Carting Off Grocery Sales: As Wal-Mart Eats into D-FW Market, Traditional Grocers Bite Back
By Maria Halkias, The Dallas Morning News
Jul. 30–Competitors might have expected Wal-Mart’s grocery machine to slow down by now in Dallas-Fort Worth, its most mature major U.S. market.
Not a chance.
In just the last six months, Wal-Mart Stores Inc. has captured additional grocery sales equal to what it’s taken Target Corp.’s SuperTarget stores the last six years to build here.
Wal-Mart’s Dallas-area grocery market share increased to 31.1 percent in June, gaining 3.6 percentage points since January, or just slightly more than SuperTarget’s 3.2 percent total, according to midyear statistics gathered by Trade Dimensions’ Market Scope. In the four-county Fort Worth area, Wal-Mart’s share jumped to 36.5 percent from 33 percent in January.
Wal-Mart wasn’t the only food retailer to score as consolidation picked up speed in one of the most competitive U.S. grocery markets.
Kroger, which has been slowly capturing more of the region’s grocery dollars over the last few years, again saw its market share rise. Whole Foods and SuperTarget also posted modest share increases for the first time in many years.
Some of those gains came from people who simply needed a new store.
More than 30 supermarkets have closed in Dallas-Fort Worth since the end of last year — the most since Winn-Dixie left Texas in 2002:
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–22 Albertson’s and Super Saver stores were shuttered after the former No. 2 U.S. supermarket chain was split up and sold to various retailers and private equity groups. Cerberus Capital Management and Kimco Realty led a group of investors that acquired 661 Albertsons stores in unprofitable markets that included Texas.
Albertson’s Dallas-area market share fell to 12.3 percent in June from 15 percent in January.
–Safeway Inc.’s Tom Thumb closed nine area stores as part of a plan to make its Texas division more profitable by converting its remaining stores to its successful lifestyle concept. Tom Thumb is starting out anew with a 13.7 percent share in June, down from 15.7 percent in January.
–Albertson’s new owners shut down its online grocery shopping business, leaving the region without a local Web-based grocery option. Plano-based Melonseed.net closed operations earlier this year.
The big three conventional chains — Kroger, Albertson’s and Safeway — led a U.S. consolidation of regional chains in the 1990s to get bigger to better compete with Wal-Mart, Kmart and other discounters in the food business and with wholesale clubs Sam’s and Costco, among others.
Five years ago, Wal-Mart was the fastest-growing grocer in the Dallas area, but the big three were still ahead of it. Albertson’s was No. 1 with 21 percent of the market, and Tom Thumb was a close No. 2 with 20.8 percent. Kroger was No. 3 with 13.5 percent.
Albertson’s with a new owner, Tom Thumb with a new plan and Kroger with new momentum are getting a fresh start in the race to please area grocery shoppers.
Consumers will benefit with better prices going forward, analysts said.
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Kroger’s good fight
Kroger captured some of those wandering shoppers to shore up its No. 2 Dallas ranking with a 16.6 percent market share.
“We’re much more competitive with the big-box retailers than in any time that I can remember,” said Kroger spokesman Gary Huddleston.
Kroger and Tom Thumb have been “highly promotional to offset the effects of liquidation sales prices at Cerberus [Albertson's] stores,” said Mark Husson, an analyst with HSBC Global Research in New York. The conventional chains “should stay promotional after their closure to try to keep the loose share.”
Cincinnati-based Kroger Co. gets kudos in the grocery business for putting up a good fight nationwide against grocery goliath Wal-Mart, which unseated it as the nation’s largest food seller in 2002. It operates several formats nationwide, including combination food and general merchandise stores.
In Texas, its Signature stores are stocked to match neighborhood tastes, Mr. Huddleston said.
A Kroger store on North MacArthur Boulevard in Irving is on the way home for workers leaving the headquarters of some of the world’s biggest companies, including Exxon Mobil Corp. and Kimberly-Clark Corp. Not only are these shoppers well-traveled and highly educated and compensated, they are ethnically diverse. The store’s specialty food aisle is flagged with sections for Indian, British, Middle Eastern, Asian, kosher, Hispanic and Caribbean foods.
