Strong retail competition bolsters Philadelphia produce markets

09/08/2009 04:15:09 PM
Doug Ohlemeier

PHILADELPHIA — In the city known for the Liberty Bell, competition among supermarket chains remains fierce.

One produce director for a regional supermarket chain, who didn’t want to officially speak for his chain, said retailers are sweating the increased competition.

“I have never seen it as competitive as I have seen it now,” he said. “There are a lot of new entries in the market.”

Much of the market’s retail growth is coming from chains such as Wegman’s Food Markets Inc., Rochester, N.Y.; Wakefern Food Corp., Elizabeth, N.J.; Shop-Rite Supermarkets, Edison, N.J.; and Giant Food LLC, Landover, Md., he said.

“There are a lot of new competitors entering the market. The old standbys of Acme, Pathmark, Genuardi's, they’re just there. But the growth is coming from those other three and at the expense of the others.”

Distributors and produce sellers say the competition has heated up.

“All of the chains are battling for their market shares,” said Tom Curtis, president of Tom Curtis Brokerage. “It’s in all of the newspapers how they’re battling each other. They’re naming names.”

Curtis said supermarkets in advertisements are increasingly comparing their price savings to their competitors’, saying how shoppers can save $50 if they buy the same items at the advertised store.

One factor has been the increasing presence of Wal-Mart Stores Inc., Bentonville, Ark.

In mid-July, Wal Mart opened a location in Tullytown, northwest of Philadelphia.

According to Wal-Mart’s Web site, the chain has 20 stores in the immediate Philadelphia area, with locations in the southwest part of the city, and in suburbs such as Eddystone, King of Prussia and Deptford, N.J.

Overall, in Pennsylvania, Wal-Mart has 85 supercenters, 41 regular stores, 23 Sam’s Clubs and four distribution centers, according to the Web site.

Curtis said Wal-Mart recently opened a supercenter in Collegeville, northwest of Philadelphia where he lives. The chain doubled the space of a regular store.

“More and more of these are popping up,” he said. “The whole catalyst for this increased retail competition is Wal-Mart. Wal-Mart is just starting to take these chain stores apart. I think you will see a shrinking of the chain stores. They’re having a very tough time competing.”

Ron Carkoski, president and chief executive officer of Four Seasons Produce Inc., Ephrata, which distributes produce throughout the northeast, said that competition has lowered margins for distributor and consumer.

“This retail competition is incredible,” Carkoski said. “Out of all this competition is obvious margin compression. It’s happening all over. Everyone is pushing down on the margin trying to create consumer excitement and enthusiasm.”

To respond to the lower profit margins, Carkoski said Four Seasons has reduced deliveries by one day a week and helped save on distribution costs.

Ethnic groups such as Koreans have become more important to produce market sales, said Chip Wiechec, president of Hunter Bros. Inc.

“The Koreans are opening more and more bigger retail operations,” Wiechec said. “They as a group are probably one of the larger retailers that buy on our market. You have more of an opportunity to sell them than you do the big chains.”

While competition remains furious on the retail side, restaurants are also always competing for patrons.

Distributors note the economic slump has hurt foodservice sales, particularly the higher-end restaurants.

A prominent restaurant in the heart of the city’s historic district, Bookbinders, closed its doors in April. Autographed photos of many celebrities graced the walls of the famous seafood restaurant that attracted many tourists.

“These restaurants are hurting bad,” said Jack Collotti Jr., vice president of Collotti & Sons Produce Inc. “Everyone’s working closer and closer. The percentages of profits are lower.”

Consumers are spending more of their money at supermarkets and buying fewer meals at restaurants. That change in behavior has helped harm white-tablecloth restaurant sales, said Mike Maxwell, president of Procacci Bros Sales Corp.

The mass feeders and fast-food operators continue strong sales and haven’t been hurt as much as the upper end of the foodservice category, he said.

Maxwell said he recently read a Philadelphia magazine article that stated how new and creative chefs that bring different menus are doing well while the older and more traditional white tablecloth restaurants haven’t fared as well.

“If you have something offering a little different or present it differently, you will do okay,” Maxwell said. “But if you’re in the mainstay and you won’t go out and recreate yourself, you’re going to lose business. Those are the guys that are hurting.”

John Vena Jr., president of John Vena Inc., said local chefs add excitement to the produce market.

Chefs such as George Perrier from famed eateries such as Le Bec Fin, Susanna Foo and Marc Vetri from Vetri and Osteria have been visiting the market.

“We are starting to see a little trend of some restaurateurs to come back to the market in an effort to cut their costs,” he said. “The quality of the chefs only improves every year. More and more chefs are interested in specialties, particularly, to help them redefine themselves or to interpret ethnic recipes or cuisines. It crosses all ethnic lines.”

When a chef visits a market vendor, he or she may see things the chef wasn’t necessarily looking for, and will try it and seek ways to incorporate new produce items into their menus, Vena said.

Martin Roth, secretary-treasurer of Coosemans Philadelphia Inc., said he’s noticed a change in the way restaurants market their offerings.

“They look at the commodities they can put on the plate and try something different and switch their menus around,” he said. “Years ago, they wouldn’t have thought of it.”

As one type of beans, for example, falls in price, restaurant buyers, Roth said, will switch to the lower-priced beans.

Specialties purveyor Coosemans Philadelphia sells its produce to foodservice distributors and other wholesalers.



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