Giant Eagle a national leader as grocers innovate in changing market
A Giant Eagle shopper might stop for dinner at a Market District store, stock up on bargains at the new Good Cents Grocery + More and then stop for gas at GetGo on the way home.
The grocery operator has moved to diversify its revenue in the face of stiff competition for shoppers in an ever-crowded field — highlighting a growing problem for traditional supermarket brands.
Supermarkets are losing their dominance as go-to places to buy groceries — with retail supercenters, such as Wal-Mart and Target, and wholesale clubs and health food, drug, dollar and convenience stores all vying for a piece of the $1.1 trillion market.
“The low end and high end of the market is absolutely taking away sales from traditional supermarkets. They are stuck in the middle,” said John Stanton, a food marketing professor at St. Joseph's University in Philadelphia.
Neighborhood supermarkets have seen a steady decline in their share of sales because of competition and changes in consumer shopping habits. It dropped to 40 percent in 2011 from 43 percent in 2007, according to Willard Bishop, a market research firm in Barrington, Ill. that tracks the grocery industry.
Consumers have become frugal as they coped with the recession, shopping at discount chains or buying at warehouse clubs for bulk bargains, or simply choosing the convenience of dollar stores to pick up a few items for cheap. Others have been driven to high-end retailers for specialty products -- trends prompted by a flood of television cooking shows and healthy eating.
“People who really want low priced food are going to find it at stores like Aldi and Bottom Dollar Food” that offer higher quality than earlier discounters, Stanton said. “If you are a foodie you want to go to an upscale store.”
The competition is squeezing profits and has prompted some traditional grocers to trim expenses by getting rid of underperforming stores and cutting staff. Indeed, Giant Eagle, Pittsburgh's largest grocery chain, announced plans last month to cut 75 corporate jobs to cut costs although there were no store closings. The company employs 36,000 people.
Still, experts point to O'Hara-based Giant Eagle, the 29th largest privately held company nationwide with $9.9 billion in sales last year, as one of the grocery industry's top innovators in fending off the competition.
Giant Eagle, with 229 supermarkets, was among the earliest grocers to offer loyalty card points and tie gasoline sales to groceries with its fuelperks! plan. GetGo now has 187 gas stations and convenience stores.
“We've gotten into the fuel business, and the destination store business,” spokesman Rob Borella said. “There's not really one (competitor) that keeps us up at night.”
Other supermarket chains have been making moves as well to protect their turf. Rochester, N.Y.-based Wegmans offers plenty of specialty foods and is giving away a generic version of Lipitor, a cholesterol lowering drug. Cincinnati-based Kroger offers varying store formats and uses its own factory for private label items.
Giant Eagle's Market District stores, a higher-end brand, offer extensive eat-in and to-go options, plus deep assortments of specialty foods, health and beauty items and cooking classrooms. The company has five of these stores, including four in the Pittsburgh area, and will add two more this year in northeast Ohio.
Market District's and GetGo's biggest hits gradually are showing up at other Giant Eagle stores. Renovations completed in March at Giant Eagle in Wexford added a sub shop, specialty cheese area, more extensive prepared and hot foods, beer selling area and a bigger wellness section.
Mary Lu Matoka has bought groceries at Shop ‘n Save and Bottom Dollar Food, but favors Giant Eagle ‘s bigger selection. “Now that they've remodeled it, I really like it . It's bigger, cleaner, brighter,” the McCandless resident said.
The chain leads the region with 29 percent of market share, compared to 18.5 percent for Wal-Mart, research firm Chain Store Guide of Tampa said.
Privately held Giant Eagle doesn't disclose profits, but New York City-based Strategic Resource Group estimates the company earns a penny on every dollar of revenue, after taxes.
Kuhn's, which operates eight Pittsburgh area supermarkets, took a hit on sales when Bottom Dollar Food opened 14 no-frills discount grocery stores in early 2012 in Western Pennsylvania and eastern Ohio, said Joe Dentici, Kuhn's president.
“I've never seen anything like that, but after the first few weeks sales started coming back,” he said. The chain's 2012 sales were flat, compared to 8 to 9 percent gains in prior years, but customers returned.
Dentici and Jeff Sorbara, owner of six Shop ‘n Save supermarkets, stress the importance of offerings at the perimeter of a store: Shop ‘n Save's full-service bakery, deli and floral departments, and Kuhn's beef with no additives and variety of produce.
An expanding number of Whole Foods, Trader Joe's and other specialty grocers don't worry Dentici. “They cater to a different customer and draw from a wider area,” he said.
Giant Eagle and Shop ‘n Save accept Bottom Dollar Food and other competitors' coupons, while Kuhn's stores stopped taking them a month ago.
Shop ‘n Save's Pump Perks partnership with Sunoco stations in 2005 to answer Giant Eagle's program has helped supermarket owners maintain a “decent, healthy sales base, and it also gives them an opportunity to reinvest in their stores,” said Bill Lipsky, director of merchandising for Supervalu.
Ron Levick remodeled a former Foodland in Beechview into the Market on Broadway IGA in 2011 and said sales are slow, but growing. “I'm fighting against a lot of big things” like fuelperks! and discounters, he said, and the small store can't offer many varieties of items.
Giant Eagle opened Good Cents Grocery + More in November in Ross, right next to a Bottom Dollar Food, and has discussed rebranding its Valu King stores outside Pittsburgh to that name.
Another format is poised to grow: The first Giant Eagle Express, a smaller grocery store with fuel pumps that features food to go, opened in 2007 in Harmar.
Giant Eagle's lineup of store brands is similar to Marriott's range of hotels for all budgets and tastes, Stanton said.
Kim Leonard is a staff writer for Trib Total Media. She can be reached at 412-380-5606 or firstname.lastname@example.org.
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