first_img Kroger has also expanded to compete with both supermarket chains and specialty grocers. It opened two dozen Marketplace stores nearly double the size of its typical stores, selling expanded food offerings and nongrocery goods such as furniture, office supplies, kitchenware and fine jewelry. It is competing with the specialty food stores with about two dozen Fresh Fare markets, mainly in California, offering natural and gourmet food, and it has added no-frills, low-price warehouse stores, called Food 4 Less, in some markets. “Kroger has been able to experiment more with alternative formats,” said Whitmer, whose company has a “buy” rating on Kroger stock. “They’re definitely ahead of other companies … in becoming more relevant to a broader customer base.” Pleasanton, Calif.-based Safeway Inc., the nation’s third-largest supermarket chain, is in the midst of a makeover – remodeling hundreds of stores for a more upscale look. Second-largest Albertsons, based in Boise, Idaho, has tried lower prices on high-volume items, opening Extreme Inc. discount stores and slashing costs, but the struggling company has put itself on the market. Jacksonville, Fla.-based Winn-Dixie Stores Inc. is trying to emerge from Chapter 11 bankruptcy filed this year, and Indianapolis-based Marsh Supermarkets Inc. is considering a sale of the company after a weak earnings report. Kroger reported second-quarter net earnings of $196.5 million, up from $142.4 million the previous year, with sales rising 6.8 percent to $13.9 billion. The company, which also operates hundreds of convenience stores, jewelry stores and fuel centers, will report third-quarter earnings on Tuesday. Kroger overhauled its business strategy in 2001 to include $500 million in cost cuts, elimination of 1,500 jobs and lower prices. Rhodes said traditional grocers can’t comprehensively compete with Wal-Mart’s prices, but Kroger can neutralize price while focusing on better customer service – faster checkout and better food selection, particularly in meats and produce – and by presenting inviting, attractive stores with more amenities. “The Krogers of this world are working very hard to create a reason to shop in the traditional supermarkets,” said consultant Wendy Liebmann of WSL Strategic Retail of New York. “It’s about food. It’s about what’s for dinner tonight. It’s about ease of shopping.” The success of chains such as Trader Joe’s proves that people are willing to spend extra time and effort on groceries if they think the quality is high, said Liebmann, adding there’s also appeal to some in the one-stop-shopping approach. At one of Kroger’s two Marketplace stores in Columbus, Ohio, Ginger Perry explained that she works long hours in interior design and marketing, and shopping at the year-old store – including picking up a hot Donatos pizza for dinner – works out perfectly for her busy schedule. “I can get a lot done in one trip,” said Perry. “That saves fuel; that’s a factor now. And convenience is certainly a factor.” But Susan Riolo, a nurse in Mason, Ohio, is unimpressed by Kroger’s fuel discounts and too busy to worry about tracking her qualifying purchases. She shops at a Supervalu store. “Their prices are usually lower,” Riolo said. And while Weisbrod likes the gas discounts and other Kroger promotions tied to the Plus card, she doesn’t like expanded stores. “I like to get in, get my groceries and get out,” she said. “I don’t like the distraction of being tempted by the nongrocery things.” 160Want local news?Sign up for the Localist and stay informed Something went wrong. Please try again.subscribeCongratulations! You’re all set! AD Quality Auto 360p 720p 1080p Top articles1/5READ MOREBlues bury Kings early with four first-period goals Wal-Mart took less than 15 years to become the nation’s largest grocer since its aggressive entry into the food business in 1988, and rival Target Corp. has complicated matters with its own aggressive expansion of grocery aisles. “It’s not a simple business,” said Jason Whitmer, an analyst at FTN Midwest Research of Cleveland. “It’s not just putting discounts in the weekly circular or giving double coupons.” Kroger – still the country’s largest grocery chain, with more than 2,500 stores under banners including Ralphs, Fred Meyer, Fry’s and Smith’s – has rolled out a variety of weapons to battle its multifront competition. It launched a rewards MasterCard, which awards points for purchases that build up to gift certificates, and expanded use of its customer loyalty card for promotions. Some Kroger stores have also added nongrocery bargains, such as televisions, deck furniture or toys, meant to make store visits “like a treasure hunt,” said spokesman Gary Rhodes. CINCINNATI – The days of gasoline price wars aren’t over. They have moved from service stations to grocery stores. “Ten cents is 10 cents. It adds up,” said Vikki Weisbrod, a nurse in suburban Fairfield, Ohio, who often saves $2 on a fill-up of her minivan through a Kroger Co. discount of 10 cents per gallon for frequent shoppers. “It’s convenient, so why not take advantage of a chance to save some money on gas?” Most of Kroger’s competitors in Ohio markets – such as Giant Eagle, Meijer and Wal-Mart – also have offered gasoline promotions. The gas discounts, usually tied to total shopping purchases or use of loyalty cards, vary in different markets. The fuel promotions are one of the latest forms of competition in the grocery industry, where traditional grocery chains led by Kroger battle Wal-Mart Stores Inc., Costco Wholesale Corp. and other big-box discounters on one side and, on the other, upscale specialty food stores such as Trader Joe’s Inc., Whole Foods Inc. and Wild Oats Inc. last_img

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