Americans still prefer in-store grocery shopping over buying online

American consumers still overwhelmingly prefer to buy groceries in stores rather than online, according to a survey sponsored by facilities management company Vixxo. Not surprisingly, the research also found that providing an exceptional in-store experience and high food quality are key drivers for keeping supermarket customers happy and loyal.

About 1,260 U.S. consumers were surveyed about their attitudes and buying preferences, and some of the results are as follows:

• 87% of consumers prefer to shop in person (including 96% of baby boomers and 81% of millennials)
• 84% of consumers said that they liked the ability to inspect and select their own products
• 60% of consumers said that they favor the atmosphere and experience of shopping in brick-and-mortar stores
• Approximately 25% of respondents said that they buy prepared food from their grocery stores
• 14% of consumers said that they shop in only one grocery store
• Millennials are three times more likely than any other age group to say that they enjoy the social interactions they experience in grocery stores

Pathmark supermarket to open in Brooklyn... really

Grocery retail cooperative Allegiance Retail Services announced that it plans to open a 49,000 square foot Pathmark supermarket - at the site of a former Pathmark store in Brooklyn, NY - later this month or next. The New Jersey-based cooperative purchased the intellectual property of the Pathmark name and associated marks last year.

Pathmark was a mainstay in the metro New York market for decades until parent company A&P filed for bankruptcy in 2015.

The new store's owner is PSK Supermarkets, which operates about a dozen stores in the New York market, mostly under the Foodtown banner.

Giant opens 38,000 SF e-commerce hub in Lancaster, PA

Giant held a grand opening earlier this week for its 38,000 square foot Giant Direct hub, built on the site of a closed Giant supermarket in Lancaster, PA. The facility serves as a curbside pickup site and grocery delivery center. It's the fifth site of its kind for Giant.

According to the company, customers can drive up and have their orders - which are made through the Peapod online service and app, or the Giant website - brought to their cars. There is also a walk-up vestibule with lockers for placing and picking up online grocery orders. Items are taken from rows of bar coded shelves, and refrigerated and frozen cases in the warehouse.

ShopRite tops in New Jersey with 139 stores

A story on NJ.com last month listed the 10 biggest supermarket chains (by number of stores) in New Jersey. Here's the list.

ShopRite - 139 stores
Acme - 77
Stop & Shop - 61
Target - 44
Aldi - 42
Walmart - 29
BJ's Wholesale Club - 23
Kings Food Market - 23
Save-A-Lot - 22
Key Food - 22

Stores in New Jersey with fewer locations include Whole Foods, Trader Joe's, Wegmans, Weis Markets, and soon... Lidl.

Food deflation and competition hurting supermarket profit margins

A story this morning in USA Today reported that "low food prices and razor-sharp competition" are putting a serious dent into grocery chain profits. However, the issue is good news for consumers, who last year saw the first annual decline in supermarket prices since 1967.

According to Supermarket Analyst Phil Lempert, the low food prices and competition have created "a price war among everybody." This price war, combined with supermarkets' efforts to attract new customers (mainly via investments in pricing), have badly hurt profit margins.

According to the Agricultural Department's Economic Research Service, prices of supermarket items declined 1.3% in 2016 compared to the year before. The article cites confirming evidence from Wegmans and Costco, both of whom provided examples of recently lowered prices on items like bananas, peanut butter, eggs, pistachios and laundry detergent, among others.

The USDA said that meat, chicken and eggs have seen some of the biggest price cuts due to oversupply and lower than expected exports.

Kelly Bania, a senior analyst at BMO Capital Markets, added that "we're definitely in a prolonged deflationary period."

Supermarkets increasing their presence in power centers

Shopping Centers Today, an ICSC publication, recently published an article explaining that U.S. developers are changing the traditional shopping center retail mix by moving neighborhood stores - namely grocery retailers - into power and lifestyle centers. The article says that the ground was broken about a decade ago by stores like Costco, Target and Walmart, all of which offer supermarket shopping in a warehouse style or as a supplement to discount retail.

