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Giant Eagle says 'price lock' through holiday season to combat inflation

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Wednesday, Oct. 10, 2012, 3:46 p.m.
 

Giant Eagle is locking down prices for the holidays, but the freeze will thaw shortly after the new year begins.

Starting on Thursday, the grocery store chain is locking down prices on 300 popular items, including produce, meat, deli, dairy, bakery and prepared foods, to help customers plan for holiday shopping, spokesman Rob Borella said.

The Low Price Lock program was created as a result of rising costs for commodities, such as corn, wheat and soybeans, and fuel prices, contributing to rising grocery prices, O'Hara-based Giant Eagle Inc. said.

The program will exclude milk and eggs.

“I think it has affected the customer because it results in an unpredictability and/or an increased grocery bill, and we all feel that,” Borella said.

With 229 supermarkets and 178 convenience store-gas stations in four states, Giant Eagle has long been the dominant player regionally in the grocery industry, but it is increasingly surrounded by discount grocers looking to increase market share.

It's a risk for the company to lock in prices because there is a chance it could lose money, but it also could be a marketing success in signaling to customers that the company is sensitive to the economy's effect on shoppers' finances, said Jeff Inman, professor of marketing at the Katz School of Business at the University of Pittsburgh.

Retailers locking prices is unusual but not unheard of, said Jim Hertel, managing partner at Barrington, Ill.-based Willard Bishop, a food retailing consultant.

Rochester, N.Y.-based Wegmans Food Markets Inc. implemented prize freezes on 40 items from February 2011 to the end of last year. It has been implementing seasonal price freezes this year.

Stores that choose to do this usually will have more price flexibility with their own private-label products, Hertel said. “They probably ... have a little bit bigger margin on those products.”

About 54 percent of the price-locked products will be Giant Eagle's brand, Borella said.

The majority of the products' prices will be lowered before being locked, and the price reductions will be as high as 49 percent of recent prices, Borella said.

The Low Price Lock program will be in effect through Jan. 2, but whether it will be reinstated at some point is unknown, he said.

“So this is something new for us, and we're going to learn some lessons, get some feedback from customers and see where it goes from there,” he said.

Giant Eagle has about 29 percent of the market share in the Pittsburgh region, but discount grocers, such as Aldi and Bottom Dollar, are gaining footing as price-conscious shoppers seek deals, according to data from Chain Store Guide, a Tampa-based market research firm.

Wal-Mart Supercenters have the second-largest grocery market share in the Pittsburgh area at 18.5 percent, according to Chain Store Guide.

In a TV campaign, Wal-Mart asks shoppers to bring their latest receipts from other stores when they visit Wal-Mart, then buy the same items, which are likely cheaper at Wal-Mart, the Bentonville, Ark.-based company said.

Bottom Dollar has opened 16 stores locally since the chain entered the market in January. a spokeswoman said.

Aldi, Bottom Dollar and Sav-A-Lot are classified as limited assortment stores, which have lower prices but are smaller and carry fewer name-brand items than traditional stores.

Giant Eagle has responded by diversifying its banner with its upscale Market District stores, GetGo convenience store/gas stations and Giant Eagle Express, “which has a little bit of everything,” Borella said. It also is bringing its discount store, Valu King, to the Pittsburgh area with an opening next month in Ross Towne Center on McKnight Road in Ross.

Giant Eagle recently started a television campaign in which “regular people” tout the store's high-quality products and yearly savings with double coupons, weekly specials and Fuel Perks, a gasoline purchase discount program linked to grocery sales.

Tory N. Parrish is a staff writer for Trib Total Media. She can be reached at 412-380-5662 or tparrish@tribweb.com.

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