“We’re the No. 1 Indian store in the metroplex,” said manager Garry DeLong. “Besides all the specialty groceries, in the bakery we adjusted a shift in the evening to have wheat tortillas hot at 8 p.m. because that’s when our Indian shoppers want to purchase them.” He added an extra refrigerated box just for plain yogurt “because for many of our customers, it’s a staple.”
Tom Thumb remodels
Safeway’s lifestyle stores, which have more prepared foods and specialty items and a heavy focus on customer service, are beginning to get accolades from Wall Street. Chairman and chief executive Steve Burd told analysts last month that remodeled stores are seeing substantial sales increases.
“It’s my understanding that profitability is improving quickly from low levels and that the new remodels are trading above expectations, so they’ll do a lot more over the next three years — maybe all of them,” said analyst Mr. Husson.
Steve Frisby, president of Safeway’s Texas division, said that 19 stores have been remodeled to the lifestyle concept so far, 13 of them in Dallas-Fort Worth. “We have six more under construction now and over the next two to three years expect to remodel all stores.”
New items introduced with its “Ingredients for life” ad campaign include Rancher’s Reserve meats, O organic brand groceries and expanded produce selections, he said.
“We remind ourselves that market share ebbs and flows quarter to quarter, but we expect to benefit down the road from what we are doing now,” Mr. Frisby said.
Albertson’s mends
“We’re the new Albertson’s, and we realize we have a lot to prove,” said Williams Emmons, Albertson’s local division president. Though the stores changed hands just a couple of months ago, he hopes shoppers notice a cleaner store environment “from the sidewalks out front and throughout the store.”
Employee morale is better, he said. It had deteriorated as the chain was rumored to be for sale for more than a year and stores were losing customers.
Now Mr. Emmons said he doesn’t anticipate closing any more stores. “I think there’s enough business here for us to get our fair share. We can compete against Wal-Mart by outperforming them, having better stocked, cleaner stores. My best defense is to know my customer.”
Wal-Mart’s next move
As Wal-Mart evolves, it is taking a page from Tom Thumb and Kroger.
The chain known for its cookie-cutter yet super-efficient aisles and distribution abilities is trying to make its stores more neighborhood-specific. Wal-Mart wants more of its 130 million shoppers a week to browse the food side of its mammoth Supercenters.
In March, the chain grabbed worldwide attention when it opened its upscale Supercenter in Plano with more specialty items, organic foods, a sushi bar and a pumped-up wine department.
So far this year, it has opened three Supercenters, in Far North Dallas, DeSoto and Fort Worth. It replaced a White Settlement store with a new one in Westworth Village and added 82,000 square feet to a Balch Springs discount store to turn it into a Supercenter.
Shoppers decide
Shoppers always have the last word.
Richardson resident Anne Bienfang says she pays close attention to the area grocery scene and shops all the chains. She stopped at the Kroger on North MacArthur in Irving on her way home from work last week.
“Kroger and Tom Thumb are head to head, but I don’t think Albertson’s, on the whole, has kept up with quality of product or price in the past couple of years,” she said. “It’s fallen further behind in the race for quality and price.”
Patrick and Danea Thuemmel of Irving said they shop weekly at Kroger for produce and meats and make less-frequent “stock-up trips” to a Wal-Mart Supercenter “for things like sodas and snack food.”
There’s an Albertson’s across the street, but the twentysomething couple said they stopped shopping there when the stores were for sale.
“It was obvious they were trying to sell the chain, and they were keeping their prices high,” Mr. Thuemmel said.
What else does he like about Kroger?
“They sell E-85 in their gas pumps,” Mr. Thuemmel said. “I don’t use it. I just like that they care to offer it.”
Apparently, Wal-Mart heard this, too. The chain launched a major environmentally friendly corporate initiative, starting with the experimental store in McKinney.
E-mail mhalkias@dallasnews.com
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Copyright (c) 2006, The Dallas Morning News
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