Value-conscious shoppers feed growth of discount grocery chains
Grocery shoppers remain in a budget-conscious mood even as the economy rebounds, and that's continuing to fuel the growth of smaller, limited-assortment food stores that focus on value.
Discount chains Aldi and Save-A-Lot have opened dozens of stores in Western Pennsylvania in recent years. Food Lion's low-cost Bottom Dollar concept is likely to appear in the region. And O'Hara-based Giant Eagle Inc. now runs five Valu King, deep-bargain stores in Pennsylvania and Ohio.
"There are increasing numbers of households that are compelled and willing to go to these places to get greater value," said Bill Bishop, chairman of retail consulting firm Willard Bishop LLC of Barrington, Ill.
Aldi and other grocers that carry fewer products in smaller stores should grow sales by 6.5 percent annually over the next five years, Bishop's firm said. Traditional supermarkets are projected to grow by only 0.2 percent a year and lose market share.
Bishop recalls Aldi's debut in the mid-1970s as a bare-bones shopping experience that still turned shoppers' heads. Major grocers responded with their own cheaper, in-store brands.
"The Aldi guys and Save-A-Lot dropped below the radar and grew quietly for the next 25 years," he said, and as the recession began a few years ago they were ready to return to the limelight. "By then, they had become more pleasant stores, and people were saying, 'I'll add that to my stops,'" he said.
In-store brands have improved in quality and packaging, gaining more acceptance among shoppers. That poses a dilemma for mass retailers, such as Wal-mart, which advertises major brands at the lowest prices but still comes in higher than similar, private-label products, Bishop said.
Examples of discount grocers' prices: Save-A-Lot's Splash Out juice drinks, similar to Capri Sun, cost $1.79 for a box of 10. A frozen breakfast with scrambled eggs and sausage is available for $1.19 at Aldi.
Features of the stores vary. But they tend to be much smaller than modern grocery stores, with fewer varieties of each product and shorter operating hours. Few have bakeries or deli counters. Prices appear on big signs with bold print.
"They are all running on that same theme of low, low prices that we love," said Paige Beal, a Point Park University marketing professor. Discounters are growing at a time when more food is being sold in nontraditional places, such as drug, convenience and big-box stores.
Price-conscious consumers seem willing to visit a few stores. In Robinson's business district, she said, "professional shoppers" might start at Aldi, cross the parking lot to warehouse club Costco for bulk purchases and finish up at Super Kmart or Giant Eagle's Market District.
As she pushed a full cart of groceries through Save-A-Lot's Duquesne store, Jacqueline Butler estimated she saves $200 to $300 a month there. "The things I buy here, if I go to Giant Eagle I am going to spend well over what I can afford," said the Duquesne resident, who has a family of four.
Janet Hays said she and her husband have four adult children and two younger children living at home. She buys 75 percent of the family's groceries at Save-A-Lot, and wishes a store would open closer to her home in Hazelwood.
John Kawecki and his business partners bought the Duquesne Save-A-Lot last fall and remodeled it. Since 1999, they've acquired 12 stores, mostly in Ohio.
While nearby McKeesport and West Mifflin have several supermarkets, Kawecki said the store's business could rise as nearby residents seek more bargains and conserve fuel. "Gasoline prices are going to change people's shopping habits," he said.
Save-A-Lot hasn't announced more Western Pennsylvania stores. But Aldi plans to open six or more new locations over the next few years. Stores in Friendship and the South Side may open later this year, and Pine Township, West Mifflin and Indiana are other future sites.
Other discount grocers may jump into the market.
Raleigh, N.C., developer C. Brantley Tillman said he's about to seek construction bids for a grocery "value" store off Walnut Street in McKeesport, and he'll travel to Western Pennsylvania late this month to scout for other store sites.
Tillman said his Commercial Properties Inc. is "sitting tight" on plans for another store on Penn Avenue in Bloomfield after discussions with neighborhood representatives, but he declined further comment.
He won't name the store brand he's representing, but Tillman's company has built Food Lion stores elsewhere. Food Lion's Bottom Dollar Food concept has opened 17 stores in Philadelphia since October, and plans more there.
Bottom Dollar Food bought a former Foodland on Frankstown Road in Penn Hills last year.
"Ultimately, we do plan to open a store at this location," spokeswoman Tenisha Waldo said of the Penn Hills site, and while there's no timetable, Pittsburgh is among markets the company is eyeing for future growth.
Giant Eagle, meanwhile, has opened five small discount grocery stores since late 2008 under the Valu King name. Three are in Ohio, and the others are in Erie and Johnstown.
Valu King's website has photos of products with familiar Giant Eagle brands, such as Food Club and Valu Time. Beal, of Point Park University, said Giant Eagle may be trying formats to serve shoppers hungry for discounts while defending its main store concept.
"We have been pleased with the initial success of these pilot stores, and continue to evaluate potential opportunities to expand the concept," said Giant Eagle spokesman Dick Roberts.
Where possible, "You don't want an Aldi to come in and do the discount thing," she said.Additional Information:
Low, low prices
Some value-themed, limited-assortment stores that operate in Western Pennsylvania or elsewhere in the state:
• Save-A-Lot is a St. Louis-based subsidiary of Supervalu Inc. that has nearly 1,300 stores and plans to grow to 2,400 within five years. Stores feature full line of groceries, with meats and produce; 80 percent of stock is exclusive brands. Opened five stores on Chicago's South Side last month. Pittsburgh-region stores: 16.
• Aldi, based in Batavia, Ill., is a subsidiary of Aldi Group of Germany. There are more than 1,135 U.S. stores; 81 will open this year. About 95 percent of stock is private label; customers must pay 25 cent deposit for shopping cart. Recently opened first New York City store, in Queens, drawing 600 customers in first half hour. Pittsburgh-region stores: 24.
• Bottom Dollar Food and supermarket chain Food Lion, both based in Salisbury, N.C., are owned by the Delhaize Group of Brussels. Bottom Dollar Food has 45 stores in all, including 17 that opened in the Philadelphia area since October. Major brands make up two-thirds of stock. Pittsburgh-region stores: None.
• Valu King, concept developed by Giant Eagle Inc. of O'Hara. Stores in Erie, Johnstown and three Ohio locations. Pittsburgh-region stores: None.
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