Did Markets Shelve Price-War Plans?
Where are the grocery wars?
When the California supermarket strike ended in late February, expectations ran high that the stores would unleash a price-cutting battle for the ages to woo back customers.
They have indeed offered some attractive bargains. But the sales appear to be only a notch above the regular weekly specials. The chains have yet to engage in make-your-head-spin promotions that some analysts thought would be unveiled to lure back all the people who avoided picket lines and shopped elsewhere during the 4 1/2-month strike and lockout.
“There were more bargains during the strike,” Michael Guillermo complained after he shopped at a Pavilions in Sherman Oaks. At a Vons in the Hancock Park section of Los Angeles, customer Diana Catalan said that “the prices seem the same to me.”
The sales are “less than expected,” agreed Jonathan Zielger, a principal with PUPS Investment Management in Santa Barbara, which focuses on the retail sector. “I expected they were going to do lotteries and giveaways and contests” in addition to wide-scale price cuts.
The three chains -- Albertsons Inc., Kroger Co., which owns Ralphs, and Safeway Inc., the parent of Vons and Pavilions -- are keeping quiet about their specific pricing plans, for competitive reasons. But some of their senior executives indicated that they might not pursue exaggerated sales after all, preferring to focus on regaining customers by rehabilitating their stores, ensuring that staffing levels are back up to par and keeping prices routinely low, if not at deep discounts.
Some analysts suggested that the supermarkets were waiting until their stores were back to normal before letting loose with heavier promotions.
“They’re not ready to disappoint folks by having hot ads and then having everything out of stock and long checkout lines,” Ziegler said. But deeper price cuts probably are necessary at some point because “they’re going to have to win back traffic.”
The current sales do have their fans. “I just bought 20 pounds of meat and some produce for $25,” Carrie Schultz said as she left a Pavilions in Sherman Oaks. “That’s a great deal.”
The promotions going on right now might even be enough for the three chains to recapture most of their lost patrons. Analyst Mark Husson of Merrill Lynch & Co. said in a note to clients last week that “sales already are improving without a price war, [with] just a few cheap cans of Coke, etc.”
Indeed, Ralphs last week advertised 12-packs of Coca-Cola for $1.99 for card-club members. Albertsons’ card-club sales included four boxes of Kellogg cereals for $5, and two bags of Nabisco Oreo cookies for $3.
Vons, meanwhile, offered club members Healthy Choice frozen dinners for $1.77 apiece. And its online service, Vons.com, is offering free delivery for orders over $100.
Ralphs, in particular, “doesn’t need widespread price wars to recapture sales,” Husson said. During the labor dispute, the United Food and Commercial Workers union generally didn’t picket Ralphs, which enabled Ralphs to pick up new, permanent shoppers from the other chains.
And Kroger Chief Executive David Dillon indicated that Ralphs wouldn’t be doing anything dramatic.
“It’s our intent to be rational” with promotions, he said at an investor conference last week. “We don’t want customers back just for tomorrow or the next week, we want them back for the year and the next year. So our intent is to get them back the old-fashioned way -- serving them right, having clean stores.”
At the same conference, Safeway Chief Executive Steven Burd said Vons and Pavilions “will continue to be promotional,” but he said Safeway wanted to narrow the gap between its sale prices and its everyday prices. But he added, “We’re determined to get the business back quickly.”
Some shoppers said the chains have their work cut out, and that it’s taking time for the stores to recover from nearly five months of labor unrest, interrupted supplies and disaffected customers.
“I had to bag my own groceries,” Cynthia Sullivan said after shopping at the Vons in Hancock Park. “They are understaffed.”
Another shopper there, Peter Kim, said he was disappointed by how many items still were not on the shelves. “It’s almost like they were still on strike,” he said.
After shopping at the Pavilions in Sherman Oaks, Diane Weinstein said the current sales showed the store was “really making an effort” to win her and others back. But she added that “they haven’t done enough.”
What she missed, she said, was the pre-strike ambience, with clerks cheerfully greeting her and offering to help her with her groceries. On her recent visit, “no one even said hello,” she said. “It’s going to take more than lower prices to take away the bad taste of this.”
