Independent grocers still in a pickle They fight the giants with warmer smiles and hotter specials

A niche is nice to have

Super Pride, Eddies and Mars succeed with service and ingenuity

Food

November 22, 1998|By Lorraine Mirabella | Lorraine Mirabella,SUN STAFF

Once practically guaranteed the loyalty of neighborhood shoppers, independent grocers throughout Maryland are fighting for survival, squeezed by big chains with deep pockets as consumers spend more time and money eating out and turn increasingly to mass discounters.

Independent chains say they can no longer be all things to all shoppers, especially as competition has reached a fever pitch with retailers such as Wal-Mart, Kmart and Rite Aid stocking groceries. Dominant chains such as Giant Food Inc. and Safeway Inc. have extended their reach, while others, such as Metro Food Markets and Food Lion, are vowing to take even bigger bites of the market.

"Everyone in the world wants to come into this area," said Denis Zegar, president of the Mid Atlantic Food Dealers Association. "Companies are cannibalizing each other. Caught in the middle are the independents, who have been in those communities forever. Because of their size, they lack the buying power, or the sustaining power, to compete with some of the very, very large chains or mass merchandisers."

Last week, locally owned Valu Food, the Baltimore region's sixth-largest chain, filed for Chapter 11 bankruptcy protection, with an estimated $3.5 million owed to its 20 largest creditors. The company had previously announced plans to shut down four of 14 supermarkets and all three of its specialty grocery stores.

Valu Food's financial troubles had simmered for months as sales sagged at weaker stores and suppliers went unpaid. Some in the industry said the problems stemmed from the chain's efforts to go head-to-head with giant chains. The competition also includes Wal-Mart, the nation's top retailer with $118 billion in sales, about 23 percent of that in grocery sales.

"To survive in the future, [independent chains] cannot fight Wal-Mart on price," Zegar said. "What they have to do is redefine themselves. They have to find a niche and perform that niche better than anyone else."

Still, the best for which many can hope is to hold on to -- rather than increase -- profits and sales -- while cutting costs. That can be as true in areas of little or no population growth as in rapidly growing areas because consumers have more choices than ever.

Small chains such as Food King, Super Pride and Stop, Shop & Save have held their own by competing on price and being flexible enough to tailor their products to the likes and dislikes of a particular neighborhood's shoppers. Mars, the region's top independent with 15 stores and sales of $213 million, has built and maintained a loyal following over the years in its east Baltimore County base.

Super Pride, a 28-year-old chain with eight locations, mostly in East and West Baltimore, has faced challenges of a decreasing population in the city as well as competition from bigger chains, from the more-established to those just discovering the inner city market.

"What we've tried to do is work hard-

er at the service level and have even hotter specials," said Oscar Smith Jr., president and owner of the chain, which just remodeled a store in Cherry Hill and eventually hopes to expand into under-served, urban areas outside of Baltimore. "It's all people, courtesy, smiling, being attentive."

The chain also has leveraged its small size by relying on its wholesale supplier almost as a business partner, Smith said.

Small chains often use that approach as a way to gain economies of scale in buying, technology and advertising, said Michael Sansolo, a senior vice president with the Food Marketing Institute.

Other grocers, such as Eddie's of Roland Park, have found their niche in gourmet and prepared foods. With a 45-year-old store in Roland Park and a 6-year-old one on North Charles Street, Eddie's stresses service. Its baggers carry packages to cars, and employees will shop for and deliver groceries to customers. In the late 1980s, it was one of the first to offer an extensive prepared-foods department.

But over the years, other smaller chains have failed to find a niche. Many are gone, driven out by the competition or their failure to keep up with changing times. Among those listed among the mid-Atlantic region's top 10 in 1988 by Columbia-based trade journal Food World but out of business now are Farm Fresh, Jay's Markets, George's Super Thrift and Kash & Karry. Also gone are Foodtown, Michael's Food Rites and Steve's Supermarkets. Santoni's, in the top 10 a decade ago with six stores, has one store today.

"It's more difficult for everybody," said Jeff Metzger, Food World's publisher. "The overall competitive base is tougher; the lines between retailers are more blurred; and the pie is split more ways.

"Independents are farther down on the totem poll because of capital, technology, training and [smaller] size of stores. This gridlock has created more congestion for everyone, and independents have felt it that much more."

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