Chains with muscle: 10 supermarket giants.
While three of the top 10 companies--Kroger, Grand Union and Jewel Cos.--found 1983 a tough row to hoe, each has bounced back strong with solid earnings through the first half of this year. economic expansion, stable energy costs and tough positions in labor negotiations are contributing to already significant economies of scale. All the leading chains are expected to be even stronger through the balance of 1984.
By far the most significant single devleopment to take place this year was the recent acquisition of Jewel by American Stores, resulting in the creation of a food retailing conglomerate that surpasses all but Safeway and Kroger in total sales. In addition to becoming the third largest grocery store chain in terms of sales, the merger will give the new company a markedly bigger presence in the U.S., with stores blanketing states from coast-to-coast.
Virtually all of the leading food chains are focusing their expansion efforts on superstores, including Safeway, the world's number one food chain, which itself is committed to an ambitious superstore program. After a slow start in 1984, Safeway rebounded strongly in the second quarter with a 28% climb in profits over the same period in 1983.
The sterner cost control measures and elimination of profit-draining assets
that aided Safeway have played a similarly major role in Kroger's reversal of its dismal performance last year. Lower labor costs due to the company's tough bargaining position, together with a leaner corporate structure and the added volume of Dillon stores, keeps Kroger firmly entrenched in the number two position.
One of the real success stories of this or any other year is the remarkable turnaround by A&P, a company that as recently as three years ago was flirting with bankruptcy. Now financially sound and flushed with cash, the chain is expected to put approximately $150 million into capital spending next year. Such an investment is likely to be profitable for the sixth largest food chain as its new and remodeled units generate, on average, 40% to 50% more in sales than older stores.
Other highlight of the year include:
* On the heels of another year of record sales and earnings, Albertson's has set in motion a bold five-year plan designed to double sales volume to $9 billion, while adding as many as 250 new units during the same period.
* Supermarkets General Corp., operator of Pathmark Supermarkets, should move up at least one notch in the rankings with its recent acquisition of Purity Supreme, which is expected to fatten its sales base by more than $750 million. The merger also extends SGC's clout into the New England states.
* Stop & Shop, well on its way to becoming a superstore chain, hopes to generate 40% of its food store volume out of the larger units within the next two years.
* Lucky Stores has launched an ambitious remodeling and new store opening program hoping to capitalize on the one-stop shopping trend. With margins under intense competitive pressure, the diversified operator is counting on specialty departments to provide a cushion.
While the numbers alone point up the power these 10 food chains possess, it is what they've done to get where they are and what they're doing to stay there that commands the industry's attention. On the following pages, Progressive Grocer analyzes the strengths and strategies of these supermarket giants.