Autumn has brought a cool gust of price competition to New England.
In Revere, Mass., last week, a 32-year-old Johnnie's Foodmaster conventional store reopened under the Save-A-Lot banner. In New Bedford, Mass., a 95,000-square-foot new Market Basket opened, posing a powerful new threat to the price leaders there. Meanwhile, Shaw's supermarkets throughout Massachusetts since late last month have been promoting new everyday low prices on thousands of items.
John DeJesus, owner of the 10-store Foodmaster chain, said a new influx of price-focused competitors in New England — as well as shoppers demanding value — sparked the change at Foodmaster. He said he was considering converting a few more of his Foodmaster locations to Save-A-Lot and was looking at sites to open new Save-A-Lot outlets.
“As the economy goes, you have to look at each store and ask, ‘Where are we heading?’ Is this going to appeal more to an upscale customer or an economy-minded customer?” he said in an interview with SN last week. He cited the arrival of Wakefern Food Corp.'s Price-Rite banner, rumors of Aldi's interest in expanding in New England, and established price leaders such as Market Basket and BJ's Wholesale Club gaining additional strength for sparking the decision to emphasize price.
DeJesus closed the Revere store in August and spent around $500,000 making renovations in preparation for reopening as a Save-A-Lot. Changes included removing service deli and seafood departments, creating labor savings he said would go into lower prices on a revamped in-store selection that includes a heavy concentration of private-label goods, but also some specialty goods with appeal to Revere's Italian heritage.
Supervalu's new willingness to expand the Save-A-Lot brand, including policies giving more control to franchise operators, helped convince DeJesus to make the switch.
“I'd been talking with Save-A-Lot for quite a bit, and we finally were able to strike a deal,” DeJesus said. “The good thing about the model is, you're a licensee, but you still can own and operate your store. I don't want to work for someone else.”
Shaw's on Sept. 17 introduced new lower everyday prices on thousands of items. It joined Stop & Shop and Hannaford Bros. among conventional retailers in the area with an EDLP message.
“We recognize that consumers' budgets continue to be stretched and are committed to providing the best value we can to our customers,” Steve Sylvan, a spokesman for the West Bridgewater, Mass.-based chain — also a Supervalu division — told SN last week. “Shaw's recently undertook an evaluation of our pricing across the board to identify where we could help families save money. As a result, Shaw's has cut prices on thousands of items storewide.”
Patrick Roquas, an Amsterdam-based analyst who covers Ahold for Rabobank, noted Shaw's moves could bring more margin pressure to area competitors including Ahold's Stop & Shop brand, Shaw's largest conventional competitor. He noted, however, that it was unlikely Supervalu could afford to wage a price war in New England given its financial condition.
Tewksbury, Mass.-based Demoulas Market Basket last week opened the 95,000-square-foot Market Basket store at the site of the former Fairhaven Mills in New Bedford, a city that already counts Shaw's, Stop & Shop, PriceRite and Save-A-Lot among its grocers.
DeJesus described Market Basket as a fierce price competitor owing to policies of owning rather than leasing its stores and self-distribution.
“Market Basket has turned New England upside down,” he said. “Without a doubt, they are harder to compete with than Wal-Mart.”