This article from The Buffalo News is an interesting snapshot of Walmart’s expansion in this economy and how local and regional grocers are responding. This condensed version presents both Tops and Wegmans as competitors for the expansion. Not the comments of Frank Curci, president and chief executive officer of Tops Markets about their Private Brand.
Wal-Mart’s Expansion Heats Up Grocery Wars
By Samantha Maziarz-Christmann
As much of the retail world craters amidst the worst recession in decades, big box juggernaut Wal-Mart Stores is emerging stronger than ever, drawing in newly cost-conscious customers with its promise of impossibly low prices.
But as the deep discounter expands its grocery offering in Western New York, many in the industry fear the company’s growth will come at the expense of others in an already crowded and fiercely competitive grocery market.
“The market cannot support any new stores,” said Burt Flickinger III, managing director of consulting firm Strategic Resource Group, citing the region’s declining population and employment, along with its sluggish income growth. “Wal-Mart’s gains will be competitor losses.”
The company is adding eight new supercenters in Western New York, each measuring roughly 135,000 to 190,000 square feet and boasting fully expanded grocery departments. It brings the number of Wal-Marts in the area to 13.
“We are committed to growing our business in Western New York,” said Steve Restivo, Wal-Mart regional director of corporate affairs. “Most other Wal- Marts have full grocery departments and we wanted our local stores to match our national offering.”
Tops upgrading stores
Tops Markets, which recently returned to local operation after Morgan Stanley Private Equity bought the chain from Royal Ahold for $310 million last December, is the area’s largest supermarket chain with 76 full-service stores.
“Shelf price is just one part of the definition of value. We’re very promotion oriented and have partnered with strong local brands Western New Yorkers are very loyal to,” said Frank Curci, president and chief executive officer of Tops Markets. “We offer a different type of shopping experience.”
The company recently unveiled a $150 million capital improvement plan to open 10 new stores within five years and renovate 60 existing ones. Still, experts warned Tops may be vulnerable.
“Tops is taking on some inspiring initiatives but it’s not enough with the Wal-Mart supercenter tsunami in full force,” Flickinger said. “Tops, Quality Markets and Rite Aid will get caught in the competitive crossfire in a contracting market.”
Wegmans isn’t panicking
Wegmans, which ranked number one in the same survey, isn’t panicking over Wal-Mart’s expansion in their territory. The company has a devoted following and has continued to post same-store sales increases despite the recession, Flickinger said.
“We know Wal-Mart well,” said Ann Mc-Carthy, Wegmans spokeswoman. “Honestly, we don’t spend a lot of time thinking about what other competitors are doing.”
Flickinger, who noted Wegmans and PriceRite’s “tremendous success,” said he expects Save-A-Lot, Aldi, Budwey’s, Wilson Farms and Noco’s convenience stores to do well also.
As more customers turn to store-brand goods, Flickinger expects Tops to struggle as Wal-Mart begins better developing its private label offerings. Curci said the change-over of private label goods from Ahold brands to the company’s two new offerings — its low-priced Clear Value line and more quality-focused Tops brand — are an important part of the company’s transition.
As the battle for market share rages on, there is one thing on which everyone seems to agree. It is the Western New York consumer who will benefit from such intense competition in the area.
“I have a tremendous amount of respect for Wal-Mart and what they do. They’re a strong competitor,” Tops’ Curci said. “Anytime a new competitor comes to the area, it’s a threat to our business. But competition is good for all of us.”