Yet another survey has found that food prices in the District are among the highest in the nation, confirming what inner-city residents have been saying for years.
According to an annual survey conducted by newspaper food editors, only Honolulu and Anchorage among major U.S. cities have higher food prices than the District. The District has consistently ranked among cities with the highest food prices.
Rankings aside, food prices are generally higher in cities than they are in the suburbs. Some unique factors in Washington's economy obviously contribute to generally higher prices here. Higher food prices in cities are more a function of an evolution in the supermarket industry than the result of purely local factors.of
The makeup of the District's consumer market and competition in the local marketplace are different than in most cities. Still, consumers in most major U.S. cities are paying a considerable price for two critical factors that continue to shape the supermarket industry -- a drastic decline in the number of urban supermarkets and a continuing shift in the population from city to suburb.
Growth in the supermarket industry, as in other major retail sectors, has been pegged to burgeoning growth in the suburbs. In the meantime, a new generation of prototype supermarkets and super stores that have been developed to accommodate that growth have made the traditional urban supermarket obsolete. Conventional stores accounted for two-thirds of the closings in the industry in 1985, according to the Food Marketing Institute. Even though there are still more conventional stores than any other type, half of all new stores opened in 1985 were "super" stores, those with 40,000 square feet or more.
Larger stores generate greater volume and higher profit margins for the industry. And in an industry where profit margin -- net income as a percentage of sales -- is less than 2 percent on average, competition obviously dictates a shift to larger stores. With less room for expansion in cities and faced with higher prices for land and leases in urban communities, the supermarket industry has chosen the line of least resistance. The results have been fewer stores and higher prices in the cities and larger stores and lower prices in the suburbs.
A study completed for the D.C. government five years ago put the disparity in food prices in perspective. The decline in the number of stores in the District "relates to a change in the industry favoring larger stores and the difficulty of identifying sites to accommodate those larger stores," the study pointed out. It further noted that because profit margins are low in the retail food industry, chain stores desire 30,000 or more square feet with a capacity for more than 12,000 items to make the operation cost-effective and provide adequate parking facilities.
Stores have been getting larger since that study was completed and, with expanded sections for food and nonfood items, the typical supermarket stocks nearly 18,000 items.
In any event, supermarket chains have tied their growth to expansion in the suburbs. The cost of doing business in the cities is much higher, supermarket industry officials maintain. Smaller and fewer stores and less competition generally lead to higher consumer prices.
The effect of the combination of those factors in the District is apparent. There are only 38 supermarkets in the District. Of the major chains, Safeway Stores Inc. operates 23 while Giant Food Inc. operates seven. In 1968 Safeway, Giant, A&P and Grand Union operated 91 stores in the District. By 1975 the same four chains had only 47 stores in the city.
A 1982 study suggested that the magnitude of effective buying power in the District was large enough to support 10 to 20 additional 28,000-square-foot stores, the average size of today's new conventional supermarkets. But the industry generally has been reluctant to expand in the city in the absence of inducements from the D.C. government.
Two bills introduced early this year by D.C. Councilman John Ray may stimulate interest within the industry. The first of the two measures now in committee would establish incentives for supermarkets to locate in underserved areas of the city. The second would authorize the city to condemn commercial property for economic development, including construction of supermarkets.
The best hope for more supermarkets and lower prices seems to reside in Safeway's continued commitment to the District, however. Despite being blindsided by Washington's Haft family in a hostile takeover attempt that left the company debt-ridden, Safeway is proceeding with plans to open larger stores in the District as well as in suburban communities. In fact, it will open two in the District this year, and it continues to look for additional sites.
"I think there are still many many opportunities in this market," said Larry Johnson, director of public affairs for Safeway's Washington division. "We've made a commitment to be in the city. We have developed our people to understand the needs of the city."
It's likely that as Safeway increases market share with more stores in the District competitors will rethink their position. That can only mean better food service in the District, sharper competition and lower consumer prices. That's why it's important for Safeway to rebound and succeed with its plans.