Gro­cery wars heat up as new­com­ers claim larger mar­ket share

The Charlotte Observer (Sunday) - - Front Page - BY KATHER­INE PER­ALTA kper­[email protected]­lot­teob­server.com

Lidl and Publix con­tinue to open stores through­out the Char­lotte re­gion, lur­ing cus­tomers from es­tab­lished gro­cers. Tar­get is fo­cus­ing more pro­mo­tional en­ergy on gro­cery sales, and Ama­zon low­ered prices at Whole Foods last year. These are some of the trends that have helped make Char­lotte’s gro­cery-store in­dus­try more com­pet­i­tive than ever.

The re­gion’s big­gest gro­cers are los­ing mar­ket share to new­com­ers, in­no­va­tors and ex­pand­ing re­tail­ers, ac­cord­ing to a new re­port on 2018 gro­cery rev­enue.

Matthews-based Har­ris Teeter re­mains the No. 1 gro­cery chain in the re­gion by mar­ket share, ac­cord­ing to an anal­y­sis from Chain Store Guide, a sales-track­ing firm. Wal­mart and Food Lion re­main No. 2 and No. 3 in the re­gion re­spec­tively, as they were a year prior.

Com­bined, those three com­mand more than half the to­tal gro­cery sales in the re­gion. But they are los­ing ground, ac­cord­ing to Chain Store Guide, a re­search com­pany that works di­rectly with gro­cery stores to get its data.

Har­ris Teeter holds 18.7 per­cent of the lo­cal sales, down from 19.8 per­cent the prior year. Wal­mart has a 17.8 per­cent share, down from 18.6 per­cent. And Food Lion has a 17.3 per­cent mar­ket share, down from 18.1 per­cent. In fight­ing for cus­tomer dol­lars, su­per­mar­kets add fancy

perks like wine bars to stores. They lower prices and build stores near their ri­vals. That com­pe­ti­tion leads to cheaper and more abun­dant op­tions, ul­ti­mately ben­e­fit­ing cus­tomers, ex­perts say.

“The best thing for con­sumers is a price war,” Cal­i­for­nia-based su­per­mar­ket an­a­lyst Phil Lem­pert said.

In a com­pet­i­tive en­vi­ron­ment like Char­lotte, food re­tail­ers are work­ing to dif­fer­en­ti­ate them­selves to woo cus­tomers, Lem­pert said.

For in­stance, Lidl stocks its shelves with mostly prod­ucts made by its pri­vate la­bels, mean­ing they’re made just for Lidl and are much cheaper than na­tional brands. Fresh Mar­ket has said it’s go­ing “back to its roots” as a spe­cialty Euro­pean mar­ket.

“It’s about fig­ur­ing out the con­sumer you want to reach, and align­ing your val­ues with that con­sumer,” Lem­pert said.

“It’s very dif­fer­ent from our par­ents gen­er­a­tion, when peo­ple would go to the same gro­cery store ev­ery Sun­day and see the same peo­ple.”

GROWTH IN CHAR­LOTTE

In Char­lotte, the re­tailer that gained the most gro­cery sales last year was Tar­get, the area’s No. 6 gro­cer. It didn’t add any stores, but it grew its mar­ket share from from 2.5 to 4.5 per­cent.

That’s be­cause Tar­get has been fo­cus­ing a lot of en­ergy on pro­mot­ing food sales, Lem­pert said. The chain has been push­ing its pri­vate la­bel, Archer Farms, for in­stance, he noted. A lo­gis­ti­cal chal­lenge for Tar­get in many of its stores has long been that its food de­part­ments are in the back, so the chain has started putting cer­tain foods like wine up front “to set the stage” for cus­tomers, Lem­pert said.

“We’ve made tremen­dous progress in food and bev­er­age over the last 18 months and we’re con­fi­dent in our abil­ity to ac­cel­er­ate this progress mov­ing for­ward,” Tar­get spokes­woman Jacque DeBuse said.

Un­der Stephanie Lundquist, Tar­get’s new pres­i­dent of food and bev­er­age, the com­pany ex­pects to con­tinue grow­ing mar­ket share in the gro­cery cat­e­gory, Tar­get CEO Brian Cor­nell said in an earn­ings call this month.

“They’re po­si­tion­ing them­selves well to be a ma­jor player in food,” Lem­pert said of Tar­get.

The other big re­tailer that gained mar­ket share was Publix, the area’s No. 4 gro­cer that’s added five stores over the last year. The Florida-based chain, which opened its first North Carolina store in Bal­lan­tyne in 2014, grew its mar­ket share to 8.9 per­cent from 7.1 per­cent over the year.

Publix com­petes for the same cus­tomers as Har­ris Teeter — that’s why it’s not un­com­mon to see the gro­cers open­ing stores in each oth­ers’ back­yards. The Publix that opened in Cotswold last sum­mer is across the street from a Har­ris Teeter. In De­cem­ber, Publix said it plans to open a 68,000-square­foot store in SouthPark, less than a quar­ter mile away from the Har­ris Teeter on Mor­ri­son Boule­vard.

Publix spokes­woman Kim Reynolds says the com­pany’s em­ploy­ees are “the key dif­fer­en­ti­at­ing fac­tor” in cre­at­ing an en­joy­able shop­ping ex­pe­ri­ence for con­sumers. Publix is an em­ploy­ee­owned com­pany, she added.

Har­ris Teeter spokes­woman Danna Robin­son sim­i­larly cred­ited the gro­cer’s cus­tomer ser­vice. She added that “in­no­va­tive so­lu­tions” like its Ex­pressLane On­line Shop­ping, Fuel Points and the Har­ris Teeter Re­wards World Master­card en­hance the shop­ping ex­pe­ri­ence.

