Safeway supermarkets here lowered prices on an estimated 2,000 grocery products yesterday in a counterattack against Giant Food's price cuts.
Giant marked down 1,500 to 2,000 products earlier this week when it instituted a new policy of marking prices on shelves rather than on each individual product in the stores. Company officials said the labor savings involved made it possible to reduce prices.
Safeway, however, will continue to mark prices on items in its supermarkets officials said. "We have no plans at this time to remove prices from items," said Ernest G. Moore, a Safeway representative.
In describing Safeway's price cuts, he said they will include such staple grocery items as milk, eggs, canned goods, baby food and bread. Examples of the reductions are Hellmann's mayonnaise, 32-ounce jar, from $2.09 to $1.48; Cragmont Cola, 67.6 ounces, from $1.15 to 85 cents, and Town House sugar, 5 pounds, from $2.49 to $1.84.
Grand Union and A&P, the area's other two major supermarket chains, continued to watch the price war but so far have not yet announced how they will respond. Both said, however, that they "will remain competitive" and continue to mark prices on each item.
Giant spokesman Odonna Matthews said yesterday that shoppers like the lower prices and "seem to be adjusting" to the absence of item prices.
Consumer leaders, meanwhile, said that Giant's savings from the elimination of item pricing are minimal, and that marking every item actually adds less than 40 cents to be the cost of $100 worth of groceries.
Charlotte Newton, chairman of a coalition opposing the Giant move, said that calculation was based on a 1975 study made by Giant and on file at the Food Marketing Institute, a retail trade association. The trade institute said the study found that it had cost Giant $2,381 in labor to mark items over a period of one month at one store. Based on that store's sales of $692,800 during that month, the item-pricing cost translated to less than one-half of 1 percent of the sales, Newton said.
Giant's Matthews said the study is outdated and no longer relevant.
Jeffrey Prince, an official of the food institute, said supermarkets typically make an after-tax profit of only 1 percent or less of store sales. That means a store with monthly sales of $692,800 would have a monthly profit of about $6,928. Those profits would swell to about $9,300, based on the survey, if items pricing was eliminated and prices held steady, Prince said.
However, he said, food industry profits also may be measured by the net return on investment. The net return in 1975 was 10.7 percent; in 1979, it was 14.4 percent, he said.
Newton charged that Giant eliminated item pricing partly to raise profits but also to lower shopper awareness of price increases. Without a price on the item, a shopper cannot as easily check the cost of a new purchase against the old one in the kitchen pantry, she said.
Giant officials say their more detailed receipts are an adequate substitute for consumer recordkeeping.
Both Giant and Safeway have mounted major advertising programs in the price war to increase their market share. At present, the two companies ring up about 60 cents of every grocery dollar spent in the Washington area. Slightly more than half of that goes to Giant.
Some questions were raised yesterday about the use of the words "warehouse prices" in the advertising. After receiving 12 telephone calls from consumers, the Montgomery County Office of Consumer Affairs has launched an investigation to determine if such ads are in compliance with the county ordinance against deceptive trade practices.
"We aren't saying there is a violation; we are just asking questions," said Barbara B. Gregg, the agency's executive director.
Warehouse pricing, Matthews said, "means that Giant has reduced prices on many of the items that people frequently buy to a price that you would find in a warehouse store -- meaning a warehouse store like Basics, which is identified as a warehouse store rather than a supermarket."
Safeway's Moore said "warehouse pricing" means the store has lower prices than the traditional supermarket but maintains full service and inventory, as opposed to limited service and inventory at a warehouse store.