July 28, 2013

Grocery trends mean war for stores

Increased competition in Maine from the usual suspects – and some unexpected ones – has forever altered the supermarket landscape.

By Edward D. Murphy emurphy@pressherald.com
Staff Writer

SOUTH PORTLAND - Stephanie Smart does most of her weekly grocery shopping at a supermarket near her home in North Windham. But on a recent trip to the Target store in South Portland, she took a few minutes to stock up on some basics in the store's grocery section, which was significantly expanded a couple of years ago.

"I'm here anyway," she explained, strolling past shelves packed with cereal, pasta and bread and coolers stocked with frozen food, milk and juice.

Smart's shopping trip is representative of a major shift under way in the marketplace. The big, traditional supermarket chains that dominate the Maine market, such as Shaw's and Hannaford, still draw plenty of shoppers, but competition for the dollars that were predominantly spent in those stores has heightened sharply in recent years. Today less than half of consumers' food budgets are spent at supermarkets, down significantly from just a few years ago.

And now Shaw's and Hannaford are facing another challenge: Market Basket, a Massachusetts-based chain known for its low prices, will open a store in Biddeford in a few weeks, its first in Maine and 72nd overall.

The grocery wars are on.

While Market Basket hasn't announced plans for more stores in Maine, it has expanded rapidly when it has moved into other new markets, although there is turmoil among executives at the chain. A family dispute led to a boardroom fight this month over who will lead the company and, although no immediate change was made, further infighting could complicate expansion plans.

Market Basket plans to roll out some of its newest features at the Biddeford store, said David McLean, the chain's operating manager.

McLean said the store will have more prepared meal takeout options and a cafe with flat-screen televisions for those who want to eat before they shop. He also said the store, which will be among Market Basket's largest, will also have expanded healthy foods, gluten-free options and gourmet offerings.

But, he said, Market Basket will maintain its focus on keeping prices low and making "the shopping experience uncomplicated, with no gimmicks and no frequent shopper cards," a swipe at Shaw's now-defunct loyalty "Rewards" card, which customers had to sign up for to get the best price on sales items.

Market Basket's entry into Maine could further change the supermarket landscape here, forcing supermarkets like Hannaford and Shaw's to respond to the increased competition from other grocery chains as well as from other retailers and online sites all trying to grab a piece of consumers' food budgets.

In response to the increasing competition, Hannaford and Shaw's recently announced storewide price cuts, as well as the end of Shaw's Rewards Card program.

Both moves are "pre-emptive strikes" because of the upcoming competition with Market Basket, said Mike Berger, senior editor of The Griffin Report of Food Marketing, a trade publication for the food marketing industry. "They won't tell you that (the price cuts are in reaction to Market Basket), but they are."

Both Shaw's and Hannaford already compete with Market Basket in Massachusetts and New Hampshire, Berger said, and the chains are worried about expanding that competition geographically.

But it's not just lower-priced competition that traditional grocery stores have to fend off. On the higher-priced end, Whole Foods and Trader Joe's, for instance, attract customers focused on organic foods or those interested in particular house brands. And retailers Walmart and Target got into the grocery mix in the past decade, enlarging or even replacing existing stores to accommodate grocery sections that are as extensive as those in traditional supermarkets.

On the horizon is increasing competition from the Internet, likely to be heightened as Amazon Fresh expands beyond its introductory base in Los Angeles. Convenience stores and dollar stores are also angling for a piece of the consumer's grocery budget and even drugstores are joining the fray, adding bread, fresh milk and other traditional supermarket goods a few aisles away from hair coloring, Band-Aids and antacids.

(Continued on page 2)

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