Shoppers are increasingly visiting smaller grocery store

Tough economic times are driving more shoppers to compact grocery stores that offer fewer name-brand products but bigger savings than conventional supermarkets, food retailing analysts say.

Across the USA, limited-assortment grocers, including Aldi, Grocery Outlet and Save-A-Lot, are "very aggressively expanding," said Jim Hertel, managing partner at the Illinois-based Willard Bishop food retailing consultancy.

"As prices continued to increase, people started shopping for food in more-varied locations," said Phil Lempert, the Santa Monica, Calif.-based retailing analyst who publishes a weekly e-newsletter from SupermarketGuru.com. "Certainly, all three are going to grow substantially in the next few years."

• Batavia, Ill.-based Aldi — the U.S. subsidiary of Aldi Group of Germany — has more than 1,135 stores in more than 30 states, and intends to open 80 to 100 more this year, according to company spokeswoman Julie Ketay.

• St. Louis-based Save-A-Lot, with more than 1,200 stores in 39 states, aims to double the size of the company within the next five years, bringing the total to 2,400 stores, company spokeswoman Chon Tomlin said.

• Berkeley, Calif.-based Grocery Outlet, with about 150 stores in six Western states, plans to add 15 stores this year, said Melissa Porter, vice president/marketing.

Hertel said the two bigger limited-assortment chains — Aldi and Save-A-Lot — offer about 80% of the items in conventional supermarkets.

Among other similarities he cited: They stock mostly private-label packaged foods, with a sprinkling of national brands thrown in when the price is right. Meat and produce sections are smaller than supermarkets', but sufficient for many shoppers. Stores of 20,000 feet or less and a bag-it-yourself policy help trim overhead.

The private-label focus brings prices "about 40% less than you will find in a traditional supermarket," Hertel said.

This fits the bill for a growing number of shoppers. In an August 2010 survey, 54% of responding consumers said they were buying more store brands. That's up from 46% in July 2009, according to SymphonyIRI Group, a Chicago-based market-research firm.

"Slightly more than one-third of consumers tell us they're struggling to afford groceries. That has increased 11 (percentage) points over the past six months," said Susan Viamari, editor of the Group's Times & Trends.

That could spell trouble for supermarkets.

In 2009, "Traditional supermarkets continued to lose market share as more consumers, looking for lower prices and savings during last year's economic slowdown, turned to limited-assortment stores, supercenters and dollar stores," Chad Fry wrote in the June Willard Bishop report.

The same report forecasts a 6.5% annual sales growth rate for limited-assortment grocers from 2009 to 2014, and projects traditional supermarkets' sales growth rate will slow to 0.2% over the same period. Shannon Patten, spokeswoman for Lakeland, Fla.-based Publix Super Markets, said the company has seen "little impact from the competition around us."

Publix, with 1,035 stores in five states, offers Publix-brand products, "which meet or exceed national brand quality, while saving customers 15% to 30%," Patten said, adding there also are "plenty of buy-one-get-one-free deals."

Major discount department stores, including Walmart and Target, are also increasingly big players in the grocery market. Spokeswoman Kristin Jahnke said Target's Market Pantry label products typically are priced 10% to 30% below comparable national brands.

Carlos Espendez, 76, a retiree in Cape Coral, Fla., said he and wife Nilsa shop at Save-A-Lot.

"I like to spend my pennies wisely," Espendez said, adding that their frugality allows them to "give food to the poor" and to provide treats for children at their Catholic parish.

In Fort Myers, Fla., a less-than-month-old Save-A-Lot is drawing repeat business from people such as Isaac Church, 36, a day care center director with six children of his own.

"You can't beat the price of the cereal — 2 bucks," Church said on his trip to the Fort Myers Save-A-Lot on Thursday. Church added: "If they had more fresh seafood, it would be perfect." He expects he'll shop both at Save-A-Lot and at a Walmart Supercenter in the future.

Since the national economic downturn, any stigma in some shoppers' minds about discount grocery shopping has lessened, Hertel said.

"Watch the parking lots," Hertel said. "You'll see a lot of late-model cars, even what we would categorize as luxury marques."