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The recession takes a bite of supermarket sales.

The recession takes a bite of supermarket sales

When the holiday sales figures were toted up early last month, it became apparent that the recession is taking a toll on supermarkets in much of the nation.

Sales are soft. There is some trading down. In some areas there is an upsurge in private-label sales, and, in a few cases, in generics. Shoppers also have become more conservative in their purchasing. Operators are promoting better-value products.

At the same time, sales of more expensive convenience items are holding up. There is a tradeoff as shoppers eat out less and buy takeout foods in supermarkets.

A few retailers say their holiday sales topped year-earlier figures. But even in parts of the country where the economy is still fairly strong, shoppers are cutting back. Supermarket operators feel this is psychological as consumers read about the national recession and make it a self-fulfilling prophecy.

Here's how the economy is affecting retailers and wholesalers.

Chains: |We won't be hammering

away at lobster and shrimp'

A&P:"Sales are still tough to get," says Michael Rourke, vice president, communications/corporate affairs of the Montvale, N.J.-based chain.

Holiday sales varied, depending on the area, but were basically flat. Rourke characterizes them as "fair to medium, not record-setting, but not a disaster either."

Customers are trading down, according to Rourke. While A&P hasn't changed its product mix, it has altered its merchandising to put more emphasis on private label and such basics as ground meat, flour and sugar. "We won't be hammering away at lobster and shrimp except on special occasions."

Ralphs:"Our business has been strong and holiday sales were good," says Al Marasca, executive vice president, marketing of the Crompton, Calif.-based chain. There has been a slight softening of the economy - no trading down but somewhat lower average ticket sales, Marasca says.

In response to economic signals, Ralphs is promoting its 200-item Plain Wrap branded generics line.

Raley's: The Sacramento, Calif., chain hasn't noticed any slowdown, according to Charles Collings, president, although there are signs that competition is increasing in some areas. He sees an opportunity for more takeout food sales. "Supermarkets are cheaper than restaurants, and we've promoted the eat-out-at-home theme."

Stater Bros.: In Colton, Calif., Jack Brown, chairman and president, notes that "with all the media attention, there's a lot more fiction than fact for areas where the recession hasn't hit."

Sales gains in Southern California have slowed by about 10% to 15%, Brown says, depending on the area. "A big hit in Southern California might mean growing at a rate of 5% rather than 10%, not flat sales, or a decline, as in other areas."

Valu Food: Louis Denrich, president of the Baltimore chain, says the economy is "not that bad" in Baltimore. Perishables are doing well, but in grocery, consumers are looking for discount operations.

Denrich thinks this benefits his price-oriented firm. The chain in October began a strong promotion of a price rollback. Valu uses deal items with a Temporary Price Reduction theme. It passes along the full deal and may sweeten it with ad money, Denrich says.

The promotion was extended through this month and may be used longer. The results have been good, Denrich says. November sales were up 15%, December's about 8% and "January looks good too."

Hills Food Stores: "We've been doing well," says Dewey Hill, chairman of the Whiteville, N.C.-based chain. Hills closed the year "a little above 1989." Although the recession hasn't hit the Carolinas hard, Hill says there has been a slight shift in mix, with consumers going more to "the middle of the store." At the same time, people are eating at home more.

Fiesta Mart: Business has been somewhat soft in Houston during the past few months, although the overall economic numbers have been a little better, according to Bernard Murphy, director, special projects. Traffic is the same, or even a little higher, but shoppers are buying less and trading down on size, Murphy says.

Ball's Super Food Stores: Although business is "not easy to get," Kansas City has not suffered as much as some other cities in the Midwest, says Fred Ball, president of the Kansas City, Kan., company. There hasn't been much trading down, he says, "but when you look at the whole customer base, I don't think they have as much to spend. They are scrambling a little at the end of the month, running low on cash a day or two earlier than they used to."

Wholesalers: |We thought

it would be worse'

Fleming: Holiday sales were mixed, says Ron Frost, spokesman for the Oklahoma City-based wholesaler. Because most Fleming divisions are in areas not being hit hard, the firm is well-situated for a recession, he says. Fleming expected to see a change in mix, but it had not yet materialized.

Super Valu: Michael Mulligan, vice president, communications of the Eden Prairie, Minn.-based firm, says very sluggish sales persisted through the holidays. He attributes some of this to delays in development projects of 60 to 90 days, or more. Super Valu is in a position where it can "step in and get retailer projects on stream," Mulligan says.

While comparative store sales are hard for a wholesaler to pin down, Mulligan says some chains have been reporting 2% declines and he assumes this holds true for many Super Valu retailers. The discount formats "seem to be a little more resilient," he says.

Nash Finch: In Minneapolis, Russell Mammel says the holidays were basically flat, "but since we thought it would be worse, we're not unhappy." As examples, he cites same-store sales down 1% in one Nash Finch group and up 1.5% in another. Shoppers are being conservative, but they're not trading down.

United Grocers: The business outlook in the Portland, Ore., area is good, says Tom Drew, director of sales, development and advertising. However, shoppers have become cautious after reading how bad the economy is elsewhere.

Independents: |You can

feel recession in the air'

Bag-n-Save Foods: There has been a little trading down in his area, says Jim Stoll, president of the Dover, Ohio, company, with more interest in price-sensitive items, such as generics.

Covington Foods: Holidays sales were good, says Don Clark, president of the six-store operation based in Covington, Ind. Clark's stores are in a basically farming area in west central Indiana, and the recession hasn't hit there yet.

LaBonne's Epicure Markets: Holiday sales were ahead for the four-store independent based in Waterbury, Conn. Robert LaBonne Sr., president, was "quite satisfied," since some area retailers were off 8% to 10%. "You can feel the recession in the air here. There has been so much gloom and doom," says LaBonne.

PHOTO : Retailers are using recession merchandising. ShopRite's annual Can Can sale came at a propitious time and the initial response has been good. Valu Food is using a price rollback.
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Publication:Progressive Grocer
Date:Feb 1, 1991
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