Grocery stores battle for consumers

Meijer’s entry into Northeast Wisconsin brings market changes

Posted on May 1, 2018 :: Insight Insider
Posted by , Insight on Business Staff Writer

The New North’s crowded grocery store sector is bracing for a new player.

Discount grocer and merchandiser Meijer entered the Green Bay market in 2017 and is opening a store later this month right off Interstate 41 in Grand Chute. The family-owned chain is building a store in Sheboygan and owns land in Manitowoc County.

Meijer’s arrival is the latest upheaval in the ever-shifting grocery store market. In the past few years, discount grocer Aldi has spent millions remodeling its area stores, De Pere-based Festival Foods opened two new stores in Northeast Wisconsin, StoneRidge Markets of Wautoma bought three Fox Valley Piggly Wiggly stores, and national supermarket giant Kroger purchased the parent company of Pick ’n Save and Copps in 2016.

Mark Skogen, CEO of Festival Foods, says Meijer’s entry into an already-crowded market has everyone talking.

“You can’t have someone opening a 200,000-square-foot facility and think it is not going to affect you,” he says. “Everyone is going to be affected. We need to focus on what we do well and keep doing it. For us, that is providing fresh bakery, having a meat cutter onsite, a deli that makes things onsite and friendly customer service.”

David Livingston, managing partner of DJL Research in Pewaukee, has watched the changing grocery store marketplace throughout the country and says there is no doubt local communities and consumers will feel the impact of Meijer’s arrival.

“More choices mean lower prices,” which is a win for consumers, he says. Adding tough competition may force some stores to close and lead some people to travel farther to get their food.

Drawing the battle lines

Gone are the days when only grocery stores sold food products. Now grocers compete against mass merchandise retailers including Walmart and Target, convenience stores such as Kwik Trip, warehouse clubs and online retailers including Amazon. The regional market is further segmented by the presence of deep discount grocers Aldi and Woodman’s Market.

Traditional grocery stores, such as Festival Foods, Pick n Save and Piggly Wiggly, have to distinguish themselves in a crowded market, Livingston says.

“Meijer will impact Walmart, Target and Pick n Save the most,” he says. “Walmart and Target because of the general merchandise segment and Pick n Save because they are a mediocre grocer in that their stores for the most part don’t set themselves apart like Festival Foods does.”

As for other grocers, Livingston predicts limited impact. Aldi and Woodman’s, he says, are both deep discount grocers and really only compete with each other while Festival “is a superior conventional grocer, so they are more immune than Pick n Save, while club stores might only see a minimal drop-off since they occupy a different place in the market.”

Since purchasing Pick ’n Save and Copps in 2016, Kroger rebranded its Wisconsin stores under the Pick ’n Save banner and began closing underperforming stores, including one in Kimberly. Livingston says more could follow.

“Kroger does not have a problem with closing stores that are not doing well,” he says. “I wouldn’t worry about the ones that were just remodeled, but some of the others, time will tell.”

StoneRidge Markets of Wautoma increased its market footprint during the past year by purchasing Piggly Wiggly stores in De Pere, Kaukauna and Little Chute from a local family looking to retire and exit the industry.

In addition to its grocery stores, StoneRidge has a wholesale division where it provides many large and national grocery store chains with bulk orders and private label services for cheese and certain types of meats, says Gail Henschel, who is general manager for all four Piggly Wiggly stores. She says the store also works with restaurants and festivals to have their products available.

That diversity of business helps with the overall bottom line, and being able to offer its unique products in its own stores is another bonus that sets StoneRidge stores apart, Henschel says.

Livingston says stores, such as the local Piggly Wiggly, do have ways to compete with the behemoths. “These smaller retailers can be successful by focusing on their neighborhood appeal,” he says.

For some grocery stores — especially those in smaller towns — their largest competitor is not another grocer, but rather Kwik Trip convenience stores and dollar stores, Livingston says.

“Kwik Trip has been killing small-town stores with their low prices on eggs, butter, milk and bananas. Stores like Dollar General and Family Dollar are often in these small markets as well” and hurt a grocery store’s sales, he says.

Online advantage
Grocery stores and mass-merchandise retailers have another, shared competitor: online retailers.

Millennials, a large and growing consumer segment, prefer to order their groceries online. In 2017, 43 percent said they shop online for groceries occasionally — a 50 percent increase from the year before. The 18-to-35 age group has made digital grocery shopping the fastest-growing segment in U.S. retail, according to a report by the Food Marketing Institute, an Arlington, Va.-based retail trade group.

Amazon is far ahead of the rest of the pack for online-only options, but specialty options, such as Fresh Direct and Local Harvest, have carved out their own niches. To compete with online grocers, brick-and-mortar stores created their own options that allow consumers to order groceries online or through an app and then either pick them up at the store or, in some areas, have it delivered right to the home. Depending on the store, a small fee will be charged.

One area where Kroger may have an advantage is its ClickList e-commerce program. Consumers go online, select their groceries and pay via credit card. A store employee then selects the groceries and delivers them to the consumer’s vehicle at a predetermined time.

Spokesman James Hyland says consumers have responded positively to ClickList, and Kroger plans to add stores to the program.

