Supermarket chain going back to basics

Image: Company is revisiting its warehouse origins with an everyday-low-price strategy.

March 18, 2001|By Lorraine Mirabella | Lorraine Mirabella,SUN STAFF

If shoppers are confused about Metro Food Markets, Bill White certainly understands.

Consumers have gotten conflicting messages over the past few years, says White, president of the Baltimore area's second-largest supermarket chain. It's no wonder, he says, given an evolution in which a former warehouse-style chain called Basics grew into the more upscale Metro, a hybrid that billed itself as a "theater of foods" emphasizing prepared meals, fresh produce and low prices. And that format, some say, had lost its luster.

Despite fast growth of the superstore-sized markets, Metro lacked a clear image, says White, who was brought in by Minneapolis-based Supervalu Inc. in April. Supervalu acquired Metro and a Washington-area chain, Shoppers Food Warehouse, when it bought Richfood Holdings Inc. in 1999.

White believes the key to Metro's future lies in its past, in the low warehouse prices that were a hallmark of Basics and now distinguish the 40-store Shoppers chain.

White is leading the effort to remake the 18-store Metro once again by shifting to an everyday-low-price strategy, which means selling the bulk of items at low prices all the time, rather than running sales.

It's been a winning strategy for Food Lion and Wal-Mart Stores Inc. It's worked for Supervalu's other low-price supermarkets around the country. It's been a success for Shoppers Food in the Washington area.

And the strategy fits Baltimore, says White, who had been president of Shoppers Food before taking on Metro, too. White says he watched who was shopping the Metro stores, now in Baltimore City and Baltimore, Anne Arundel and Howard counties to see "how we could create a point of difference between us and the competition [especially market leader Giant Food Inc.] to increase sales and profit."

He turned to the everyday-low-price strategy he knows so well from Shoppers, where merchandise is sold out of cardboard boxes stacked to the rafters and shoppers bag their own groceries.

"Baltimore is really blue-collar," White said. "What we're trying to be is more blue-collar and less [full] service-oriented in perishables, and offer more prepackaged items."

Eventually, the Metro stores might assume Shoppers' warehouse appearance and even its name - though not right away or all at once. "There's still name recognition, and Shoppers is not known," White says. "The name Metro means something in Baltimore."

But then again, he said, "somewhere down the road, it's possible Metro could become Shoppers. It would behoove us to have one banner."

For now, Metro has taken on Shoppers' prices - which, White says, meet or beat any in the market. Analysts agree with the low-price strategy and say it makes sense for parent Supervalu, which specializes in low-price chains.

"That is the positioning they prefer and where they think they have some strength and can do a good job," said Sally Wallick, a retail analyst with Legg Mason Wood Walker in Baltimore. "This is consistent with that philosophy."

Standout strategy

It will help Metro stand out from the higher-priced, upscale chains such as Giant Food and Safeway, especially since both have introduced bonus card programs, analysts said. Giant sales account for 30 percent of the market, while Metro's sales make up 11 percent of total sales and Safeway ranks third with over 10 percent, according to Food World trade journal.

"There are certain consumers who are going to shop an upscale store, and it will be difficult to attract them, but at a time when consumer confidence is falling, people are becoming more concerned about sticking to a budget and could be attracted to a more value-oriented format," Wallick said.

The value format also should help Metro in the hotly contested battle for second place in the Baltimore market, a spot Metro just barely holds, as well as position the chain for the future, analysts say. That future will likely include new grocery players and more intense competition from discounters such as Wal-Mart, which is expanding supercenters with grocery stores.

"The timing for Supervalu is superb to move into a price impact format," said Burt P. Flickinger III, managing director of Reach Marketing. "To have a chainwide price impact market before Wal-Mart converts all its divisions and builds newer supercenters is a very good step."

The low-price format, which forgoes gourmet touches such as coffee bars and sushi, is considered a reliable, less risky strategy for many supermarket chains, said Todd Hultquist, a spokesman for the Food Marketing Institute.

`Price-conscious public'

"We still are a very price-conscious public," Hultquist said. "Americans want quality, but they're looking at the best quality at the lowest price."

White says that when he took over the Metro chain, sales were flat and the chain was not profitable. The chain had been successful in its previous incarnation as Basics, which Richfood acquired from Rite Aid in 1995. Richfood then began converting Basics stores into the larger Metro format.

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