Hannaford has launched one of its most extensive price comparison campaigns in recent memory, advertising across multiple channels as the ever more competitive grocery industry clamors for consumer loyalty.
Since October, the Scarborough, Maine-based food retailer has focused predatory advertising on Price Chopper, with in-store basket-to-basket comparisons, radio announcements, newspaper advertisements and other forms of convincing customers that Hannaford prices are lower.
Sometimes the best way to help consumers understand what you have to offer in terms of price is to make a comparison, according to Hannaford spokesman Michael Norton.
“Price is always No. 1. The economy doesn’t fundamentally change that. It definitely requires that you not be misunderstood in any way about what your prices are and what you have to offer,” Norton said.
The last campaign of direct comparisons to Price Chopper was around three or four years ago, he said.
“The number of items, the number of months are probably a little bit more in this instance,” Norton said. “It’s a major campaign, no question about that.”
But Price Chopper says despite such efforts, market share for the Rotterdam-based supermarket chain has risen to an all-time high. Leaders say every day more than 10,000 shoppers redeem points related to its Fuel AdvantEdge Card launched locally in June 2009.
“It’s flattering to us for our competition to rely on those type of price comparisons because they can’t compete on so many other levels,” said spokeswoman Mona Golub.
“We do price checking on a daily if not weekly basis and we remain highly competitive,” Golub said.
Competitors like Hannaford and Wal-Mart use the everyday low price model, which assigns goods a day-to-day, week-to-week median price that doesn’t change much over time.
Price Chopper, on the other hand, is a promotional pricer, offering thousands of specials each week that motivate consumers to purchase items, Golub said.
Competition in the grocery industry is extending beyond the checkout lines of the traditional grocery store to convenience stores offering freshly made pre-packaged meals and to dollar stores and big-box discount retailers and clubs, all of which are expanding food-related inventory, according to the U.S. Bureau of Labor Statistics.
Supermarkets, on the other hand, are offering more general merchandise and are adding services to cater to the budget-conscious and time-strapped consumer.
Price inflation projected
Grocery shoppers are expected to pay up to 3.5 percent more at the checkout counter this year as retail food price inflation kicks in.
The 2010 consumer price index, which measures inflation for all goods, is projected to see an increase of 2.5 percent to 3.5 percent for grocery store prices, according to the U.S. Department of Agriculture’s 2010 Food Price Outlook.
Increased commodity and energy costs, combined with more demand for food from recovering global economies, will lead to rising prices, the USDA said.
The Food Alliance of New York State in Albany closely tracks prices as a trade group that mostly lobbies for the industry on legislative matters.
“Shoppers are in grocery stores a couple of times a week, most of the time buying things they have previously. The industry is a penny profit on a dollar’s worth of sales,” said executive director Jim Rogers.
“Competition just sharpens the competition and the ultimate beneficiary of competition happens to be the consumers. That is the case whether you’re talking about the Capital District, New York City or western New York,” Rogers said. “The consumers in this area are very well served by the types of supermarkets that they have here. Customers shop stores for different reasons. Price is very important, so is the freshness of the produce, the service, and so shoppers really have a multitude of reasons why they shop in certain stores.
“It gives stores the opportunity to play to their strong points to attract shoppers,” he said. “Consumers drive the market and drive it with their dollars.”
Wal-Mart, the world’s largest retailer, said it will begin cutting its grocery prices April 1 in efforts to shake shoppers from their routine just in time for the Easter holiday, which traditionally results in a surge of meal sales.
Hannaford and Price Chopper shrug off the plans, but a study shows that Wal-Mart Supercenters cause a downward trend in prices in the surrounding area.
The 2008 study, “The Effects of Wal-Mart Supercenters on Grocery Prices in New England,” found the grocery prices of national brands at competing supermarkets within a five-mile radius experienced a 6 percent to 7 percent decline. Private label goods at such stores saw a 3 percent to 8 percent decrease. The study was published in the Journal of Agricultural Economics.
“In one form or other, there’s a Walmart in competition near all of our stores,” Norton said. “We have to compete against everybody and that’s part of what you’re seeing in this campaign.”
Hannaford’s strategy is to grow in communities where people drive an average of 20 minutes to the grocery store.
In June, the company will open a store in Duanesburg, intercepting shoppers that would normally have driven to the Price Chopper in Rotterdam, Norton said. The supermarket chain is adding three stores in Vermont this year and will have 173 stores by June, 46 of them in New York.
Along with streamlining front-end operations to make the checkout process simpler and more efficient, the company is focusing on services that promote healthy lifestyles, such as the pharmacies located in 80 percent of its stores. Price Chopper has pharmacies in more than half its stores.
The focus on wellness is creating more niche markets throughout the grocery industry, according to Niskayuna Cooperative general manager Don Bisgrove.
“Gluten-free is the big area we’re concentrating on. There’s so many needing gluten-free products and people who didn’t know they needed it,” said Bisgrove. “Demand is building and building and we’re getting calls from different companies all the time that they’re producing more products that fit into that category.”
The cooperative, at the intersection of Nott Street and Balltown Road in Niskayuna, picks up 100 members a month, Bisgrove said. At last check, it had more than 15,000 members.
“We decided to really concentrate on the upscale, the more natural food and the organic foods, but we still have the full lines of supermarket foods. We got away from the giant-size detergents and paper goods. We’re more into food rather than non-foods,” Bisgrove said.
Price Chopper said it continues to increase service offerings in stores, recently expanding the food court in Albany’s Westgate Plaza store and expanding the deli in its Slingerlands store.
Price Chopper also uses its “Good ’til” program to attract shoppers who prefer the everyday low price model used at Hannaford and Wal-Mart. The program runs quarter-to-quarter, discounting more than 5,000 items in a 14-week period, according to Golub.
“Price comparisons are very common in our industry. They take the consumers’ eye off other competitive forces, like Price Chopper’s Fuel AdvantEdge program, which none of our competitors have,” Golub said. The fuel program offers shoppers who use Price Chopper’s loyalty card a reduction in gas prices at certain stations.
Local food retailers also point to science-based nutritional rating systems like NuVal and Guiding Stars, exclusive brands at deli departments, customer-centric seafood departments and floral services as marks of distinction.
Price Chopper says goods from its bakeries are made from scratch — one of the many reasons the supermarket remains competitive. The company’s community involvement in local civic efforts and sponsorship of events also give customers a reason to explore its aisles, Golub said.
Price Chopper will have 127 locations by June, as it adds new stores that will open in Warwick, N.Y., and Middletown, Conn., in June, along with six stores it recently acquired from a rival supermarket chain in another part of the state.
“We will work to earn that loyalty every day. It’s a never-ending endeavor,“ Golub said. “But clearly given the growth of our market share we know that customers are responding to the offers that we have.”