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Posted: January 01, 2010

Rundles Wrap Up: Grocery wars

Jeff Rundles

About 30 years ago a supermarket price war broke out in Denver, and it always struck me as one of the all-time blunders.

Back then I always shopped at Safeway because it was the closest supermarket to my house. Safeway went on a big marketing blitz saying their prices were lower than the competition, and they were offering some pretty sweet deals. I don't remember the specifics, but I recall that the promotion worked, and that the stores - mine at least - were packed.

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Unfortunately, the day they launched the initiative it snowed something awful. In the price-cutting furor, Safeway had apparently failed to adequately staff the stores. Shelves were empty, the floor was a mess from people tracking in the snow, and the upshot was that when the promotion was over fewer people shopped Safeway than had before. I switched to King Soopers and didn't go back into a Safeway for years.

The grocery landscape in those days was far different than it is today; we had Safeway, King's and Albertsons, and that was pretty much it. Today we have those players, although Albertsons has apparently fallen off drastically, and added to the mix are Target Super Centers and Wal-Mart on the giant end of the scale, and Whole Foods Market and Sunflower Farmers Market in their own strategic niches. King's dominates with a nearly 39 percent market share, with Safeway and Wal-Mart each enjoying significant shares, 19.6 percent and 19.1 percent, respectively.

In early December, Safeway, apparently stung by falling market share, launched a price war with a campaign it is calling Everyday Low Prices, lowering prices from 10 percent to 44 percent. It occurred to me that the campaign was very Wal-Mart in its approach - and that is probably not by accident - what with all the yellow sticky notes and the prices crossed out with a marker and replaced with the new lower costs.

News reports said the major competitors were eager to follow suit or had, they said, actually beaten Safeway to the price-cutting punch, just without the fanfare. The beneficiaries will be all of us who buy groceries - at any of the stores, majors and minors alike. As my wife said, "Isn't competition wonderful?"

I wonder. The answer is "yes" in the short term. But wars bring casualties. Albertson's has all but ceded the marketplace to competitors - it recently closed five of its metro Denver stores - and I worry that the grocery body count is about to rise.

I like all the new competition; don't get me wrong. When a Sunflower market opened near the King Soopers in my neighborhood, I spread my grocery allegiance around and, lo and behold, prices dropped at the King's. I grocery shop from time to time at Target, I go to King's and Safeway regularly, I really enjoy Sunflower for food staples, and I even visit Whole Foods on a semi-regular basis and always seem to find the prices better than I expected. I don't go to Wal-Mart for anything, for reasons I have discussed before.

The point, however, is that where I used to have some loyalty, I now look at these stores as commodities: I follow the deals. There used to be some major differences - better produce, better meat department - but now they all seem to be knockoffs of each other. And I think the public in general sees this, too. Wal-Mart has gone from barely on the grocery radar screen in 2001 to vying for No. 2 in the market nine years later. Something eventually will give. Short-term, nice savings. Long-term, inevitably, fewer choices and higher pricing.

Obviously, the focus on price during a recession resonates with the widest possible audience. But I want a better reason to shop one over the other than saving 10 cents on a cake mix. How about more checkers and shorter lines?

As I write this, union workers at King's and Safeway are still considering a strike vote.

Bad idea. As I said, wars cause casualties.

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Jeff Rundles is a former editor of ColoradoBiz and a regular columnist. Email him at jrundles@cobizmag.com.

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