Even with keen and well-established competition from conventional supermarkets, the Southern California retail market may see future inroads toward more “fresh” oriented chains, Dick Spezzano believes.
The Los Angeles market also may see continuing success for independent retailers, potential expansion of Aldi and/or Lidl and more fresh food offerings in dollar stores, he said.
Though Sprouts is established in Southern California, Dick Spezzano, president of Spezzano Consulting Service, Inc., said there could be more “fresh” oriented entrants to the market.
“I’m surprised that as big a market this is in both Northern and Southern California, we don’t see more,” he said.
The leading chain store in the Southern California/Nevada market area, according to Shelby Market Shares, are Albertsons/Vons/Pavilions, with 390 stores, a 19.80% market share. Second is Ralphs/Food 4 Less/Fry’s (Kroger), with 334 stores and an 18.60% market share. Third in market share are retailers served by the Supervalu/West wholesaler, with 568 stores and 14.40% market share. Costco ranks strongly with an 11.7% market share with only 37 stores. Walmart has 140 stores and an 11% market shares, according to Shelby Market Shares.
Spezzano said fresh-oriented chains like Lucky’s and The Fresh Market could expand into Southern California.
“They both work with wholesalers and don’t self-distribute, so if they wanted to make the leap to a market like Southern California, they could do that with an existing wholesale supplier versus trying to help you with their own distribution center,” he said.
All the leading supermarket chains in Southern California have invested in serving the online grocery customer, Spezzano said.
Whether pick up or delivery, chains have worked out combination of a lot of different ways of getting food into consumers’ kitchens. While the fresh side of online business lags center-store brands, Spezzano said fresh produce consumers do have options.
Southern California retailers also have become sophisticated in handling organics, Spezzano said.
“I think that the conventional (supermarkets) have done a very good job of learning how to deal with organic — buying it right, selling it right and promoting it,” he said. “So it’s not like the old days where you had a small shelf and bought (organics) through a third or fourth party; now it is bought directly just like anybody does in the business.”
Deep discounter Aldi is adding a few stores in California and now has close to 60 in the state, Spezzano said.
“I think they are doing okay, but I don’t think they’re at the at the level they would have hoped have been by this point,” he said.
Dollar stores, while not a big factor in fresh sales, are showing their willingness to invest in refrigeration and stock fresh food.
For example, the California-based 99 Cents Only Store has shown a willingness to break the 99 cents per pound price barrier by buying better product in better packaging.
“It’s almost impossible to sell grapes and berries at 99 cents without the product being distressed but (now) they are buying good berries and good grapes and they are getting a retail that is less than a conventional supermarket but not 99 cents,” he said.
Other dollar stores are likely to invest more in selling fresh foods, he said.
Trader Joe’s, with 112 stores in Southern California/Nevada and a 5.40% market share, isn’t adding much to their store count in region, Spezzano said.
“You occasionally will see a new store from Trader Joe’s here, but they’re really breaking new ground in the Northeast,” he said, noting that the chain also is in the Southeast U.S. and Florida.
Spezzano said that wholesalers serving Southern California area are adapting to build sales, such as delivering to foodservice clients such as commissaries, prisons, hospitals and schools. Some produce wholesalers are repacking produce into smaller packs needed by broadline distributors, he said.
“The smart (wholesalers) are fine, but the ones that just didn’t want to change their model and kept chasing retailers, they’re not around, or they’re much smaller they once were,” he said.