It wasn’t the best of times and it might not have been the worst of times, and on an overall basis, the food and drug retailers of the Mid-Atlantic market once again found the competitive terrain pretty challenging.
Actually the past 12 months resembled 2008 and part of 2009 when commodity costs spiked wildly and retailers and suppliers struggled to hold their pricing structures. However, there was one key difference from 30 months ago: the economy is still unstable, which continued the trend of inconsistent shopping patterns and cautious spending. It didn’t help any retailer in any class of trade that virtually every corner of the region was overstored. And for traditional supermarket retailers, they continued to be more adversely impacted by the faster paced growth of their alternate channel competitors.
Total retail food and drug spending over the past 12 months (April 1, 2010-March 31, 2011) was $41.81 billion in the 88 counties and cities measured.
While good grades were again difficult to achieve, there were several retailers that fared admirably despite the rugged conditions. One of those was perennial market leader, Giant/Landover.
The 175 store unit of Ahold USA saw sales increase to $5.66 billion as it continued to reinvest in its stores and offer new marketing opportunities to its customers most notably its gas rewards program which helped drive grocery sales (fuel revenue is not included in the sales totals in this study for any retailer). And much of Giant’s success was achieved without a full-time president as Robin Michel left the supermarket chain in November. Ahold USA is still searching for Michel’s permanent replacement, but should be very satisfied with the job Ahold USA veteran Don Sussman is doing on an interim basis.
Once again in second place was Food Lion, the biggest banner in Delhaize America’s stable, which saw sales dip slightly to $3.66 billion from last year’s $3.68 billion while operating four fewer stores than last year. The unit of Belgian retailer Delhaize, which operates three banners in the area (Food Lion, Bloom and Bottom Dollar) was market leader in the Richmond, Richmond-Norfolk, Tidewater and Eastern Shore markets.
Wal-Mart, where ID sales were flat, nonetheless added share in the region by adding three new stores (all SuperCenters) and converting several other existing units to its combo store model. And despite sluggish comp revenue, Wal-Mart’s per store average (even on an extrapolated basis) remained one of the highest among all retailers in the Mid-Atlantic market. Now with 127 units in the region, the Behemoth amassed estimated extrapolated food and drug sales of $3.4 billion, up slightly from last year’s $3.33 billion.
Safeway was one of many retailers that found the going challenging over the last 12 months. The chain was still feeling the overall sales effects of lowering its prices in late 2009 and the impact of the expanding completion around it (Harris Teeter, Wegmans, Wal-Mart, Target/PFresh and a resurgent Giant/Landover). The chain’s eastern division, based in Lanham, MD operated 129 stores (down from last year’s 132 count) and amassed estimated sales of $3.20 billion as compared to last year’s $3.23 billion.
Another Ahold USA division, Giant/Carlisle (Martin’s} held on to fifth place with its 78 stores bringing in sales of $2.57 billion up from last year’s $2.42 billion. Giant/Carlisle continued to fare well in its core Central PA market, but its 2010 acquisition of 25 Ukrop’s stores in the Richmond market remained an ongoing challenge.
The leading drug store chain in the region, CVS increased its food and drug sales from an estimated $2.15 billion to an estimated $2.19 billion with the same number of stores as last year (445).
Shoppers Food & Pharmacy had another poor year as it struggled with its consumer price image, comparable store sales declines and store closures. The Bowie, MD unit of Supervalu (a new headquarters base from last year) now operates 56 stores (down from 62) bringing in an estimated $1.78 billion, down from last year’s $1.91 billion.
Target once again held its own in the eighth spot with extrapolated food and drug sales of $1.44 billion up from last year’s extrapolated total of $1.31 billion. The big Minneapolis, MN based mass merchant continued to make progress by converting many of its store to its PFresh model, which incorporates more fresh offerings and an increase in grocery, refrigerated and frozen SKUs, too. More than half of Target’s 99 stores in the Mid-Atlantic units have been remodeled to incorporate PFresh, with that total growing monthly.
Operating five fewer stores than last year, Rite Aid’s 382 units continued its decade long struggle as it continued to fight an uphill battle against larger competitors CVS and Walgreens. The Camp Hill, PA based retailer saw its estimated sales drop to $1.25 billion from last year’s sales of $1.34 billion.
Rounding out the top 10 among all retailers in the Mid-Atlantic region was 7-Eleven, once again the leading convenience chain in the region. Operating the most units of any merchant (938, up eight from last year), 7-Eleven’s sales remained a flat $1.1 billion, although the Japanese-owned and Dallas, TX based operator did unveil a more modern prototype in addition to announcing it has began a major corporate restructuring which revolves around a centralized merchandising model.
Other retailers that fared well on an overall sales basis included Harris Teeter, which jumped from 16th to 11th among all Mid-Atlantic chains and saw its store count increase by 10, to 48 stores; Costco, the biggest and best performing club operator in the region; Wegmans (highest per store average); and Whole Foods (best identical store sales increases).
Included among the retailers that struggled during the past 12 months were Super Fresh/A&P (which will close 25 area stores next month), Acme Markets, Farm Fresh and Kmart.
Retailers we believe will continue to change the landscape of the region include Wegmans, Wal-Mart, Target, Harris Teeter, Walgreens, Whole Foods, and ShopRite (Wakefern) which now operates 11 stores (including PriceRite) in the market and could add more units with the acquisition of A&P sites and by organic expansion.
By class of trade, Giant/Landover (175 stores, $5.66 billion in sales) topped all supermarket retailers; Costco (26 stores $1.03 billion in extrapolated sales) led all club retailers; Wal-Mart (127 stores; $3.4 billion in extrapolated sales) led the mass merchandisers; CVS (445 stores and $2.19 billion in sales) led among the drug chains in the Mid-Atlantic and 7-Eleven (938 stores and $1.11 billion) paced the c-stores. Additionally the 21 military commissaries rang in sales of $866 million (down from last year’s $902.2 million).
Viewed as a group, the 48 corporate chains in the market operated 4,443 stores and accrued $40.80 billion in sales, good for 97.58 percent of the Mid-Atlantic region’s food and drug sales.
Among all independent retailers (those operating 16 or fewer stores), Baltimore based Mars Supermarkets (16 stores, $204.1 million in sales) continued to lead all non-chain operators in sales. Other independent retailers topping the $100 million sales mark included B. Green (five stores, $116.3 million in sales); and Karns Prime & Fancy Foods (seven stores and $106.3 million in sales).
As a collective group, the 16 independent retailing organizations in the Mid-Atlantic operated 78 stores which garnered sales of $966.2 million (down from $1.02 billion last year). Independents controlled 2.31 percent of the region’s food and drug revenue.