Stay Tuned/National Food System Revisited

Several months ago, I wrote a brief column about standardization of food, and how regional and seasonal items are likely to be available across the country and year round, but may have lost some essential element of their charm in the process.

I really do believe that our consumption habits were better when we only ate strawberries during strawberry season, and the strawberries were probably better too. But that's not what I want to talk about at the moment.

I read an interesting article a few days ago which noted that, far from spreading regionalisms across the country right and left, grocery chains are actually quite wary of regional eating habits ... and, in fact, this is one reason why there has never been a nationwide supermarket chain.

The article notes, for example, that shoppers in the Northeast buy milder salsa than those in the Southwest - predictable, I suppose - and also that they prefer thicker peanut butter, which may not be so obvious.

Grocery stores survive on very thin margins. A grocery store which doesn't know the exact tastes of its customers is one which is losing money. So no chain has dared push national - it could break them if they guess wrong.

The closest we ever came was A&P, which had about 4600 supermarkets in its heyday, says the article. The stores later did business under the name Super Fresh, which is the way younger readers will remember them, but once they were the Great Atlantic and Pacific Tea Company, and they were titans.

However, by the time I was in college, the Super Fresh stores were widely considered the worst grocery stores in Baton Rouge, with the possible exception of Delchamps, a tiny chain based in New Orleans. (After buying spoiled meat from Delchamps three times in a row, I quit going there.) A&P now has about 900 stores. One of the reasons given for their decline is indifference to customer tastes. Many grocery chains are undoubtedly wary of the same fate.

The article notes that shoppers tend to personalize grocery stores and develop strong loyalties - they are reluctant to shop in grocery stores they're not familiar with, so it's difficult to break into a market where another chain already has a foothold. I don't know if I buy that. Maybe in the retirement-age crowd. Most of the thirty-somethings and forty-somethings I know tend to select for price, and possibly the quality of the produce section, the only real area where stores can vary widely.

Certainly I don't have any special loyalty to Star Market, the prevalent area chain, except that they carry my favorite brand of cookies. I could learn to love a different brand, but it'd be hard.

I did shop at only one store chain when I lived in Baton Rouge - Albertsons - but the success of Albertsons at the expense of all the other chains in town underscores my theory that the preference was simply because they did a better job!

At any rate - the article notes that it could be possible for a national grocery chain to develop. The technology now exists so that customer's buying habits can be tracked more closely than ever before - the primary improvement being the scanner at the checkout. (Another item cited in A&P's decline was failure to modernize their equipment quickly enough.)

I know for a fact that Star Market customizes its stock from store to store, because I've compared them. But Star Market has only fifty-odd stores, all in Massachusetts. Dealing with that kind of customization gets more problematic when one is, say, Kroger, and one has many hundreds of stores in several states.

It may be moot. The advent of the national grocery chain may come about in a completely different way.

Royal Ahold, a Dutch company, has been buying grocery chains right and left. They bought Stop & Shop, a chain in the New England area, a while back, and they are now in the completion stages of buying Giant, a chain in the Virginia/Maryland area (and my favorite grocery chain in the country).

Ahold has had a lot of experience in the European grocery market, but the Euro market is very different from the American one. Fewer items, fewer brands, more house brands, less advertising in general, more short-term purchasing (i.e. buying what you need for the day, rather than for the week or month) and so forth. So they have sensibly let the chains keep their marques - that is, Giant still gets to be Giant - and, for the most part, run themselves their own way.

Ahold will operate seven chains in the U.S. once the Giant purchase is complete. And so far, the complaints have been few. Ahold plans to make other acquisitions ... and so, one day, Ahold may have national coverage without actually having a national name.

The American grocery market is looking very good to European companies - the European grocery market is basically stagnant, so this may be their only growth opportunity. But in addition to that, the market is consolidating internally as well. There have been more than 100 mergers or acquisitions in this area in the last four years, the article reports.

Part of the reason is that mergers are always attractive to big companies anyway. It's a well-known flaw of the capitalist philosophy - big companies would usually rather merge than compete, and competition's what keeps them honest. A lot of other industries are merger-happy right now as well - check out the drug industry, for example.

But while I usually disapprove of mergers, for the reason above, in the case of grocery stores I'm actually pretty enthusiastic.

Mergers often do make the products cheaper, by reducing overhead. I'm not too worried that this will in turn lead to a bland or unsatisfactory selection of products, because of the A&P example - they'll go bust quickly if they don't keep the fickle consumers happy. (No such check valve exists in, say, the drug industry. But let's not go there.)

Grocery mergers will also help the stores compete with the restaurant problem and the Wal-Mart problem - two big external threats.

However, I admit to some hypocrisy here. Allow me to come clean.

One of the problems grocery stores are facing right now is that people just don't buy groceries as much: Consumers now spend about half their food budget on restaurants and takeout food.

Now, I eat in restaurants at least two nights a week, often more. I hate to cook, except desserts. But that doesn't mean I want grocery stores to go into a tailspin because of it, and frankly I think people should be cooking at home more, myself included. So I'm rooting for the grocers, while feeling guilty about contributing to the problem.

The other problem is that general merchandise retailers who haven't traditionally sold groceries - Wal-Mart, Target, et alia - are starting to do so. Since I cannot abide Wal-Mart, the kudzu of retailers (note: that previously read "the Microsoft of retailers," but I'm over my cheap shot quota this month), I will root against them any chance I get. They killed the variety store (seen any Woolworth's lately?), they tried to kill the music store and the hardware store, and now they're going after the grocery store.

Hypocrisy: I cannot blame anyone for shopping price, all things being equal. If grocery stores can't keep their prices below Wal-Mart's - and it'll be hard to do - then I'm not going to jump on you for shopping at Ye Behemoth. I just hope it doesn't happen.

A summation seems called for here.

The U.S. grocery market - $430 billion a year - is changing rapidly, due to foreign interest and competitive pressures. In general, this will probably be a Good Thing for the consumer - for once.

Aside from minor price fluctuations, what can you expect as a grocery buyer?

- More deli departments and prepared foods. These are what the consumers say they want, and they allow groceries to stab back at the restaurants.

- More organic foods, more care in labelling foods, more health-conscious and environment-conscious foods. This has been a boom market for ages and it hasn't peaked yet. Consumers grow more aware every day.

- More specialty items, more ethnic foods. It is no longer unlikely that a grocery shopper in New England will want to purchase chipotles in adobo - the Food Channel, a boom in cookbook sales, and changes in the restaurant business are some of the factors responsible. Ten years ago, they didn't know what sushi was in Baton Rouge. Now they want to know where the freshest fish for it is.

More individualization of grocery stores. This is one of the things enabling Star Market to stay competitive; it's an idea proven to work: Give the customers what they want.

More willingness to listen to consumer input. These days, not only are consumers not scared to ask for specific items by name, it takes a lot fewer requests to get the store to consider doing it.

So, all in all, it's a good time to be a shopper. You might say it's a buyer's market.

[February 2007:] All my changes prophecied have come true to some degree or another in the intervening years, except perhaps the willingness to listen to customer input.

In terms of local chains, Stop & Shop is still owned by Ahold, who also owns the Peapod service (see previous column). Star Market became Shaw's (although they operate under both names), which briefly was owned by British grocery giant Sainsbury's, and was then owned by Albertsons, until Albertsons was bought by a partnership of investors in order to divide its parts between them. The upshot is that now Shaw's/Star Market is owned by Supervalu.

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