Walmart and Woodman’s also offer services where consumers can order items online and have them delivered to their vehicle.

“Adding these services is getting standard,” Livingston says. “It’s just another service just like pharmacies were added 30 to 40 years ago.”

Festival Foods has one store in De Pere offering an online shopping option, and Skogen says the grocer plans to roll out a new option soon.

“Ordering online and offering a pickup or delivery service has greater appeal in areas with a dense population, which is why it has not taken off as much in Wisconsin as in other parts of the country,” Skogen says. “It may not dominate sales, but grocers need to offer the service, which is why we are working on that now.”

Meijer has its own online shopping choices, including a delivery option. The Meijer store in Howard, which opened last May, offers delivery to certain parts of the Green Bay area. It is unclear how quickly curbside pickup or delivery will be offered at the Grand Chute store.

Meijer spokesman Joe Hirschmugl says the retailer partners with Shipt, an app-based company, for its merchandise delivery service to provide customers with another way to get what they need from groceries and cleaning products to household items and toys.

While the industry is experiencing a lot of change right now, Livingston says one thing is certain: More changes will come as grocers strive to keep up with consumers’ demands.

 

The big players

 

Walmart: Headquartered in Bentonville, Ark., Walmart is the world’s largest retailer and operates 83 super centers, four discount stores, two neighborhood markets and 12 Sam’s Clubs in Wisconsin.

Target: Headquartered in Minneapolis, Target is the second-largest discount store in the United States behind Walmart. The retailer has Super Targets, which feature full grocery stores, and regular Target stores. In the New North, the location at the Fox River Mall in Grand Chute is the only store with a complete grocery department. Other Target stores in Appleton, Green Bay, Fond du Lac, Oshkosh, Sturgeon Bay and Kohler carry some grocery items, but not fresh produce or meat.

Meijer: Family-owned and headquartered in Grand Rapids, Mich., Meijer has 235 supercenters and grocery stores in Michigan, Ohio, Indiana, Illinois, Kentucky and Wisconsin. The first Meijer store in Wisconsin opened in 2015. Wisconsin is home to nine stores, including Howard and Grand Chute, with several more in development, including one in Sheboygan.

 

Focused on groceries:

 

Here’s a look at the five largest supermarket chains in the New North:

Aldi: Headquartered in Germany, Aldi is a discount grocer with 10,000 stores in 20 countries. There are eight stores in the New North.

Festival Foods: Headquartered in
De Pere, Festival Foods is a family- and employee-owned company with 31 full-service supermarkets in Wisconsin, including 13 in the New North.

Kroger Co.: Headquartered in Cincinnati, Kroger is the world’s third-largest retailer in sales behind Walmart and Costco. In Wisconsin, it operates 107 stores under the Copps and Pick ‘n Save names. Kroger entered the Wisconsin market with its purchase of Roundy’s.

Piggly Wiggly: One of the nation’s oldest grocers, it has 530 stores in 17 states. All stores are independently owned and operated. There are more than 30 Piggly Wiggly stores throughout the New North from Crivitz and Sister Bay to Campbellsport and Wautoma.

Woodman’s Market: The employee-owned grocery store is headquartered in Janesville. Woodman’s bills itself as a discount grocer and has stores in Wisconsin and Illinois. It has two stores in the New North — Green Bay and Appleton.

 

Grocery shopping a game to find best prices

Growing up, my mom bought groceries at two different stores depending what was on sale. My, how times have changed. In any given week, I can easily visit three grocery stores, plus purchase food at Target or online on Amazon (giant chip variety bags, I’m looking at you) and buy milk and eggs at the nearby Kwik Trip.

The reason for all the trips? To save money.

Grocery store expert David Livingston, managing partner of DJL Research in Pewaukee, says I am not unique. “Consumers are changing the way they shop,” he says, adding shoppers want good deals and grocers need to respond.

With two teenagers, I am always on the lookout to save money on food, especially since we seem to go through so much of it. The cluster of retailers selling groceries in east Appleton/Darboy means I do not waste too much time or gas scouting for the best deal.

I will admit my husband looks at me funny when I come home with items from three different stores, but thanks to experience and the internet, I know which store has the best price on what our family uses on a regular basis. As long as I have my list in hand, I can visit Pick ‘n Save, Aldi and Festival Foods in just over an hour.

I am definitely not alone. Social media, and Facebook especially, has allowed coupon clippers and bargain hunters to share deals and information. One page I follow has links to the coupons mentioned and explains exactly how to get the deal. (Of course, these websites earn a small amount of money when I click on their links due to affiliate programs with retailers and food merchandisers, but I do not mind.)

The internet has also changed shopping since it allows people to go out and find the coupons they want instead of waiting for the Sunday newspaper to arrive. And let’s be honest, the number of coupons in the paper has declined. Companies also appeal directly to consumers through their own social media accounts and websites and provide coupons and free samples.

When I heard Meijer was building a store in Grand Chute, I was excited since I could see online the great deals they offered at stores in Howard and in the Milwaukee area. The location is not that convenient for me, but I will likely check it out and see if the deals warrant a longer drive. Sometimes, time is more precious than money.

                  MaryBeth Matzek