Sunday, July 15, 2018
Business

Winning over Tampa Bay market won't be easy for Winn-Dixie

When Winn-Dixie took over Sweetbay supermarkets in April, it swapped the signs and shopping carts but basically left the stores the same.

Shoppers saw the same faces working the registers and stocking the shelves. Every item from peanut butter to popcorn stayed in the same spot.

Long term, Winn-Dixie hoped to narrow gaps between stores and gain market share in an area dominated by Publix and, to a lesser but growing degree, Walmart. It wanted to succeed where Sweetbay had failed.

Three months into the changeover, experts say that won't be easy. No one likes the mushy middle.

"I think they are going to struggle. They don't have the prices of Walmart and they don't execute as well as Publix," said Lee Schwartz, who owned a grocery store in South Tampa in the '90s and closely follows the local market. "They are going to continue to fight hard, but they are going to have a very, very hard time."

History backs him up. Plenty of chains have tried to succeed here but failed, from Sweetbay and its predecessor Kash n' Karry to Albertsons and even Kroger, the country's largest supermarket chain, which once owned Florida Choice stores.

While the converted Winn-Dixie stores are clean and attractive, Schwartz said the bakery and deli items aren't as good as Sweetbay's, leading to lower sales volume. Lower volume means more food waste, which means some items get discontinued. People start missing those items and go to other stores, causing what Schwartz calls a dreaded "death spiral."

"You need to have the chicken and egg arriving at the same time, which is difficult to do," he said.

A Winn-Dixie spokesperson said sales at the newly converted stores are meeting or exceeding goals but declined further comment. Winn-Dixie and its sister BI-LO stores account for 14 percent of central Florida's grocery share, compared with 43 percent for Publix and 29 percent for Walmart, according to the industry's latest Shelby Report.

Scott Stewart, a comparison shopper in St. Petersburg, hasn't noticed many changes in the new stores. The Winn-Dixies around his neighborhood are seldom crowded and lack any wow power to woo him back. Rarely does he pass by a full shopping cart, but he didn't at Sweetbay, either.

"I have seen virtually no difference between the presentation Sweetbay made and the presentation Winn-Dixie is making," he said. "The staffing is the same. The customer base is the same. I think the prices are even higher than Sweetbay."

Winn-Dixie's parent company, Jacksonville-based Bi-Lo Holdings, took over the Sweetbay stores as part of its $265 million purchase of 165 Sweetbay, Harveys and Reid's grocery stores from their Delhaize America parent. Bi-Lo said the additional stores would allow the company to offer lower prices to a broader base of customers and reduce overlapping between its brands.

Converting the Sweetbay stores into Winn-Dixies could be an interim move until Bi-Lo figures out a long-term strategy, said Tom Henken, vice president and director of design for API, a Tampa design and architectural firm, noting that Winn-Dixie had closed many of its local stores before its parent company's recent purchase.

"I don't think changing the brand is going to get them anywhere," he said. "In the Tampa Bay area, Winn-Dixie has had their day. The region told them, 'Thanks, but no thanks.' "

Henken, whose firm designed the interior and exterior of Sweetbay stores, said Bi-Lo should refresh the brand based on the success of Winn-Dixie's high-performing, more upscale stores in South Florida, where the brand is well-entrenched.

"They've got a long way to go before people believe there is anything different about the stores," he said.

Over time, he expects the chain will try to make the stores as profitable as possible, either to better compete with Walmart and Publix or even to sell the chain to a big grocer, such as Kroger.

Bi-Lo is the ninth-largest grocery store chain nationwide, with 686 stores in the Southeast under the Winn-Dixie and BI-LO banners. Its stores are known for their rewards card and "fuelperks!" program, which earns members 5 cents off per gallon of gas at most Shell stations for every $50 spent on groceries.

Every new store in the chain helps it consolidate distribution and advertising costs, ultimately leading to lower prices at the checkout, said Steven Kirn, executive director of the University of Florida's David F. Miller Retailing Education and Research Center.

Winn-Dixie might not be able to match Walmart's prices, but it probably can do better than Publix, he said. And not everyone likes to shop at Walmart.

"The middle is not a really happy place to be, but I think people are hungry for alternatives," he said. "We'll just have to wait and see what happens."

Contact Susan Thurston at [email protected] or (813) 225-3110. Follow @susan_thurston.

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