Neither natural forces nor competitors seem to matter to Giant Food Inc. as it continues to increase its dominance in the market.
A single incident last Saturday demonstrated how well the Giant Juggernaut performs under pressure and how easily it can adapt to emergencies or, in the case of competitors, market conditions. Although the incident had no direct bearing on competition, it demonstrated the efficiency with which Giant has built customer loyalty and systematically increased its dominance in the Washington and Baltimore markets.
A thunderstorm last Saturday evening knocked out power in a suburban Maryland community, momentarily turning off lights in a Giant supermarket and interrupting the operation of equipment throughout the store. The store's emergency power unit took over within milliseconds, providing limited lighting, though restoring power to the computerized checkout stands took much longer.
During a 10-minute delay, clerks at checkout counters calmly assured customers that power would be restored momentarily. The store manager's voice could be heard over the public address system, instructing stock clerks and other personnel in the warehouse area to stand by at the checkout counters.
An apology to customers, some standing in lines six and seven deep at checkout counters, was accompanied by further assurances from the manager that power would soon be restored. Even though a few customers worried aloud that frozen foods in their carts might thaw before they got home, the scene was one of unusual calm. No one railed. No one panicked. No one left in disgust. Strangers leaned on their baskets and chatted amiably while Giant personnel went about restoring normal operations.
Shortly after the manager on duty completed an inspection of each checkout stand, full power was restored and the temporary baggers who had been summoned to the front of the store sprang into action, hastening the checkout and departure of relieved customers.
In those 10 minutes, the staff at that store demonstrated what Giant Chairman Israel Cohen meant when he said, "I'm convinced that the reason we're a premier operation today is because we have the right people; motivated, disciplined, caring people at every level of the company."
It's much more than that, of course. Giant's management has parlayed an emphasis on service, innovative marketing concepts, advanced technology, vertical integration of the organization and the resolve of a conquering army to crush the competition. A recent survey of the Washington market by Food World, a trade publication in Columbia, showed Giant increased its share of the market last year by more than two points, to a whopping 45.35 percent. In the more splintered Baltimore market, Giant holds a 25 percent share, but its nearest competitor, Food-A-Rama, trails by 18 percentage points.
Only Safeway Stores Inc. has prevented Giant from becoming a monopoly in the Washington market. But even Safeway, which was rendered vulnerable last year in a takeover attempt by Washington's Haft family, lost market share to Giant in a bloody price war, falling behind by almost two points.
Safeway, saddled by more than $4 billion in debt incurred in taking the Oakland, Calif.-based chain private to escape the Hafts, remains vulnerable in the highly competitive Washington market. Forced to close unprofitable and marginal stores, Safeway hopes to boost sales by opening bigger and more attractive units in better locations.
Closing the gap or holding on to its current share will be extremely difficult for Safeway, however. Giant put competitors on notice last week that they can expect more of the same -- grueling price wars.
Giant's announcement that first-quarter earnings were up 15 percent was followed by this declaration from David B. Sykes, Giant's senior vice president-finance, secretary and treasurer: "We've got a formula that seems to be working. As long as it's working, I don't see any need to change."
Matching prices with Giant obviously won't help close the gap for Safeway. It did that and lost market share. Knowing that earnings would suffer initially, Giant went after market share and volume and got both.
It's obvious then that Safeway has to come up with a new formula for building volume. The Oakland chain may find part of the answer in the District where it operates 23 stores and has achieved a fair amount of success. Giant, which operates only seven D.C. stores, is reluctant to build more in the city without incentives from local officials.
Three significant factors indicate that there is substantially more market share to be captured in the District. Two Safeway stores in the District produce annual sales in excess of $25 million each. With so few supermarkets in the District, thousands of D.C. residents shop in the suburbs. The District's population has declined since the 1970s, but household income has increased at least 12 percent since 1980.
Just food for thought.