Food retailing is a tough game

MMR, June 19, 2006

ATLANTA -- Winn-Dixie Stores Inc. is the latest casualty in this city's brutal war for supermarket market share.

The beleaguered retailer faces challenges throughout its territory, of course, and last year opted to close about 326 of its 913 stores and exit 14 designated marketing areas. Atlanta was one of those markets--Winn-Dixie closed 40 SaveRite stores and a warehouse there, cutting about 3,000 local jobs.

Winn-Dixie had converted its stores in Atlanta to the SaveRite warehouse format in 2001, in an effort to find a new niche for itself in the intensely competitive market. The move failed to gain much traction with consumers.

Winn-Dixie is only the latest in a long list of grocery retailers that have found the Atlanta market too competitive in recent years. Harris Teeter Inc. pulled out in 2001, and other recently departed chains include A&P, Bruno's Supermarkets Inc., Cub Foods and the Harry's In a Hurry convenience outlets operated by Harry's Farmers Market Inc.

The departures have been attributed to the increased competitive pressure caused by the aggressive expansion of two chains: Publix Super Markets Inc. and Wal-Mart Stores Inc.

Publix made its debut in the Atlanta market in 1992. Two years later Wal-Mart opened its first Georgia Supercenter in nearby Gainesville, positioning the outlet just a half mile from a new Super Kmart store.

At the time that Wal-Mart brought its Supercenter format to the area Winn-Dixie was the No. 2 supermarket retailer in metropolitan Atlanta, with 93 stores. Kroger was No. 1 with 127 outlets. But while Kroger has remained a strong competitor, Winn-Dixie has struggled. By the middle of last year, meanwhile, Publix had opened about 130 supermarkets in the greater Atlanta metropolitan area, and Wal-Mart had opened more than 30 Supercenters. Kmart, now part of Sears Holdings Corp., no longer operates Super Kmart stores in the Atlanta market.

Currently Publix and Kroger are running virtually neck and neck, with 32% and 27% of the market, respectively, while WalMart Stores Inc. is a strong No. 3 with a 15% share.

Atlanta's food shoppers have other options as well. Ingles Markets, based in Asheville, N.C., operates stores in the metropolitan area--most of them in such outlying communities as Acworth, Ga., which happens to be the same town that Target Corp. has chosen to debut its next generation Super Target store. Ingles sees itself primarily as a small-town grocer, but Atlanta's growth in recent years has in effect brought the city to its stores.

No-frills consumers in Atlanta got another option in 2002 when the deep discounter Aldi arrived in the market, beginning with the opening of a store in Conyers, Ga., which was located near both a Kroger and a Publix store.

Whole Foods Markets Inc. is another comparatively recent arrival. The organic food specialist opened its first Atlanta store in 1999 and boosted its presence with the acquisition of three Harry's Farmers Market megastores in October 2001. The stores continue to operate under the Harry's banner, which has been a fixture in the Atlanta area since 1987.

Greensboro, N.C.-based The Fresh Market Inc., which specializes in perishables and gourmet food, has established a niche for itself with four stores in Atlanta.