Several trends were cited for the changing retail mix, including the significant drop off in neighborhood shopping center development as well as the recent expansion of smaller-format, natural and organic grocers. More grocers and less neighborhood shopping centers being built means that these new formats have to go somewhere other than neighborhood centers.

The trend may be troubling for traditional supermarkets like Kroger, ShopRite, Giant and others. It's much easier for a 15,000 - 25,000 square foot small format grocer to find a spot in an existing power center than it is for a 50,000 - 100,000 square foot store.

In addition, power center owners have realized that customers typically visit grocery stores at least twice per week, and the increased visits benefit all tenants. An added benefit to landlords has been the resulting cap rate compression brought on by the addition of grocery retail. 

Supermarkets among top retail chains in the world

A report published by Deloitte Touche Tohmatsu and Stores Magazine last month claims that 32 of the 100 largest retail chains in the world are supermarket chains. And in the U.S., 20% of the retail chains on the top 100 list are supermarkets. The list includes the following grocery chains:

Kroger - #5
Safeway - #24 (prior to the sale of the company's Canadian unit and closing of the Dominick's chain)
Delhaize - #33
Supervalu - #35
Publix - #36
H-E-B - #51
Whole Foods - #91

Also of note:
Walmart - #1
Tesco - #2
Costco - #3
Target - #10
Dollar General - #56
BJ's Wholesale Clubs - #88

Analysts optimistic about supermarket results

Last week Supermarket News published a story listing several reasons why supermarket analysts are optimistic about results for the first half of this year compared to the second half of last year. The reasons cited include the following:

• All the negative factors that impacted the first couple months of the year - like higher payroll taxes, higher gas prices and a bad flu season - are no longer present, and consumers have made necessary adjustments, helping to drive a successful second quarter.
• Supermarket powerhouse Kroger announced that it would no longer increase its price investments at an accelerated level, which may prompt others in the industry to follow their lead.
• The cooler weather has kept people home, which boosts supermarket sales. Last year's warmer weather caused many people to eat out more.
• Economic conditions began improving after the holidays, which is good news for retailers.
• The industry has adjusted to Walmart's aggressive programs.

Some analysts are not as optimistic, citing a lack of job growth, uncomfortable levels of household debt and unemployment.

I'm optimistic, mostly since it's more fun to think that way.

Weis Markets targeting Bedminster, PA for new store; to spend $135 million on CapEx this year

Last week Weis Markets presented its plans to the Bedminster Township planning commission for a 63,000 square foot supermarket and adjacent gas station at the corner of Routes 113 and 313 in Bucks County, not far from Doylestown. Meetings with the Board of Supervisors and the town's municipal authority are planned for the coming months.

Township officials have been hoping for some form of new construction at the site that would result in road improvements paid for by the developer. Rite Aid had received approvals to build on the site, but abandoned its plans.

In related news, Weis announced that it would invest $135 million this year towards 37 major projects, including four new stores and 32 remodels. (I'm not quite sure what the 37th project is.)

Weis currently operates 164 stores in PA, NJ, MD, NY and VA.

ShopRite to open 75,000 SF store in Camden

The news spread quickly yesterday that ShopRite is planning a 75,000 square foot supermarket in Camden, NJ, which would be the first such store Camden has had since the early 1980s.

Plans for a 20-acre retail shopping center at South 17th Street and Admiral Wilson Boulevard were unveiled by representatives of the Goldenberg Group and ShopRite.

Camden has been cited as a food desert for its lack of full service grocery stores.

Tesco to shut down Fresh & Easy chain

Tesco, the British supermarket giant and the world's fourth largest retailer, announced it will sell or shut down its 200 Fresh & Easy grocery stores. All of the stores are located in California, Arizona and Nevada, and the banner is Tesco's only U.S. asset.

