Lion plops in between me and two other food stores and has a price advantage, I'll probably go there."

At the same time, chains such as Giant Food Inc., Metro Food Markets and Safeway Inc. -- all unionized -- are also expanding. These chains also are enlarging and redesigning stores and offering features such as prepared meals, in-store banking and electronic coupons.

It's unclear how the grocery wars will play out -- or how Baltimore's suburban shoppers will warm to Food Lion's no-frills approach.

Its clean but stripped-down stores have well-lighted aisles and shelves peppered with red and yellow bonus-buy tags. But shoppers will find none of the pizazz of established competitors -- no prepared meals, gourmet truffles or cappuccino bars.

"They have a grocery-driven approach to the supermarket business," said Jeff Metzger, publisher of Food World, a Columbia-based trade journal. "Food Lion operates stores that are typically less square footage than the market norm. They have fewer items and offer lower retail prices. They're not nearly as heavily involved in health and beauty or perishables as other retailers. But their execution level is solid."

Giant spokesman Barry F. Scher wouldn't say how the region's largest supermarket chain might respond to Food Lion, saying only, "Giant will do whatever we have to do so we don't lose business."

"We have had Food Lion as a competitor in other markets for a number of years and have met them successfully," he said. "We look at Food Lion like we do any new, large chain."

Food Lion has had a tougher time competing against other strong, everyday low-price retailers, such as Giant Food Stores Inc. of Carlisle, Pa., which operates 15 Martin's Food Markets in Western Maryland and others in Pennsylvania. Sales at Food Lion stores in those areas have been disappointing, analysts said. But few question Food Lion's ability to capture some market share.

"Food Lion is a large enough company that if they want to keep prices low and keep pressure on [their competition], they can," said Kenneth Gassman, a retail analyst with Davenport & Co. "Anybody positioned as a low-pricer in the Baltimore market is going to feel the impact of Food Lion coming to town."

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