Wednesday, September 19, 2018
Business

Q&A: How did Publix win the battle with Walmart? And what new challengers does it face?

Publix Super Markets is king in Florida. It has survived the Goliath-like Walmart assault, crushed Sweetbay Supermarket and has all but beaten down Winn-Dixie.

But a new wave of specialty organic competitors are next to threaten Florida's homegrown grocery store chain.

Sprouts Farmers Market is poised to enter the state in a big way. It has started construction on a store in Palm Harbor. Lucky's Market opened stores in Naples, Orlando and South Florida. It's only a matter of time before we get one in Tampa Bay. And discount chains like Aldi and Save-A-Lot continue to beef up their operations in parts of town where there are no competitors.

As president of one of the largest retail leasing, management, development and marketing firms in the Southeast with more than 25 million square feet of properties, John Crossman of Orlando-based Crossman & Company is optimistic about the industry's future growth in Florida, especially for grocery stores.

"You need 10,000 people to support a grocery store. So when you look around at how many people are moving to Florida, and not even counting those who come just to visit, you realize, 'Oh my gosh, we need more grocery stores,' " Crossman said. "It's important to watch and easy to predict."

Crossman talked to the Tampa Bay Times about Publix and its competitors last week.

Quite a few new grocery brands are headed to Florida. How will that affect Publix?

There's no doubt that Publix is No. 1 in Florida. I don't see that any of this is going to change that. Why? Because Publix offers a quality product and excellent service. People are loyal to this brand. My own daughter, her first word was "dada" the second was "momma" and the third was "balloon" because she got a free balloon every week from Publix. The stores are ingrained into the communities they serve.

Having said that, there are pockets in the market where some of these new grocers make sense. Publix shoppers still shop at other places in addition to Publix. But you won't see a Publix shopper stop shopping at Publix for another brand. They go to stores like Trader Joe's or The Fresh Market for specific products.

So if there are winners and losers in the grocery segment in Florida, who is the biggest loser?

Walmart. They made huge gains in the grocery arena but they've started losing it to other expanding discount brands like Aldi and Save-A-Lot. Those brands tend to go into markets that are underserved and instead of selling 27 different kinds of mustard like Publix, they'll sell two. They appeal to a shopper who is shopping for value. Walmart may still go after Publix on price, but if I were them, I wouldn't do that. They should stick to what they know and focus on that category of shopper, which is discount, where they can play.

I'll be interested to see what Safeway looks like when they get here. (With just three stores) it's a small step into the Florida market. They're not going to try to compete with Publix, but they must see an opportunity.

And what about this rumor of Kroger coming to Florida?

Kroger is a traditional grocery brand, so it would be more challenging for them to come into Florida and compete with Publix. I don't know how they would find the right locations to do so. Let's look at the big picture for a minute. I think the best grocers are the ones who know their customers and their customers know who their grocer is. So for Kroger to come to Florida makes me wonder, who is the customer they're trying to go after? A good example of this is Sweetbay Supermarket. I think they struggled because they didn't know who their customer was. And now they're not here.

Taking all that into consideration, what does that mean for Publix as it heads into new territory?

If you look at the buzz on social media from the Publix stores opening in North Carolina right now, it's really interesting. I just saw on Facebook where a guy I knew wrote about how excited he was that his daughters could try Publix now that they are open there. Publix will continue to win in new markets because of the real estate locations they choose and their store managers. Their managers are empowered to connect them to their local community. That connectivity component is so important. Look at Chick-fil-A. Recently they started a new promotion where if families come in to eat at a restaurant and put their cellphones in a basket off the table while they eat, Chick-fil-A will give your family free ice cream. Customers want to be a part of a brand like that.

What are some trends you see in the future for retail growth in Florida?

Your traditional "fortress" shopping malls are still doing really well. Here in Orlando, Mall at Millenia is doing extremely well. There are plenty that are struggling, and some that have been sold for the cost of the land and redeveloped. But we've reached a time where malls are evolving in Florida. Some are taking on nontraditional tenants, like grocery stores or office space, or they're just limiting the number of stores that they have. That way they're not just in a holding pattern because of brands like Sears and J.C. Penney. I think this is a great time for malls. They're becoming more consumer-friendly, almost town center-like with the amenities they offer.

I think power shopping centers will go through something similar. The big-box stores like Sports Authority have the hardest time competing with online retail sales, so you're seeing a need to backfill some of these spaces. That will continue to happen. It will be fascinating to see what happens in the next 24 months. It's opening our minds to new ideas. Shopping centers don't have to work by a strict set of rules any longer.

Contact Justine Griffin at [email protected] or (727) 893-8467. Follow @SunBizGriffin.

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