A CONTROVERSIAL MOVE

ATLANTA -- Publix Super Markets' move into this market is winning kudos from many observers who say the strategy will pay off for the Lakeland, Fla.-based chain. But there are mixed opinions on the ultimate growth potential of Publix in Atlanta, with some more optimistic about the short-term rather than the long-term outlook.a, the area's economy is robust, and prospects for growth in employment and

ATLANTA -- Publix Super Markets' move into this market is winning kudos from many observers who say the strategy will pay off for the Lakeland, Fla.-based chain. But there are mixed opinions on the ultimate growth potential of Publix in Atlanta, with some more optimistic about the short-term rather than the long-term outlook.

a, the area's economy is robust, and prospects for growth in employment and population have helped support the store expansion that's taking place there.

However, Hofheinz pointed to the increasing levels of competition in the region.

"The market was already highly competitive before Publix came in, and it's remained so since," he said.

"The economy has been strong enough to support all the store expansion taking place, but if things slow down, I would expect everyone to look at smaller sales gains, which could result in more price promotions.

"I'd be surprised if the marketplace would support the current level of expansion much further into the future." To maintain current market shares, companies will have to promote heavily, with lower pricing and additional advertising costs that could hurt each competitor's economic performance, Hofheinz said.

"That could lead companies to close unprofitable stores, and it could result in some consolidation through mergers and acquisitions, though it's probably too early to assess the staying power of the newer entrants," Hofheinz said. "But I would not expect all the current players to still be here in 10 years."

The potential for overstoring is cause for concern among other observers of the Atlanta market as well. "Shame on the grocery community for allowing this to happen," said one source. "The Atlanta market will be overstored -- and it already is in some areas, where you have six stores within a mile.

"As a result, every operator may have to look at his margins and store volumes and make some decisions in the next few years."