Grocers Work Fast to Offset High Fuel Prices, Tomato Ban

By Miller, Valerie

While gasoline prices have risen well above $4 a gallon for regular unleaded in Nevada, some grocers are acting quickly to keep food prices from following suit.

Fresh & Easy Neighborhood Markets, Albertson and Wal-Mart supermarkets are among the operators taking steps to conserve fuel and ease the passing of rising fuel costs along to consumers. From using energy-efficient vehicles to economizing deliveries and negotiating with suppliers more, retailers say they are taking steps to hang on to customers.

As one of the latest entries in the local grocery market, the Tesco-owned Fresh & Easy chain has employed cost-saving measures since its valley launch seven months ago, said Breeden Wonnacott, a company spokesman.

The chain has opened 11 Las Vegas Valley stores and has 25 more planned. Wonnacott said Fresh & Easy’s recent arrival was a plus for the operation when it came to saving on fuel costs.

“We were able to build our own supply drain from scratch,” he said. “We set it up so that our stores receive one truck a day.”

That truck has a hybrid freezer, which allows different levels of refrigeration and a mixture of fresh, frozen and packaged foods to be delivered in a single daily shipment.

“What it does is minimize the costs of diesel fuel it takes to safely transport and cool the product,” he said. “The refrigeration shuts off; it is not constantly running all the time and saves on fuel.”

Diesel fuel cost increases have been hard on all retailers, said Mary Lau, the Retail Association of Nevada’s chief executive officer.

“It has gotten tremendously harder. Now diesel is the most expensive fuel. It used to be the cheapest,” she lamented.

And Nevada’s “landlocked” position and lack of much agriculture only worsens the situation, Lau said.

“I don’t think we have a good rail system,” she said. “We have to ship by trucks. It’s bad for all the grocers.”

Profit margins in the grocery industry are tight compared with many other businesses, which average 5 percent.

Retailers say they are finding ways to make the best out of a had situation, however.

All Supervalu-owned Albertsons and Lucky stores also work to conserve gasoline through its vehicles, Albertsons spokeswoman Lilia Rodriguez said.

“We look at the rising costs of fuel and how it hurts our customers,” she said.

“We monitor the tractors.

“Do they have an idle-ignition shut off? Are our tractors limited to a certain speed? We look at the (specifications) on our tires. Do they have good air pressure?”

Albertsons and Lucky stores, which have combined for 38 valley locations, use the truck-inspection policy that Supervalu has always mandated. The chain bought Albertson in 2006.

Wal-Mart takes a little different approach to trying to keep gasoline prices from hurting business. It tries to keep suppliers’ prices down, said Tiffany Moffatt, the retailer’s corporate affairs director for the Western region.

“At Wal-Mart, we are committed to saving people money so they can live better,” she maintained. “When a grocery supplier brings price increases to the table, we don’t just accept it. We try to keep prices down. We negotiate:

Pricing and sales keep customers coming back, retailers say. Wal- Mart’s low prices ease the pain at the pump, Moffatt said. Albertson also claims “competitive prices,” Rodriguez added, but promotions definitely help. Specifically, the grocer’s “eight-hour sale” has been a hit with customers, she said. Albertson shoppers also can get a 10 percent bonus added to their gift card purchases up to $300 if they are using their economic stimulus checks.

Fresh & Easy offers $5 gift cards to bring in new customers, Wonnacott said.

The deals could go on for the foreseeable future. Lau said reports from the National Retail Federation predict shipments of goods into U.S. ports won’t increase until around Halloween, making the demand greater than the supply and driving up prices even further.

The recent salmonella outbreak in tomatoes will also add to rising food prices, she predicted.

“That will make another huge impact. All of a sudden you have a food ban on a staple,” she said. “So, if you are getting them from a cheaper source, like Mexico, all of a sudden you can’t now.”

Copyright Las Vegas Business Press Jun 16, 2008

(c) 2008 Las Vegas Business Press. Provided by ProQuest Information and Learning. All rights Reserved.