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Grocers scramble, Publix gambles

By Mark Albright, Times Staff Writer
In print: Tuesday, August 5, 2008

A worker takes stock at a construction site Monday for a two-story, 214,000-square-foot Publix at 1700 66th St. N in St. Petersburg. Publix and other area grocers reported depressed quarterly profits in the past week.
	[WILLIE J. ALLEN JR. | Times]

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Shoppers were unmoved by the first wave of discounts at Albertsons' "inventory blowout" liquidation sale over the weekend: 10 percent off most groceries, 20 percent off general merchandise and 50 percent off greeting cards.

"This isn't much of a sale," said Paul Urken, a semiretired dry cleaning plant supervisor from Treasure Island.

"I expected at least 25 to 30 percent," said Ruth Simmons, a South Pasadena retiree.

Welcome to the fallout from a discount-driven summer among grocers. With shoppers shocked by higher food costs, chains are slashing prices in fear of losing loyal shoppers to lower-priced rivals like Wal-Mart and limited selection grocers Save-a-Lot and soon Aldi.

Meantime, Publix Super Markets — which is buying Albertsons — smells blood. It sees the weakness of its rivals as time to expand its dominance among Tampa Bay area supermarkets by building a slew of new stores in addition to the Albertsons' locations that it's snapping up.

A new study by TNS Retail Forward, a retail think tank, found 20 percent of food shoppers switching stores for cheaper prices. And they are shaving food bills by trading down to store brands, buying less food and eating at restaurants less frequently. Experts blame a stagnant economy and shaky job security for this surge in consumer thriftiness.

In the past week, Publix, Winn-Dixie and the owners of Sweetbay Supermarket reported depressed quarterly profits and meager same-store sales gains of 1 percent to 2 percent. This at a time when food prices jumped 6 percent.

Grocers — and even Costco Wholesale Membership Club — fret about their growing inability to pass on all of today's higher food costs to customers. Instead, they turned to a carnival of $5 coupons, 10-for-$10 deals, inflation-fighting "stretch your dollar days" and buy-one-get-one-free come-ons to keep shoppers coming to their tent.

Sweetbay cut prices on 1,500 items last winter when surveys found shoppers questioned the chain's low-price image. After Easter, Winn-Dixie dialed up even more discounts, then paid the piper when the Jacksonville chain said it will take a $5-million loss for the quarter that ended June 30.

"All Florida grocers took up discounts a couple of notches this summer after oil prices and all the negative economic news hit," said Peter Lynch, Winn-Dixie's chief executive. "I just went too far when it appeared we were headed toward negative sales."

One analyst said the quarterly performance shows a flaw in Winn-Dixie's long-term recovery strategy from bankruptcy.

"The plan hinges on Winn-Dixie taking customers from Publix with more remodeled stores," said Louis Mellet, an analyst with Strategic Resources Inc. who studied 50 of the remodeled stores. "This quarter proved they can't. People drove past to (shop at) Publix stores 3 miles away."

Because studies show shoppers most likely will switch if offered a new store, Publix is capitalizing. The chain is scheduled to close next month on its purchase of 49 Albertsons statewide. That includes 19 of the 22 Al­bertsons in the Tampa Bay area, which will close for overhauls after the liquidation sales.

The Lakeland grocer has not disclosed specific plans for those locations or several old Publix stores nearby. But it's expected to reopen every Albertsons purchased and keep open virtually all of its current Publix stores nearby. Speculation is rampant that a few will reopen under the Sabor or Greenwise flags, Publix's experimental supermarkets designed for Hispanic and natural/gourmet food fans, respectively. Some may be retooled into a Publix even if another Publix is two blocks away.

"It's not uncommon for us to run two stores within a stone's throw to relieve store congestion or under the other Publix banners," said spokeswoman Maria Brous.

The chain's goal: add most of Albertsons' 8 percent share of the Tampa Bay food market to Publix's current 38 percent.

If that's not aggressive enough, Publix has seven new stores in the pipeline that will open in the next 18 months: one in Treasure Island opening Aug. 28, a two-story Greenwise under construction in south Tampa opening Oct. 30, plus stores in west St. Petersburg, Lutz, Weeki Wachee, and two stores in Zephyrhills.

A deal was signed for a new store in Ruskin, but it has no opening date.

Mark Albright can be reached at albright@sptimes.com or 727-893-8252.