Supermarkets Feel the Squeeze

Discount chains and upscale markets are pressuring traditional grocery stores to change their ways.

January 10, 2011

CHICAGO - Traditional supermarkets are facing a quadruple threat in the form of discount chains, upscale grocers, rising food prices and cost-conscious consumers, the Chicago Tribune reports. The increased competition and pressures have caused supermarket chains to rethink their game plan.

For example, SuperValu Inc. is slashing costs by closing around 20 underperforming stores, while announcing plans to add 1,200 Save-a-Lot dollar stores by 2016. "We??re in a very competitive industry and we're looking at every area of the company to lower our operating expenses," said a SuperValu spokesman.

With food prices expected to soar this year, many large food manufacturers have said they will raise prices this year. Supermarkets are finding their clientele willing to shop at nontraditional grocery stores, such as Wal-Mart and Target, which are expanding their fresh food offerings. Even Walgreens will be adding more food and grocery items.

"You can almost picture the industry on some kind of ledge, walking into the fog," said Lee Peterson, executive vice president of creative services at consulting firm WD Partners. Traditional supermarkets "are not the cheapest, they??re not the most organic or sustainable, and many of them are set up for the way people used to shop."

Today, households more likely to stop at several stores for different items throughout a week?"supplemented by a trip to a club store quarterly?"instead of a once-a-week grocery run. The large chains still capture most of the grocery sales, but analysts say those numbers could be changing.

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