Fresh & Easy began with its first store in Phoenix in 2007, and the grocery chain's stores are typically in the 10,000 to 15,000 square foot range. They offer fresh food and ready-to-eat meals at low prices, and the stores are touted as more convenient alternatives to traditional U.S. supermarkets.

Since 2007, Tesco has invested about $1.6 billion in the chain, but it has never been profitable.

"It is now clear that Fresh & Easy will not deliver acceptable shareholder returns on an appropriate timeframe in its current form," said Tesco CEO Philip Clarke.

Analysts say that Aldi could be among those interested in acquiring the chain, and that Walmart could bid for parts of it.

Supervalu freezes pay, lays off workers as buyer conducts due diligence

Supervalu, the troubled supermarket chain whose banners in the Philadelphia region include Acme and Save-A-Lot, announced last week it would implement a pay freeze for all employees at its corporate headquarters in Minneapolis, MN. The company said it will also reduce or suspend matching contributions to employees' 401(k) plans starting next year.

Earlier in the month Supervalu announced that the company would layoff 700 people, or approximately 4% of the workforce, at Shaw's and Star Market, both of which operate in New England.

In the mean time, Cerberus Capital Management, which is in talks to buy Supervalu, is still conducting its due diligence. The two companies are familiar with each other, as Cerberus joined Supervalu in buying a stake in Albertson's in 2006. According to published reports, Cerberus currently owns the entity that operates 205 Albertson's stores, while Supervalu operates 564 of them.

Supervalu, which operates Shoppers, Bristol Farms, Cub and Jewel-Osco in addition to the banners mentioned above, has lost more that $2.5 billion over its past two fiscal years, and recently reported its 14th straight quarterly sales decrease. It is the third largest grocery chain in the United States behind Kroger and Safeway.

It has been reported that private equity firms KKR and TPG Capital have expressed interest in purchasing Supervalu, as well as billionaire Ron Burkle.

Wal-Mart ad campaign targeting supermarket prices

Wal-Mart reported last week that net earnings for its fiscal second quarter increased 5.7% compared to the same quarter one year ago. More interesting to me were two tidbits about pricing that I read in a summary of the company's results:

1) Due to Wal-Mart's continued investment in pricing, gross profit as a percentage of sales declined by 20 basis points in the U.S.

2) The company said it was pleased with the results in the 25 markets in which they are running ads built around basket price comparisons with other supermarkets in the market.

Clearly Wal-Mart is paying great attention to price and making significant efforts to be perceived as the low price alternative to supermarkets.

Pension risks run high for supermarket companies

According to a report released earlier in the week by Fitch Ratings, the "big three" supermarket chains face the largest risk of all U.S. businesses for cash flow and earnings problems due to underfunded pension plans.

Fitch Ratings says that Supervalu, Safeway and Kroger's pension plans are significantly underfunded. The ratings company also states that in the long term, these plans "could grow at a rate that cannot be fully offset by smaller increases in wage rates or healthcare costs, resulting in a creeping increase in overall labor costs."

Supervalu's brands in the Greater Philadelphia market include Acme and Save-A-Lot. Safeway is the parent company for Genuardi's, which is in the process of exiting the market, and Kroger does not have stores in the market.

Genuardi's... and then there were 4

Five Genuardi's stores transitioned to Giant last week and 10 more will transition later this month. Three Genuardi's stores reopened as Weis supermarkets last month, and one will be a McCaffrey's within a couple weeks. For those (like me) keeping score, that leaves five open and operating.

Next month it'll be down to four. The Cherry Hill Genuardi's, located in Ellisburg Circle Shopping Center, will close on August 4, according to published reports. Safeway couldn't find a buyer for the store, and is still looking for buyers for the remaining supermarkets in New Jersey (Barnegat, Egg Harbor, Evesham) and Audubon, PA.

ShopRite, Giant tops again in Greater Philly sales

I received the highly anticipated Market Study issue of the Food Trade News last week.  As usual, there was an incredible amount of information about the supermarket industry in the PA, NJ and DE markets.