At Whole Foods, Ama­zon has worked to shake the “whole pay­check” im­age of the gro­cery chain it bought in sum­mer 2017. It low­ered prices on a num­ber of gro­cery sta­ples, and last year ex­tended ben­e­fits at Whole Foods stores to Ama­zon Prime mem­bers na­tion­wide.

Char­lotte’s No. 12 gro­cer, Whole Foods saw its mar­ket share grow last year to 1.8 per­cent from 1.5 per­cent. And it opened its highly an­tic­i­pated up­town store on Stonewall Street last sum­mer.

EURO­PEAN GRO­CERS IN CHAR­LOTTE

Last year was the first full year Ger­man gro­cer Lidl op­er­ated stores in Char­lotte. It has six stores through­out the re­gion, with plans for more stores in Char­lotte and Mooresville.

Spokesman Will Har­wood said Lidl’s low prices and prod­uct qual­ity help at­tract and re­tain cus­tomers. “Our sim­ple ap­proach to gro­cery is be­ing re­ceived pos­i­tively by cus­tomers across the Char­lotte area,” he added.

When Lidl en­ters a new mar­ket, other gro­cery stores tend to re­spond by drop­ping prices to stay com­pet­i­tive, ac­cord­ing to a study from UNC-Chapel Hill last year.

Lidl’s prices and small­store for­mat (about 20,000 square feet) are sim­i­lar to those of Aldi, which has been ren­o­vat­ing stores and adding lo­ca­tions in Char­lotte, in­clud­ing one re­cently at the cor­ner of Rama and Idlewild/Mon­roe roads.

In 2017, Aldi said it planned to in­vest $3.4 bil­lion to ex­pand its foot­print to 2,500 stores na­tion­wide by the end of 2022. That would make it the third largest gro­cery store chain by count in the U.S., be­hind Wal­mart and Kroger, which owns Har­ris Teeter.

Lidl and Aldi’s smallscale foot­print and pri­vate la­bel fo­cus are at­trac­tive to young shop­pers who gen­er­ally care less about brand names, said Lem­pert, the su­per­mar­ket an­a­lyst.

“No­body has set in stone that a su­per­mar­ket should be 45,000 square feet,” Lem­pert said. There’s a lot of dead weight on these su­per­mar­ket shelves.”

LOS­ING GROUND

A hand­ful of gro­cers have lost mar­ket share be­cause they have closed stores in the re­gion.

Bi-Lo, Char­lotte’s No. 7 gro­cer, saw its mar­ket share fall from 4.9 per­cent to 3.1 per­cent last year. In Fe­bru­ary, nearly a year af­ter clos­ing six Char­lotte-area stores amid a bank­ruptcy, the par­ent com­pany of Bi-Lo, South­east­ern Gro­cers, said it is clos­ing two more stores in the re­gion — in south Char­lotte near St. Matthew Catholic School and in Bel­mont on Wilkin­son Boule­vard.

Amid plans to im­prove its fi­nan­cial health last sum­mer, Greens­borobased Fresh Mar­ket an­nounced plans to close 15 un­der-per­form­ing stores na­tion­wide, in­clud­ing its north Char­lotte store on Pros­per­ity Church Road.

Fresh Mar­ket, Char­lotte’s No. 18 gro­cer by mar­ket share, saw its mar­ket share de­cline from 0.9 per­cent to 0.7 per­cent last year.

WHAT’S NEXT

Look­ing ahead, Char­lotte’s gro­cery in­dus­try could get even more com­pet­i­tive.

Char­lotte’s rapid growth (an es­ti­mated 60 peo­ple move here ev­ery day) makes the city at­trac­tive for out-of-town re­tail­ers look­ing to ex­pand.

The Phoenix or­ganic gro­cer Sprouts opened its first lo­cal store last spring in Bal­lan­tyne. Weg­mans, based in up­state New York, re­cently be­gan hir­ing for its first North Carolina store, which is ex­pected to open in Raleigh this fall. The gro­cer has two other stores planned for Chapel Hill and Cary, too.

Spokes­woman Va­lerie Fox said there are “no plans for Char­lotte at this time,” how­ever. That doesn’t mean the chain will never come here, though, as the Ob­server has re­ported.

It would make sense for the re­tailer to want to get the most use out of its dis­tri­bu­tion net­work, ac­cord­ing to Bill Urda, senior re­tail an­a­lyst at the Bos­ton Con­sult­ing Group. “It would be con­sis­tent with the way Weg­mans has ex­panded in the past,” Urda told the Ob­server in Oc­to­ber.

With Weg­mans loom­ing and Publix and Lidl ex­pand­ing, some gro­cers will need to re­think their strat­egy, which could lead to more store in­no­va­tion and “ab­so­lutely” more store clo­sures, Lem­pert said.

“It used to be the case that years ago, you’d ap­peal to any de­mo­graphic (as a gro­cer),” Lem­pert said. “Now peo­ple choose based on where they feel com­fort­able and what’s con­ve­nient.”

KATHER­INE PER­ALTA kper­[email protected]­lot­teob­server.com

The Ger­man gro­cer Lidl opened its first Char­lotte-area stores last sum­mer. Pic­tured here is a shop­per at the Lidl store in In­dian Land.

KATHER­INE PER­ALTA kper­[email protected]­lot­teob­server.com

Char­lotte’s new­est gro­cer, Phoenix-based Sprouts, plans to open April 4.

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