Some competitor anxiety for big grocer's neighbors

Impact

September 25, 2005|By Tricia Bishop | Tricia Bishop,Sun reporter

Ozzie Mehdizadeh is nervous.

For the past five years, he has run a booming lunch business at his eclectically decorated Side Street Cafe off York Road in northern Baltimore County's Hunt Valley. But after several restaurants opened in the Hunt Valley Towne Centre this year, some customers have disappeared - about a third of them.

"It's getting tougher and tougher to make a couple of dollars," Mehdizadeh said. "There are so many [competitors] here, and suddenly Wegmans is coming too. ... I've heard they are the mother of all of them."

It's not the first time competitor anxiety has greeted the arrival of Wegmans, ranked as the second-best supermarket chain in the nation a few years ago by Consumer Reports, behind a West Coast grocer. Known for in-store restaurants, knowledgeable staff and high-quality selection, the company has transformed markets through the Mid-Atlantic as it has pushed beyond its western New York base.

"This is the 100-mile-an-hour fastball coming," said Jeffrey M. Metzger, publisher of Food World, a Columbia-based trade publication. He estimates that the Hunt Valley store, set to open next Sunday, will average about $1.5 million in weekly sales, more than double what surrounding grocers take in.

"I would anticipate [competitor reaction to include] everything from remodels to new merchandising programs and possibly pricing programs," he said.

Food sellers around Hunt Valley need to look no farther than Sterling, Va., for an example. A Wegmans store there quickly grabbed the third-largest share of the market with more than $93 million in sales in its first full year, according to Food World. By comparison, the publication estimated Food Lion brought in $72 million in combined sales from seven area stores, and Giant Food averaged about $27 million per area store - down from $35 million a year before Wegmans arrived.

"It seems to be putting a lot of competitive pressure on other stores," said Larry Rosenstrauch, director of the Loudoun County Department of Economic Development in Virginia.

Wegmans' expansion into Maryland comes at a time when competition in the $950 billion food industry is at its fiercest, with discount giants, drugstores, dollar stores, even gas stations selling all manner of food.

"The basic tenet is to know who your customers are and to know what it is they want and give it to them better than the guy across the street," said Karen Brown, a senior vice president at the Food Marketing Institute, a trade association in Washington.

Some of the largest supermarket companies, including Royal Ahold NV's Giant Food LLC, Safeway Inc. and Food Lion, have invested millions in new marketing, decor and store layouts to better compete.

In April, Safeway launched a $100 million marketing campaign celebrating new "Lifestyle" stores, one-fifth larger than the average Safeway grocery. The California company plans to spend $1.4 billion remodeling stores and opening new ones this year.

Food Lion stores in Maryland are getting a new look as well, with new tables and bins in the produce aisles, new lighting, new floor tiling and new wall graphics.

"The emphasis is primarily on the fresh departments," spokesman Jeff Lowrance said. "All stores are getting a newly renovated produce [section] and remodeled meat department."

Giant, too, has announced it will update 18 stores over the next two years. And tomorrow, it plans to launch a new "Solved" advertising campaign that focuses on food solutions to "the everyday needs of mom," according to the company.

No grocer said its changes were linked to Wegmans' arrival, but remodels do seem to happen wherever Wegmans goes. Barry Scher, a Giant spokesman, said his company's stores surrounding the Hunt Valley Wegmans have all undergone upgrades.

"[Wegmans is] a powerful economic force," said David S. Iannucci, director of Baltimore County's Department of Economic Development. "It seems to attract almost a cult-like following of people."

For the past six months, his office has been touting the Hunt Valley store as more proof that the county is capable of sustaining high-end retail. Just having the store will help the county attract better-paying jobs and wealthier residents, Iannucci believes. (Baltimore County at one point rejected a Wegmans proposed for Timonium, as did Howard County, both for zoning reasons.)

"That is a huge marketing advantage because it symbolizes a stamp of corporate approval," he said. "I'm able to say that Wegmans put their first store in Maryland not in Montgomery County, not in Howard County, not in the Annapolis area, but in Hunt Valley and Baltimore County."

Some businesses such as the Silver Spring Mining Company restaurant on York Road hope to gain customers attracted to Wegmans, which expects to draw from a radius of 30 miles or more.

Farmers are also looking forward to selling their goods to the store, which stresses local produce.

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