Super Wal-Mart vs. Supermarkets Print E-mail
Written by Tom Walsh   
Thursday, August 02, 2007

ImageELLSWORTH — When it comes to selling groceries, Wal-Mart isn’t merely the 800-pound gorilla of the supermarket world.

It’s King Kong.

In the highly competitive battle to win the carts and minds of cost-conscious consumers, the discount grocery stores that are the centerpiece of the 2,337 Wal-Mart Supercenters and 121 Wal-Mart Neighborhood Markets nationwide outperform all competitors by a very wide margin.

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Not only is Wal-Mart the largest corporation in the world, its supermarkets dominate the U.S. grocery industry. Collectively they command an estimated 20 percent of the retail grocery and consumables business in the United States.

Of the $453.7 billion in annual revenues reported last year by the 50 largest grocery retailers in the United States, Wal-Mart’s grocery revenues represented 28 percent of sales.

Each week, approximately 100 million customers — about one-third of the U.S. population — visit a Wal-Mart Supercenter, where grocery sales are stronger than the sale of general merchandise.

With reported annual sales of $126.7 billion last year, Wal-Mart’s 2,401 grocery stores outperformed the 2,459 stores in the second-place Kroger chain, which had collective sales last year of $59.9 billion, less than half of Wal-Mart’s revenue.

Ellsworth’s two incumbent High Street grocery stores — Shaw’s at the Ellsworth Shopping Center and Hannaford at the nearby Maine Coast Mall — will be doing business in the shadow of Wal-Mart when it opens a 203,000-square-foot Supercenter in 2009 as an anchor tenant of the Acadia Crossing shopping mall on Myrick Street.

Wal-Mart’s expansion in Ellsworth from a discount store on Route 3 to a Supercenter at Acadia Crossing is indicative of its aggressive approach to grocery sales. Between 2005 and 2006, Wal-Mart expanded the number of its Supercenters from 1,986 to 2,287 nationwide. Those additional stores helped increase annual grocery revenue from $98.7 billion in 2005 to $126.7 billion in 2006, according to the annual “Super 50” analysis by Progressive Grocer magazine.

Shaw’s may be better positioned financially to withstand the challenges of new competition. As the result of a corporate merger in June of 2006 involving Minnesota-based Supervalu Inc. and Idaho-based Albertson’s LLC, Shaw’s now does business under the Supervalu corporate umbrella, not Albertson’s.

That’s good news in terms of Supervalu being ranked third in annual sales in the industry in 2006, at $34 billion, behind Wal-Mart at $126.7 billion and Kroger at $59.8 billion. Albertson’s ranks 11th on that list with annual sales of $7.1 billion.

The Ellsworth store is one of 207 Shaw’s and Star Market supermarkets operating within a Supervalu network of more than 2,500 stores, most located in the West and Midwest.

The Hannaford store in Ellsworth is one of 160 now owned by Delhaize America Inc., a subsidiary of a Belgian firm that’s been selling groceries for 140 years. The U.S. branch of the business has 1,560 supermarkets, including 1,141 Food Lion stores commonly found in the South.

Delhaize America now ranks seventh in the Progressive Grocer “Super 50” with 2006 sales of $17.3 billion.

If local store managers are concerned about grocery sales at a Wal-Mart Supercenter eroding their market shares, they’re not letting on. Managers at Shaw’s and Hannaford in Ellsworth both declined comment, referring questions about the potential impact of Wal-Mart’s expansion in Ellsworth to corporate headquarters.

While Shaw’s refused comment, Hannaford said competing against Wal-Mart is business as usual.

“With respect to Wal-Mart, we’ve been competing against them in various locations for more than a decade,” said Caren Epstein, Hannaford’s director of external communications. “Frankly, it doesn’t matter if it’s Wal-Mart, Walgreens, Shaw’s or some other competitor. We don’t alter our strategy.

“If you let your competition decide your strategy, you won’t be in business very long,” she said. “And we’ll be celebrating our 125th anniversary in 2008, so we’ve determined that maintaining your strategy regardless of competition is what leads to success.”

Hannaford opened its 54,000-square-foot store in Ellsworth in October of 1986. It is staffed by approximately 200 employees, slightly more during the busy tourist season.

Epstein said she doesn’t expect the decision by Walgreens to open a drug store across High Street from Hannaford will affect how the grocery store’s in-house pharmacy will do business.

“In the same way that we don’t adjust our strategy for food industry competitors, we don’t adjust it for pharmacy competitors either,” she said.

Epstein said Hannaford has seen consumers’ “natural curiosity” steer its customers to a new competitor, but not at any significant loss of market share.

“New stores generally offer very attractive incentives, frequently price-driven, to get customers into their stores,” she said. “Our experience has been that consumers will check out a new store and take advantage of the promotional programs. If it meets their particular needs, they might stay with it. But, by and large, we have retained a significant percentage of our customers, regardless of if the competition is Wal-Mart or Whole Foods.”

At a Glance

Each year, Progressive Grocer magazine publishes “The Super 50” listing of the 50 largest grocery retailers in the United States. The trade publication’s 2007 rankings, which were published in May, show Wal-Mart dominates the grocery industry with estimated annual revenues of $126.7 billion, far exceeding $59.8 billion in annual sales for Kroger, which ranked second on the list. Supervalu, which owns Shaw’s, ranked third at $34 billion, while Delhaize America, which owns Hannaford, ranked seventh at $17.3 billion.

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