Supervalu's planned purchase of Richmond-based Richfood Holdings Inc. is merely another reminder that the nation's supermarket industry is being shaped increasingly by consolidation.
Little more than a year ago, Giant Food, the dominant supermarket chain in the Washington area, agreed to be acquired by Royal Ahold, a Dutch conglomerate that owns at least four other food chains in this country.
By acquiring Richfood, Supervalu would gain control of Shoppers Food Warehouse, the third-largest supermarket chain in the area, based on the most recent survey of market share.
But it's doubtful new ownership of Shoppers will have an appreciable effect on competition in the area's supermarket industry.
The acquisition would give Supervalu access to one of the country's richest consumer markets. And Supervalu's purchase of Shoppers may even create a scramble for market share among smaller chains in the area. But the acquisition clearly won't affect the balance of power in a market that continues to be dominated by Giant and No. 2 Safeway Inc.
Together, Giant and Safeway control more than 70 percent of the Washington area market. Shoppers is a distant third, with a 12.6 percent share, according to Food World, the Columbia-based industry publication.
In fact, Giant increased its market share slightly last year, despite going through a transition brought on by Ahold's purchase and the implementation of a major cost-cutting program. Giant's operating results "surpassed expectations," Ahold noted in its recent report of earnings from worldwide operations.
Food World Publisher Jeff Metzger attributed Giant's slight gain in market share -- to 45.25 percent, from 44.30 percent last year -- to strong merchandising and advertising.
That's another way of saying Giant put added pressure on the competition by selectively cutting prices and beefing up advertising, as it has on several occasions over the years.
Giant's 1998 annual report makes no bones about its use of the strategy, noting that the company is "committed to maintaining its current market share . . . by offering aggressive promotions."
Former Giant chairman Israel Cohen often referred to it as "aggressive pricing" -- a strategy that forced competitors to fight a bruising price war they couldn't win.
Apparently very little has changed in this cat-and-mouse game in which competitors try to nibble away at the corners of the huge market shares enjoyed by Giant and Safeway. And nothing short of a liquidation of Giant by Ahold or the withdrawal by Safeway from the area will change the competitive makeup of the industry here.
If anything, Giant may have nibbled away at the corners of the competition, including Safeway. Although Safeway remains unchallenged in second place behind Giant, its share of the market shrank slightly, from 26.38 percent to 25.35 percent.
"There's a general softness in the market now while Giant and Shoppers are going through a transition," said Metzger.
Both Giant and Shoppers will be stronger a year from now, he said.
Meanwhile, of the other eight market leaders in Food World's recent study of the area's supermarket industry, only Food Lion -- which ranks fourth -- showed a gain, moving up from a 4.82 percent share to 5.96 percent.
But not even Food Lion can be expected to challenge Giant and Safeway. The North Carolina company's strategy of opening much smaller stores on the periphery of the local market may give it a respectable share of what's left after Giant, Safeway and Shoppers take their cuts. But that's it, unless Food Lion decides to take on Giant and Safeway where they're strongest.
And that's a problem, not only for Food Lion and Shoppers, but for any chain that may be thinking of launching a major expansion here. The area may not be saturated with supermarkets. But Giant's 164 supermarkets in the area and Safeway's 90 give these two established chains the kind of market penetration that's difficult to overcome.
Adding to the problem for would-be challengers, says Metzger, is the high cost of real estate, if and when it's available.
Both Giant and Safeway point out nonetheless that competition has increased considerably in recent years, from other supermarket chains as well as from non-grocery discounters.
That no doubt has helped fuel speculation that North Carolina-based Harris Teeter, or Wal-Mart Supercenters or some other gunslinger, will ride into town and take on the marshal at high noon.
It's not going to happen any time soon. And even if it does, the outcome probably won't be any different from what it was when Grand Union, Bradlees and other would-be challengers were forced to ride out of town.
"I think this was a year when supermarkets in general and Giant in particular have been successful in staring down alternate formats and other competitors," said Metzger.