Grocery Wars: As Meijer Enters Mix, 'Something Has to Give'
Meijer plans to enter Oak Creek and add to a rapidly-crowding grocery market populated by Woodman's, Pick 'n Save, Target, Walmart and others. Is there enough business for everyone?
Since everybody has to eat every day, usually several times a day, there is an inevitability built into the grocery business. There will always be somebody ready to fill that need.
But that doesn’t mean it isn't volatile.
The retail grocery industry is highly competitive, and since the rise of the chain supermarket, it has typically been a high-volume, low-margin business. Demand for food is subject to changing tastes, offers of better service pricing, demographic shifts and and turns in the economy.
Over the past two decades, the grocery business in metro Milwaukee has changed radically, and it is about to change again. Nowhere is that more apparent than in the arrival in the Milwaukee market of Meijer Inc., builder of supercenter stores that focus more on groceries than consumer goods.
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And it's becoming acutely apparent in Oak Creek, with Meijer proposed to anchor the Drexel Town Square development near the corner of Drexel and Howell avenues.
The building would be within eyeshot of Woodman's, just down the street from Pick 'n Save and within a few-mile radius of several other grocery stores.
According to a leading local industry analyst, suburban Milwaukee is about to become the battlefront in a game-changing round of Grocery Wars.
Success draws competition
For years, the Pick 'n Save at the corner of Puetz Road and Howell Avenue was one of the company's top-performing stores.
So it was only a matter of time before a competitor moved in to grab a piece of the pie, said David Livingston, whose firm, DJL, specializes in grocery market research.
That competitor was Woodman's, which opened its huge store at 8151 S. Howell Ave. in 2008. The success has been just as huge: Livingston said the Oak Creek store brings in an estimated $2 million in sales per week, about four times what an average Pick 'n Save does.
But now with Meijer planned for Drexel Town Square, "something has to give," Livingston said.
Walmart has a store at 6701 S. 27th St., and one under construction at 222 N. Chicago Ave. in South Milwaukee. Target is not far from Drexel Town Square at 8989 S. Howell Ave. Nor is Piggly Wiggly at 2201 E. Rawson Ave.
The "market can't support" that many grocery stores, Livingston said.
"It will be an endurance test to see who runs out of money" first, he said.
Woodman's apparently feels pretty safe. According to two Oak Creek officials, the company has told the city it is fine with a Meijer built almost right next door to its Oak Creek location.
Livingston has a guess as to why that might be.
"I think Woodman's thinks Meijer would push Pick 'n Save out," Livingston said. And in the end, Woodman's would be better off than it was before.
Roundy's portion of the pie
In the Milwaukee suburbs — and the entire state of Wisconsin — Roundy's Inc. is the self-proclaimed market leader when it comes to grabbing those groceries.
Milwaukee-based Roundy's operates 161 stores and 97 pharmacies under the Pick 'n Save, Rainbow, Copps, Metro Market and Mariano's Fresh Market banners.
"I think in the whole Wisconsin market, we are the market leaders," said Jim Hyland, Roundy's vice president of investor relations.
However, there's no denying that Roundy’s is sharing real estate with plenty of other grocers hoping to attract customers in the suburbs. Besides the approach of Meijer, Walmart and Woodman's have all aggressively expanded in the suburbs.
Hyland says that's all just part of the business, and it can't steal Roundy's focus on what it does.
"The grocery business is robust, and we get new competition all the time," he said. "We are aware of it, and we focus on the consumer and their experience rather than the competition.
"There will always be competition in this business. But we try to keep our focus on leadership, our brand, and a better customer experience."
Added Roundy's spokeswoman Vivian King: "The bottom line is that the suburban customer wants convenience. They may shop once a week, and we want to provide one-stop shopping for customers."
Meijer prepared for competition
For its part, Meijer sees it much the same way, a spokesman said.
"Our offerings will be something that shoppers in the Milwaukee area will like," said Frank Guglielmi, director of public relations.
Livingston said Meijer is somewhat similar to a Walmart. It doesn't have an automotive department like Walmart, but it does offer clothing, sporting goods, health and beauty products and a pharmacy.
The grocery, meanwhile, is more upscale than Walmart. It has in-store dining options, a better liquor department and service meat and seafood cakes.
"We've developed a format that does well in a lot of different markets, but it's always based on serving the customer," Guglielmi said. "There are a lot of different offerings out there at every level, from price-point leaders to the most upscale. And there's competition at every level, but ultimately the winner is the customer."
"Competition is good for everybody," Guglielmi added. "We're in markets now where there's a lot of competition – we're in Detroit, we're in Chicago. It keeps our game up. We are used to competing in the private marketplace, and we're good at it."
Besides Oak Creek, Meijer has planned stores for Wauwatosa, Sussex and Grafton. Earlier this week, the company dropped plans for a fifth store in Franklin.
It's a lot from a privately held chain that since 1962 — when Meijer invented the supercenter concept — has amassed only 200 stores so far.
But Guglielmi said the company is well-positioned to enter Milwaukee now.
"If you look at our geography, we're already strong in Northern Illinois," he said, "so we're not that far away. It's been well-publicized that we've bought the new distribution center in Pleasant Prairie."
With that purchase, Meijer could be in position to announce even more stores, as Livingston predicts they will.
CBRE commercial properties broker Peter Glaser said that for Roundy's, major competitors — nationals like Walmart and Target and major regionals like Meijer — "haven't been in this market (before), and they see this as a natural progression to enter the suburban market.
"When you have someone who is dominant in the market, there will always be other brands that want to get in."