Grocery Stores Gear Up For Food Fight | Stop & Shop changes logo to lure consumers
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Workers install the new Stop & Shop logo.
Photo/Courtesy
Neil Stern, retail analyst with McMillan Doolittle LLP of Chicago.
Rising fuel prices, creeping food inflation and a less than resounding economy have combined to create tough conditions for grocery store operators in Central Massachusetts.
The grocery business has thin profit margins, where a few cents of profit on volume sales is the business model. And with consumers pinching their pennies, chains are remaking how their stores look, adding new products and offering cash off coupons to bring more consumers their way.
Logo Power
This month Stop & Shop, based in Quincy but owned by Dutch company Royal Ahold NV, unveiled a number of changes. They include a more colorful, slightly different logo, gold and purple uniforms to replace the standard red and green ones and a line of fresh foods that can be quickly made into meals called “Choose and Cook.”
Stop & Shop’s moves, which come on the heels of store-wide price rollbacks, are a way of signaling to consumers that the chain is improving its stores, according to Jim Dwyer, the company’s executive vice president of strategy and business development.
Neil Stern, a retail analyst with McMillan Doolittle LLP in Chicago, said Stop & Shop’s logo makeover will be hard to measure in terms of sales growth.
“Some things that retailers do you can find a clear return on investment…Expanding the deli department will let you make more deli sales,” he said. “There are other things you do as part of the overall image and what you’re trying to project, and those things are harder to necessarily justify the payback.”
Consumers, he explained, aren’t always aware of branding changes.
“They’re not as attuned to the small details that marketing people sweat over,” Stern said.
The size of the food retail market, $500 billion a year in the U.S., makes it pretty attractive to retailers. And the market is getting crowded with wholesale clubs, like Natick-based BJs Wholesale Club and Sam’s Club, drug stores, dollar stores and one-stop shopping destinations like Wal-Mart Superstores.
And according to a report by Steven Martinez and Phil Kaufman, economists with the U.S. Department of Agriculture’s Economic Research Service, grocery store competitors include fast food restaurants like McDonald’s and chain restaurants like Chili’s, which offer easy-to-use take-out service. In 2006, 48.9 percent of the country’s food dollars were spent on this “food-away-from-home” category, according to the report.
Competition in each market also comes in the form of new supermarket players, or existing players that are adding locations.
Schenectady, N.Y.-based Price Chopper already has eight stores in Central Mass., but the family-run company is seeking to build a new location in Shrewsbury on Route 9.
But even greater pressure on groceries could come if the Rochester, N.Y.-based chain Wegmans gets a foothold in Central Mass. Wegmans intends to build a new store in Westwood and is rumored to be planning locations in Central Massachusetts.
Residential and commercial developer Kevin Giblin has said in several news accounts that he is talking with Wegmans about being an anchor in a new shopping center at the corner of Routes 9 and 20 in Northborough.
If Wegmans does establish stores locally, it could mean a dramatic change in the local grocery store landscape.
Wegmans stores are typically 120,000 square feet, compared to large supermarkets that range around 60,000 square feet.
“The first thing you notice about them is the size and assortments of products they offer,” Stern said, adding that Wegmans also features extensive wine and cheese departments.
“Like any great retailer, their success is due to a combination of their people, their products and their service, which make them unique,” Stern said.
“The things that set us apart are incredible customer service, the very best and the freshest products or ingredients, restaurant quality prepared foods and our consistent low prices,” according to Jo Natale, Wegmans’ director of media relations. “But I always put our incredible customer service at the top, which is due to our employees. The basis of our philosophy is putting our employees first; if you meet the needs of your employees, they will meet the needs of your customer.”
But any worry for local stores is far off. If Wegmans comes to Central Mass., it won’t be until at least 2010.
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