Posted on June 17, 2006

Supermarkets reinvent themselves with natural, organic food lines

Stores compete for business by embracing the future

Giant Food Inc., the Washington, D.C. area’s largest grocery chain, saw its market share fall 2 percent for the second year in a row this year as new and existing grocery chains continue to wiggle into a larger slice of the market.

Taking the two percentage points, which represent about $176 million, are a combination of Shoppers Food Warehouse, Harris Teeter, Safeway Inc. and Whole Foods Market Inc., according to the annual study by Columbia trade magazine Food World.

"Competition has significantly increased within our market," said Giant spokesman Barry F. Scher.

Giant, which now controls 38.02 percent of the Washington-area market, down from 45 percent in 2001, plans to respond to the new competition with about a dozen new stores over the next 18 months as well as a 20-store remodeling project.

The first remodeled Giant store will open in Bowie under a new prototype later this summer. The store’s design, modeled after a new Millville, Del., store, will include an expanded produce, deli and meat section, as well as a Boston Market kiosk, coffee shop, video rental kiosks and environmentally friendly features such as skylights, Mr. Scher said.

The new store design stresses the most prominent features of Wegmans, Harris Teeter and Safeway’s new lifestyle concept stores. Giant’s O organics line of more than 150 organic foods is part of a response to organic grocer Whole Foods, which said yesterday it plans to stop selling live lobsters and crabs after concluding it could not ensure the creatures are treated humanely during the sale process.

"It’s designed to bring a new Giant shopping environment to the customer," Mr. Scher said.

Elizabeth Norton, mid-Atlantic research director at Delta Associates real estate research firm in Alexandria, attributed Giant’s market share decline to the grocer’s lag in keeping up with the new store design.

"Customers still want affordable groceries, but want to buy organic and shop in an appealing atmosphere," she said, adding that Giant’s new remodeling strategy could boost sales.

"Safeway has reinvented itself with the lifestyle stores and expanding its selection of natural and organic food items," she said. "It’s possibly why Safeway went up and Giant Food has gone down."

Other chains that saw a decline in market share are Magruder’s supermarkets, Wegmans Food Markets Inc., Food Lion LLC, Weis Markets Inc. and Super Fresh.

Wegmans, thought to be one of the up-and-coming grocers in the area, saw sales fall by $4 million at its two stores in the area. But the chain already has announced plans to open stores in Anne Arundel and Prince George’s counties and said at last month’s International Council of Shopping Centers convention that it plans to open eight to 10 more stores in Maryland over an undefined period.

The $8.84 billion Washington grocery market is one of the most competitive, with high education and income levels that draw grocers. Despite the competition, the three top chains — Giant, Safeway and Shoppers — control 80 percent of the market.

Among those gaining share, Safeway attributed part of its 0.5 percent climb to 27.48 percent to its new lifestyle stores.

"It’s a combination of several things we’re doing to improve our customer service and improve the quality of the perishable products in our stores," said Gregory A. TenEyck, a spokesman for Safeway’s eastern division.

"This is a very competitive industry," Mr. TenEyck said. "You have to be constantly finding ways to reach out to customers and answer their needs."

Other chains gaining share are Shoppers, where sales rose by $112 million in its 42 stores, and Harris Teeter, where sales climbed by $60 million in its nine area stores.

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