The headline was that ShopRite remains a strong leader (based on total sales) in the 55-county market area that stretches from Northern New Jersey to Central Pennsylvania to New Castle County, Delaware. Giant is a strong second, and Walmart has jumped into third. The new "big three" account for more than one third of the $49.5 billion retail food market.

In the eight-county Philadelphia market (Philadelphia, Bucks, Montgomery, Chester, Delaware, Burlington, Camden and Gloucester), ShopRite is slightly ahead of Giant, followed by three brands headed in the wrong direction: Acme, Super Fresh/Pathmark/A&P, and Genuardi's. The rest of the top 10 consists of Wegmans, Save-A-Lot, Whole Foods, Redner's Markets and Thriftway/Shop 'n Bag.

For more information than you can grasp in one sitting, check out the Market Study issue here: Food Trade News.

More on the McCaffrey's-Giant-Genuardi's deal...

Although I already wrote about McCaffrey's deal with Giant to take the Genuardi's space in Newtown, PA (McCaffrey's to acquire Genuardi's in Newtown, PA), Maria Panaritis' story in today's Philadelphia Inquirer sheds more light on the deal.

Philadelphia Inquirer: In the end, a small supermarket chain gets its Genuardi's

Traditional supermarkets lost stores in 2011, high-end grocers added stores

Supermarket powers Safeway, Kroger and Supervalu closed more traditional stores than they opened last year, while higher- and lower-end stores continued to add stores.

• Safeway, which includes Genuardi's in the Greater Philadelphia region, ended 2011 with 1,678 stores, a net decrease of 16 locations (22 closures and 6 openings).
• Kroger, the only chain of the three traditional markets mentioned here that has increased capital expenditures in 2012, had 2,435 stores at the end of last year, representing a net decrease of 25 units (41 closures, 16 openings).
• Supervalu, which includes Acme and Save-A-Lot in Greater Philly, ended 2011 with 2,434 locations, which is actually a net increase of 40 stores. However, taking discount grocer Save-A-Lot out of the equation and it's a net decrease of 12 traditional supermarkets. 

On the other hand, The Fresh Market added 13 new stores last year and currently operates 116 in total. Earlier this week at the annual International Council of Shopping Centers conference in Las Vegas, a company representative said their long-term goal is at least 500 stores nationwide. A significant capital investment is underway this year, representing approximately 8-9% of sales, and 14-16 new stores are expected.

Whole Foods, which added 12 net new stores last year and has about 300 current locations, has 63 stores in the planning stage and says it may eventually reach 1,000. In 2012, 24-27 new stores may open.

Safeway stock price rises on acquisition speculation

Genuardi's parent company Safeway saw its stock rise 7.5% last week, its largest one-week rally since 2009, on speculation of a possible acquisition. With nearly 1,700 stores, Safeway is one of the country's largest supermarket operators.

The acquisition talk was triggered by Safeway's adoption of a vesting acceleration that may require executives to remain with the company if it's bought in order to receive their fully vested payout. A JPMorgan Chase analyst also pointed to share buybacks and the promotion of Safeway's CFO as evidence of a potential "corporate action."

Wegmans, Trader Joe's top Consumer Reports survey for best supermarket

A Consumer Reports survey released today ranks Wegmans as the top supermarket in the country, based on feedback from 24,203 readers. Wegmans has 79 stores in New York, New Jersey, Pennsylvania, Massachusetts, Maryland and Virginia.

The top five stores are as follows:

1. Wegmans
2. Trader Joe's
3. Publix
4. Fareway Stores
5. Costco

Customers cited Wegmans' quality meat and produce, clean shopping environment, "very good or exceptional" prices and service (employee courtesy and checkout speed) among the reasons it's the top supermarket. Trader Joe's and Fareway Stores also scored high in those categories. Costco scored well on all the aforementioned categories except service, which - by design - is not a focus at warehouse clubs.

The stores receiving the worst ratings are Pathmark and Walmart.