Upgraded Perishables, Fresh Look Planned
By Ylan Q. Mui
Washington Post Staff Writer
Friday, October 26, 2007
About 100 Giant Food stores are slated for renovation over the next three years, the largest investment in the chain since it was acquired by the Dutch company Royal Ahold nearly a decade ago.
The effort has been dubbed Project Refresh and will focus on upgrading the perishable-food departments, such as produce, and improving the look of stores with touches like new floors and lighting, the company said yesterday. It will cover more than half of Giant's 185 stores in the District, Maryland, Virginia and Delaware.
The renovations come as Giant works to win back shoppers after years of slipping sales under Ahold's ownership. The homegrown supermarket was once the star of local grocers, but it has struggled to retain its luster as it has faced increased competition and management turmoil.
"We are very excited about what this investment will bring to our Giant customers, employees and local communities," said Jose Alvarez, chief executive of Giant and its Massachusetts sister chain, Stop & Shop, said in a statement. "The remodeling program underscores our commitment to continuing to be the supermarket of choice in these markets."
The stores will remain open during the renovations, the company said. Ahold spokesman Kerry Underhill declined to provide a list of stores that will be remodeled or the cost, citing competitive reasons. But he said store age will be a key criterion in determining which locations to target. The average age of stores in the chain is nine years, according to one analyst's report.
Giant has more stores in the Washington area than any other chain. According to Food World, a trade publication, it controlled 37 percent of the market and had $3.41 billion in sales for the year ended March 31. In 2004, Giant's market share was 42 percent with revenue of $3.5 billion.
Like many supermarket chains, Giant is being squeezed by high-end, niche grocers such as Whole Foods and Wegmans on one end and discounters such as Wal-Mart and Costco on the other.
The renovations will help bring stores more in line with the chain's latest prototype, a newly built store in Dunkirk. That store boasts 200 varieties of cheese and sells DVDs. The blueprint is nearly identical to Stop & Shop stores, though the bakery and seafood counters are larger, in a nod to local tastes.
Giant has also been lowering prices on paper products, breakfast cereals and other commodities through what it calls the "value improvement program." Giant said yesterday it plans to extend the program to dairy items, frozen foods and coffee.
One analyst questioned whether the changes would improve the chain's competitive position.
"Best possible case is it sort of keeps them whole. You've got to stem the slippage," said Bob Goldin, executive vice president of Technomics, a market research firm. "I think it's pretty unrealistic to expect too much market-share gain."
Many of chain's problems are self-inflicted. Giant workers accustomed to the open, familial culture under longtime local owner Israel "Izzy" Cohen chafed at Ahold's distant management when it bought the chain in 1998. The problem was exacerbated in 2004, when Ahold merged Giant with Stop & Shop, prompting layoffs. Giant has been working to regain its standing with workers and shoppers ever since. Ahold is scheduled to report estimates for its third quarter performance tomorrow.
Along with Giant and Stop & Shop, Ahold owns several supermarkets across Europe, including Albert Heijn and Hypernova. Last summer, two investors with a significant stake in the company, Centaurus Capital of London and New York firm Paulson & Co., pressed Ahold to unload its U.S. division.
Ahold sold Columbia food distributor U.S. Foodservice for $7.1 billion in July. This month, Ahold agreed to sell its ailing Tops Markets chain to Morgan Stanley Private Equity in a $310 million deal.
But Underhill said the company intends to hold on to Giant.
"We remain fully committed to Giant," he said.
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