Publix prepared to take on new states while defending its home turf

Photo illustration by Ron Borresen   |   Times
Photo illustration by Ron Borresen | Times
Published Feb. 13, 2016

In September 2012, Publix Super Markets announced it would expand by opening stores in North Carolina. The first one opened near Charlotte in February 2014.

Fast-forward two years, and Florida's favorite grocer now has 16 stores in North Carolina, and more than a dozen new stores set to open across the Tar Heel state in the next two years.

What happened from 2014 to now was a quiet period, or so it seemed, as Publix worked diligently behind the scenes to secure more sites in North Carolina and most recently, Virginia, to continue the supermarket chain's aggressive expansion.

"We have this saying that we all live near a Publix in Florida," said Tom Jackson, executive director of the Florida Grocer Association. "They have stores on nearly every corner in Florida, which was intentional of course. It's what makes them so strong."

Analysts say Publix will try to replicate that strategy as it forges into new territory — even as the Lakeland company tries to fight off mounting numbers of competitors on its home turf.

"In Florida, there's no question that Publix owns the market. Everyone else has tried to make a run at them unsuccessfully up until this point,'' said Steve Kirn, executive director of the David F. Miller Retailing Education and Research Center at the University of Florida. "But there might be someone coming in that could change that."

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As Publix enters new markets in the Carolinas, Tennessee and Virginia, the company is going up against brands it has never before competed against, like Kroger, Ingles and Wegman's. Those chains are known for their brand loyalty and customer service, just like Publix. And in these new markets, Publix has little brand recognition.

"I don't see Publix going into Chicago or Des Moines any time soon, but they know that to be successful, they can't do it by parachuting into a city with just one store," Kirn said. "They will continue to build in these concentrated areas where they've already started, and that way, they'll create a strong position."

That will take time.

Even in Georgia, where Publix opened its first store in Savannah in 1991, the grocer is third in terms of market share, even though it has the most stores compared with its competitors. Publix has 22.7 percent market share in the Atlanta-Athens-Macon-Rome region with 155 stores, according to the Shelby Report, a trade publication and research firm. Walmart is second in the region with 25.5 percent and 103 stores and Kroger is the dominant player at 30.1 percent with 148 stores.

In the Tennessee market, where Publix first began opening stores in 2004, the supermarket chain is fourth in market share with 38 stores and 6 percent. Walmart is the dominant player with 129 stores and 35.8 percent share and Kroger is second with 95 stores and 21.7 percent market share.

In the South Carolina-East Georgia region, Publix is fourth behind Walmart and Southeastern Grocers, the parent company of Winn-Dixie and Bi-Lo stores. Next up: Virginia, where Publix announced this month that it will open two stores in the next two years.

"Generally, the largest and greatest market share tend to be the safest," said Jon Springer, retail editor for the trade publication, Supermarket News. But Publix has the financial wherewithal, thanks to its success in Florida, to play the long game, Springer said.

"They can afford more. Publix can reach into their pockets and come up with tricks to fight off these new guys," he said. "I think they'll (Publix will) continue to do what they've always done, which is to look a little farther down the road for what's next. Publix is at a great advantage in that they have the financial wherewithal to confidently enter new markets where their brand isn't well-known and still be able to compete."

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Publix will have to fight off new guys in Florida, too.

The Sunshine State is poised to welcome more supermarket brands than ever before — from organic, high-end competitors like Sprouts Farmers Market, Earth Fare and Lucky's Market, to traditional stores like Safeway, and expanding discount brands like Walmart Neighborhood Markets and Aldi — all of which will begin to chip away at Publix's stronghold in the state. That doesn't even include popular relative newcomers like Trader Joe's and Fresh Market.

Or Kroger, which is rumored to be vying to buy the Fresh Market chain. Fresh Market has 42 stores in Florida.

"The hardest part for a competitor coming to Florida will be trying to have a big enough footprint to compete with Publix. Publix has saturated the market, and because of that, they have dominance," Kirn said.

Safeway, for instance, said last month that it will convert the three remaining Albertsons stores in Florida, including one in Largo. The stores will be remodeled this year. But expansion plans into Florida beyond those stores haven't been announced.

Trader Joe's has opened a handful of stores in affluent Florida communities, but analysts anticipate the California-based organic grocery chain to continue to expand in Florida.

"The biggest competitor to Publix will be Trader Joe's. It's going to take a while for Trader Joe's to fully expand into Florida, but it will happen," said Jeff Green, a retail analyst in Phoenix. "Trader Joe's, like Publix, is known for its brand loyalty and can compete on price."

Lucky's Market opened an organic grocery store in Gainesville quietly last year. A second store opened in Naples and three more are in the works in Orlando and South Florida.

The Fresh Market has more stores in Florida than any other state. And Walmart has gone head-to-head with Publix over price for years.

"What we call this is the share of the stomach. Publix wants the greatest share of the stomach they can get and will compete with Walmart and niche grocers to try to capture every shopper. That's why they've expanded their cheese case and offer sushi and other perks," Jackson said. The goal, Jackson said, is to make everyone a Publix shopper.

"Publix will always be strongest in Florida, but I don't see them slowing down when expanding into new areas," said Jeff Green, a retail analyst in Phoenix. "They've experimented with new concepts in new places, smaller stores and urban stores, and now a college campus store in Tampa, which could be a breakthrough market for them."

Contact Justine Griffin at Follow @SunBizGriffin.