Grocery newcomers grab hefty slice of area dollars

4/18/2002

In their first year of business in the Toledo area, the Farmer Jack and Giant Eagle supermarket chains captured $1 of every $6 spent on food.

The new entrants grabbed customers from area market leaders Kroger, Food Town, and Meijer, each of which lost significant share in the just-released report by TradeDimensions, an industry magazine. The small, independent grocers in the area, as a group, held their ground, the report shows.

Still leading is Kroger, with a 32 percent share of area dollars spent on groceries, according to the report. Food Town was a distant second at 24 percent, and Meijer had 14 percent.

But nipping at Meijer is Detroit-based Farmer Jack, which snared a 12 percent share with six stores, including three former Churchill's Super Markets it bought about a year ago. Somewhat surprising is Giant Eagle, of Pittsburgh, which captured a 4 percent share by opening just one store in the area last year in Rossford.

Industry experts said the market changes are caused in part by the sudden entrance of new players, which disrupted customer loyalty with heavy advertisements of specials. Because the metro area is not noticeably growing in population, competitors have to steal customers from each other. Unknown, the experts said, is whether the shift will last.

``It's not unusual to see a temporary draw to a new store, but we believe it's just temporary,'' said Jean Norcross, a spokesman for Grand Rapids, Mich.-based Spartan Stores, Inc., the owner of Food Town.

Ryan Mathews, a Detroit grocery industry analyst who knows the Toledo market, said, ``It's more than possible somebody could come into a market and make a big splash. One of the best strategies is to come in with a big price cut. To get that shift in behavior initially, you have to offer something pretty spectacular like that.''

The analyst with FirstMatter, of Westport, Conn., said he is not surprised Farmer Jack and Giant Eagle have a combined 16 percent market share, but added that whether the weekly advertised specials can last and retain customers is uncertain.

``Price is effective in the short term,” he said. “It is not, however, a long-term strategy, because you can't keep giving the store away forever. Once things normalize, that market share either shifts again or settles in.''

He also cautioned that the market-share figures are based on some firm industry figures and some estimates. Further, market share refers to revenues, not profits, so even if a chain has gained a significant market proportion doesn't mean it is making money and that it can continue at that level, he explained.

The report, the best publicly available statistics on the Toledo area grocery scene, is based on food sales in December at supermarkets in Lucas, Wood, and Fulton counties.

Giant Eagle spokesman Rob Borellasaid the company was pleased but not surprised by the figures.

“We think we positioned it well in the market,'' he said.

Officials of Cincinnati-based Kroger and Farmer Jack did not return phone calls seeking comment.