By James F. Peltz and Shan Li
September 12, 2015
Southern California market draws grocers but competition leads many to exit
The bold Southern California expansion by tiny grocery Haggen Inc., and the company’s abrupt bankruptcy filing only six months after opening its first store in the region, came as little surprise to Jack Brown.
Brown is the longtime chief executive of the 168-store Stater Bros. chain, based in San Bernardino, and he’s seen the rise and fall of many supermarkets since his entry into the business as a teenage box boy. Now 77, Brown even keeps a list of the chains that have disappeared — once-familiar names such as Lucky, Alpha Beta and Mayfair.
“I have seen everything in the food industry come and go in Southern California,” he said.
Southern California grocery prices
But as the Haggen bankruptcy filing last week illustrated, Brown and the rest of the industry are seeing a fresh flurry of activity among rival stores that has roiled a Southern California grocery business that already is “arguably the most competitive in the country,” said Ron Johnston, who publishes the industry-tracking Shelby Report.
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In addition to Haggen, Fresh & Easy closed 30 stores in Southern California after an ill-fated effort in the region. Stalwart grocers Albertsons and Safeway, which also own Vons and Pavilions, merged into one company to better compete against market leader Ralphs and others.
Discount food chains Aldi and Grocery Outlet Bargain Market plan new stores in the area. Whole Foods intends to open the first of its value-oriented stores, called 365, in Los Angeles next year.
Why do new entrants keep arriving despite the stiff competition and the troubles experienced by Haggen and others? Because Southern California’s $44 billion in annual grocery sales makes it the largest U.S. grocery market by far, and that’s a near-irresistible lure, Johnston said.
The market’s enormous size also is why big-box discount retailers such as Wal-Mart Stores Inc., Target Corp. and Costco Wholesale Corp. have expanded their grocery offerings in the last decade. It’s also why specialty grocers, such as Whole Foods and Trader Joe’s, have thrived alongside the conventional supermarket chains.
And while the grocers are battling one another, they’re all hustling to stay abreast of major cultural shifts affecting consumers’ buying habits. Shoppers want more healthful foods, more ethnic groceries and added convenience.
“It used to be that there was a gluten-free section in one part of the store and 10 products in that section,” Ralphs spokeswoman Kendra Doyel said. Now gluten-free versions of various products are found throughout the store as “these trends become more mainstream,” she said.
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