Giant Food said yesterday that it would overhaul a majority of its stores in the most aggressive strategy yet to fend off the growing competition that has caused the company to lose some of its footing as the region's largest grocery chain.
The grocer said it would remodel or replace 100 stores during the next three years. It's the largest investment made in the 185-store supermarket chain since Dutch food company Royal Ahold bought it for $2.7 billion in 1998.
Giant said it decided on the changes in an effort to better appeal to customers and increase sales. The moves come after the 71-year-old grocery chain spent the past few years closing underperforming stores, revamping the layout at some markets and lowering prices on some products.
Those who follow the local grocery industry said Giant needs to modernize its stores to stay current with several of its competitors. Many of Giant's older markets are smaller and outdated compared with the wide-aisled "super centers" and gourmet markets that consumers now expect.
Giant has lost customers as newer stores - such as Wegmans Food Markets Inc., The Fresh Market, Trader Joe's and Harris Teeter - brought more variety to the region in recent years. Other supermarket chains in the area, such as Super Fresh and Safeway, began renovating their stores several years ago.
Also, Wal-Mart Stores Inc. further shook up the market this week when it opened a supercenter in Cockeysville that includes a grocery store. It's one of three more "super centers" that the world's largest retailer will open in the Baltimore area, including plans for stores in Arbutus and Glen Burnie.
Slow to react
Some retail analysts said that Giant could have held onto more customers during recent years if it had better reacted to the changes its competitors were making.
"I think [Giant] probably waited 10 years too long to do this," said Geoffrey L. Mackler, a principal with retail broker H&R Retail. "They needed to update their stores and make it a more pleasurable shopping experience so they can compete with the other upscale markets."
Giant's share of the local grocery market has declined for several years. It had 29.42 percent of the Baltimore market this summer, compared with 33 percent in 2003, according to trade publication Food World. The company has supermarkets throughout the Mid-Atlantic.
"With all the competition coming into the marketplace, their back is up against the wall," said Mark Millman, president of Millman Search Group, an executive search firm in Owings Mills that specializes in the retail and shopping center industry. "They have no choice but to do what they're doing."
A Giant spokesman said the company was responding to the needs of its customers and that the changes were not designed to address any added competition in the market.
"It's a decision that Giant made to invest in a number of our stores to improve the customer experience and improve our sales performance," said spokesman Jamie Miller.
Many believe that Giant's more recent problems began when Ahold merged the administrative functions of Stop & Shop, the dominant supermarket chain in New England, and Giant three years ago to gain efficiency. Under the consolidation, Giant's headquarters moved to Quincy, Mass., from Landover.
Customers began to complain about poor service and out-of-stock items. Giant executives have acknowledged those problems and said they have worked to improve them. Also, Ahold executives said last year that they would focus on revamping the Stop & Shop/Giant chain after deciding to sell some of their other U.S. grocers, including the Tops supermarket chain in New York and Pennsylvania this month.
Prices, services cut
To win back customers, Giant has tried remedies such as introducing new store prototypes and showcasing better produce. Its lower-price strategy unveiled last year has expanded, including a separate announcement yesterday about dairy and coffee products.
But the company has cut back on services as well. It recently converted 50 of its seafood departments to self-service, along with 62 floral departments.
The three-year renovation plan is Giant's biggest attempt to regain customers.
The supermarket chain would not provide many details on the upgrades. But Miller said the renovations would include creating a "fresh market" atmosphere in the produce sections, as well as new lighting and flooring throughout the stores.
Giant said the stores would remain open during renovations, which will begin in the first quarter of next year. The company did not disclose how much it is spending on the upgrades.
Other area supermarkets also have overhauled their stores in recent years. Super Fresh recently unveiled an expansion of its store on 41st Street in North Baltimore.
Safeway announced plans in 2004 to renovate all 1,750 of its stores by 2010. Those changes include a "fresh market"-style produce section, new lighting and decor, and more food choices. The new stores have more than 100 organic items compared with the 30 or so offered in the company's older markets.
"It was all driven by competition," said Safeway spokesman Greg TenEyck. "We felt we had to differentiate ourselves from the other traditional grocery stores."
For Giant, some analysts expect the upgrades to help the grocer stem its recent losses.
"I think there is a niche out there for everyone," said retail broker Mackler. "I think if Giant would have done this quicker, they could have kept a much greater market share than they have now."