With Stores in Store, Giant Goes Gargantuan

"People want variety. They don't just want cheddar anymore," said Keith Buscemi, Giant regional vice president, who is partial to brie.

Six more prototype stores are scheduled to open by the end of September, in Easton, Chevy Chase, Bowie, Alexandria, Ashburn and Dominion Valley. One opened on the Delaware shore in the spring. Some are new stores, while others have been remodeled.

"We took a shot. We're still here," Marriott said. "And now we're opening stores."

Across the country, traditional supermarkets are scrambling to remain relevant to shoppers who increasingly turn to upscale and specialty grocers such as Whole Foods Market and Wegmans for exotic cheeses and organic produce or discounters such as Wal-Mart for low prices.

The Dunkirk store takes elements from both ends of the spectrum. The bargain aisle and expanded general merchandise are a direct challenge to discounters' appeal of convenience. Meanwhile, the store aligns itself with high-end grocers through its staffed cheese counter -- unpronounceable cheeses as the new status symbol.

"They're trying to learn lessons from those stores and their success . . . and incorporate it into their business and their cultures," said Bridget Goldschmidt, managing editor of Progressive Grocer, a trade publication. But, she added, "there's always going to be a mainstream buyer."

Other traditional supermarkets, notably Safeway and Food Lion, are also maneuvering for more elbow room. Safeway is remodeling its stores into "lifestyle" centers that focus on prepared foods and perishables departments. Food Lion is revamping its stores under two new banners, upscale Bloom and discounter Bottom Dollar.

In recent years, Giant has struggled with a raft of internal problems. Former chief executive Marc E. Smith abruptly quit earlier this year just weeks after holding meetings to boost morale among Giant workers. This month, two investors with a significant stake in Giant's parent company called for the sale of Ahold's U.S. operations. Ahold owns grocery chains Stop & Shop, Tops and the unrelated Giant-Carlisle stores based in Pennsylvania, along with food distributor U.S. Foodservice, based in Columbia. Together, they account for roughly two-thirds of Ahold's business.

Industry experts have long speculated on whether Giant would be sold or its parent company broken up. The chain has languished since Ahold bought it in 1998, its attention diverted by an accounting scandal at U.S. Foodservice Inc. But Ahold officials have consistently denied those rumors.

Giant remains Washington's leading grocer, though market share has dropped from 44 percent in 1998 to 38 percent this year, according to trade publication Food World. Industry analysts point to Ahold's plans for major renovations and store openings as signs of its commitment to the Giant chain.

"In my opinion it is not realistic at this stage to talk about selling parts of U.S. retail," wrote Rabobank analyst Patrick Roquas in an e-mail. He added that Giant has fundamental problems, including its store age and execution. The average age of Giant stores is nine years old.

Not all new or remodeled Giant stores will be able to meet the standards of the new prototype, Marriott said. The Dunkirk store is 70,000 square feet, while the average Giant store is 55,000 square feet.

The company said last week that it will closing some small and underperforming stores. A Giant Drug store in Salisbury, Md., and Giant Food stores in Bowie, Edgewood, Salisbury, Columbia and Annandale will be shuttered by the end of the year. The Giant-owned Someplace Special gourmet store in McLean closed last week.

Anders Moberg, Ahold chief executive, plans this fall to unveil a value improvement program for the chain. Company officials have kept mum about the details but Moberg has said part of its goal is to reduce the number of promotions and rely instead on lower everyday prices.

Already, the Dunkirk store is employing new promotional strategies. There's a bargain aisle with a sign that reads, "One stop savings zone." Nearly everything in the aisle -- seasonal merchandise that will change every 12 weeks, such as snack packs for school lunches -- is on sale. Refrigerated cases in front of the meat and seafood departments also carry items on sale. Weekly specials will remain at the end of each aisle, though Giant has changed its promotional cycle to run from Friday through Thursday.

"From a concept," Marriott said, "we're going after everybody."