STOP & SHOP'S EFFORTS to fix its pricing may be paying off in increased market share in Boston, according to the latest data from Metro Market Studies, Tucson, Ariz.
The No. 1 operator with 23.1% of the grocery market, Quincy, Mass.-based Stop & Shop has aggressively cut prices throughout the store in recent years under the auspices of parent company Ahold, Amsterdam. The chain operates 73 locations in the seven-county area of Metro Boston, which counts a population of about 4.5 million and one of the highest per-capita incomes in the country.
“Stop & Shop is a good example of what we are seeing happen around the country in the grocery industry as a whole,” said John Rand, director of retail insights, grocery, at Management Ventures, Cambridge, Mass. “There's been a retreat from the high-low model to a hybrid model, which is not dissimilar to what Kroger has been doing for the last few years.”
Shoppers, he said, seem to prefer a reliably low price on a core basket of items as opposed to pricing “surprises.”
Helping Stop & Shop in its effort to attract consumers with a more EDLP-style format is the fact that its largest competitor in the market in terms of share, Supervalu-owned Shaw's (and Star Markets), has not invested as heavily on price, Rand pointed out. Shaw's saw its share slide to 19.4%, from 20.1% a year ago, according to the Metro Market Studies data.
In addition, the Boston area has only a handful of Wal-Mart Supercenters, perhaps the ultimate price competitor in the grocery segment.
“What we have in that market is a fairly interesting microcosm of the grocery industry without a lot of influence from Wal-Mart,” Rand explained. “You don't have the strong impact from supercenters that you have in other markets.”
That role may be filled to some degree in the market by BJ's Wholesale, based in nearby Natick, Mass., which operates 12 warehouse clubs and has market share of 4.1%, up from 3.7% a year ago, according to the Metro Market Studies data.
“They have a very strong offering in a recession,” Rand pointed out, despite their limited selection in comparison to traditional grocery retailers.
Another retailer that appears to be gaining share is Tewksbury, Mass.-based Demoulas Market Basket, with 44 stores in the area and the No. 3 share at 17.7%, up from 17.5% a year ago. The company appears to have put its long legal battles over the ownership of the company behind it and may be investing in its store base, Rand said.
Local operator Roche Bros., based in Wellesley, Mass., also seems to be doing well, he pointed out, although the company's gains may not move the needle much in terms of market share. The company ranks No. 6, with a 4.5% share, about the same as a year ago.
Other independents in the Boston metro area include local operator Foodmaster, based in Chelsea, Mass., which captured about 1.5% of the grocery market with 11 stores.
Strong regional operators that have stores in the surrounding region but haven't yet penetrated deeply into the Boston market itself include Schenectady, N.Y.-based Price Chopper Supermarkets, which has 14 stores in Massachusetts and three in New Hampshire, and Big Y Foods, based in Springfield, Mass., which operates 58 stores in Massachusetts and Connecticut.
Each of those two chains currently operates a single supermarket in the seven-county metropolitan Boston area.
Change is coming to Boston, however, with Rochester, N.Y.-based Wegmans Food Markets set to enter the market with a store in the affluent suburban community of Westwood, Mass.
“That store is going to be fascinating to watch,” Rand said. “Wegmans' stores are so productive that even one store can change the immediate marketing area by quite a bit. If they can open up two or three stores, they could do the business of somebody opening up 10 stores.”
Overall, he said he believes the market is wide open right now to new players coming in and capturing share, both at the high end and at the low end. Stop & Shop's new price position — and the accompanying cuts in labor and services — might have created opportunities for a more service-oriented operator, he noted.
“I think the market is vulnerable to change,” he said.
|RETAILER||STORES||MARKET SHARE '09||MARKET SHARE '08|
|Stop & Shop||73||23.1||22.9|
|Shaw's, Star Market||74||19.4||20.1|
|Demoulas Market Basket||44||17.7||17.5|
|Whole Foods Market||18||5.1||5.2|
|Roche Bros., Sudbury Farms||14||4.5||4.5|
|Tedeschi Food Store||157||2.2||2.3|
|White Hen Pantry||39||0.8||0.6|
Includes Essex, Middlesex, Norfolk, Plymouth and Suffolk counties in Massachusetts, and Rockingham and Strafford counties in New Hampshire.
SOURCE: Metro Market Studies