Giant Food Inc. has significantly increased its dominance of the Washington supermarket business in the last year, according to the latest survey of the local food market.
Spurred on by its aggressive discount pricing campaign, Giant grabbed 45.35 cents of every dollar spent in grocery stores, a significant increase over last year, when Giant accounted for 43.32 percent of the area's grocery business, according to a survey published today by Food World, a Columbia, Md., trade publication.
The gain comes in large part at the expense of Giant's closest competitor, Safeway Stores Inc. Last year, Safeway rang up 33.6 cents of every grocery dollar. Today, its market share is just under 32 percent, Food World noted.
Food World gets its sales figures directly from the grocery chains.
Before Giant launched a price war last fall, Washington's food prices were the highest in the continental United States, according to the most recent national survey of food prices conducted by newspaper food editors. Some retailing observers have attributed the area's high prices to the lack of competition in the area, with the two major chains accounting for more than three-quarters of all grocery-store sales.
By contrast, in Baltimore, the top two chains ring up less than one-third of all grocery store sales. There, Giant accounts for 25 percent of the market; Food-A-Rama, operating under the names Basics and Super Super, is second with a 7 percent market share.
"By any measure, Giant's numbers are phenomenal," said Jeffrey Metzger, who, with his partner Richard Bestany, publishes Food World. For one thing, Metzger noted, Giant's steep sales gains came on an already large base and at a time when there was little inflation in local food prices. What's more, Food World figures also show that Giant now has 25 stores that sell more than $25 million in groceries a year. "That's extraordinary," Metzger said."
Safeway, on the other hand, has only two stores in this area that ring up more than $25 million in business annually: its stores in Hechinger Mall in Northeast Washington and on Wisconsin Avenue NW above Georgetown.
Giant Food's largest volume stores are at Baileys Crossroads, with $48.5 million in sales, and in Rockville, with $44.3 million.
The area's third-largest supermarket chain, Shoppers Food Warehouse, accounts for only 6.75 percent of all supermarket sales. Thanks to the opening of two new stores last year, that share is a gain from the 5.74 recorded in 1986.
Magruder's, the area's fourth-largest chain, saw a decline in sales and its market share, dropping to 3.71 percent from the 4.16 share last year. But a new name and image helped Super Fresh -- the former A&P -- achieve a marginal increase in its share of the market, from 3.21 percent to 3.53 percent.
"There is no doubt but the price war enabled Giant to outdistance everyone," Metzger said.
The price war was launched last September when Giant initiated its "warehouse" price campaign, lowering prices by 5 percent to 25 percent on more than 2,000 items in all of its stores to match many of the prices charged by the no-frills, bag-it-yourself grocery chains such as Shoppers Food Warehouse and Basics. Safeway, Magruder's and Super Fresh followed Giant's lead.
The price war was particularly brutal for Safeway because it came at the same time the chain was undergoing a change in ownership. To thwart an unsolicited takeover bid from Washington's Haft family, Safeway arranged a $4.1 billion leveraged buyout in which the assets of the company were used as collateral to finance buying Safeway's publicly held stock.
To reduce the debt incurred from the buyout, Safeway began selling off parts of the chain and closed many unprofitable and marginal stores, including 10 in the Washington area. Those closings caused Safeway's annual sales to drop from $1.239 billion to $1.213 billion a year. Food World's figures are based on store sales as of April 30.
Magruder's had an even sharper drop in sales, although no stores were closed, with sales dropping to $140.8 billion from $153 million last year, according to Food World.
Despite Safeway's drop in sales and market share, Metzger said he believed the chain would maintain a strong presence in the area. "The worst is over. The effects of the leveraged buyout have been overcome, and the price war has abated," he said.
Safeway's presence is by far the strongest in the District, where its 23 stores ring up 63.5 percent of all grocery store sales. Giant, with seven stores, accounts for only 19.3 percent of all District sales. But in the suburbs, Giant has well over 50 percent of the market.