BIG STORES WINNING N.Y. FOOD FIGHT

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Cast another vote for the superstores.

Despite myriad choices, New Yorkers are increasingly doing their food shopping at large, suburban-style superstores, according to an exclusive survey of New York City by Crain's New York Business, a sister publication of Advertising Age, and Leo J. Shapiro & Associates, Chicago.

The survey found that Pathmark, which has expanded aggressively in New York in recent years and now operates 17 superstores in the city, is the most popular supermarket chain. Nearly one in five New Yorkers shop there regularly.

Pathmark dominates in Staten Island with a 55% market share, but even in Manhattan, where Pathmark has just two stores, the chain won 14% of the business.

Pathmark's biggest challenger is another operator of big stores, the Waldbaum's division of the Great Atlantic & Pacific Tea Co., which has 12% of the city's market and is the No. 1 supermarket in Queens. A&P's overall share in the city, where it also operates stores under the Food Emporium and A&P logos, is 17%.

Despite the gains made by big-store chains in New York, the survey, which probed the shopping habits of 250 households in the five boroughs, found the market is still more fragmented than other big cities (see related story below).

With a profusion of specialty stores, greengrocers and small supermarkets, New York's food shopping differs from the rest of the nation's, although the divergence may be narrowing as the big chains expand.

"Pathmark is the littlest giant," said Leo Shapiro, chairman of the research company. "Most markets have a player that dominates with a 25% share or better, such as Dominick's and Jewel-Osco in Chicago. But in New York, even a small share translates into a huge business."

For many New Yorkers, shopping at a supermarket represents a necessary compromise, the survey found. Asked where they believe is the best place to buy selected food items, New Yorkers name supermarkets less often than does the nation as a whole.

Still, supermarkets win high points among New Yorkers for their prices and convenience. More than half of those who regularly shop at Pathmark in New York do so because of its prices. Nearly three in 10 of Waldbaum's customers shop there because of price. Waldbaum's operates 27 supermarkets in the city.

"I don't live near a Pathmark, but I have made the trip there in a cab because of the price as well as the selection," said David Weiss, a Brooklyn resident.

Pathmark is intent on adding to its local gains, and has signed leases on four more sites.

"We have the same variety and selection and store size, despite higher rents in New York," said Stan Sorkin, VP-public affairs for the Woodbridge, N.J.-based chain.

The success of the superstores is particularly noteworthy because Mayor Rudolph W. Giuliani's administration is considering changing zoning restrictions to make it easier for big stores to open in industrial areas where there is unused space.

Some small stores and residents have fought such changes, saying they would bring more traffic and drive out mom-and-pop shops.

Below the two big store operators, the market is more diverse and fragmented. Two of the next three players are food cooperatives, networks of independently owned stores supplied by a common wholesaler.

Key Food, with 160 small stores in the city, has an 11% market share, and C-Town, with 124 stores, captures 8% of the market.

Typically these networks operate stores ranging from 10,000 to 20,000 square feet, or about one-third to one-fourth the size of the superstores.

With smaller shops wedged into many neighborhoods, these chains bank on convenience to win shoppers.

About 80% of Key Food's shoppers say convenience is the most important reason they shop at the stores, while 62% of C-Town shoppers rank convenience as most crucial.

Wedged between these two co-op networks is the combination of Red Apple/Gristede's and Sloan's. Over the last several years Red Apple/Gristede's has acquired 21 Sloan's stores and operates the remaining 11 through a management contract.

The combined chains, which operate 57 stores, control 10% of the total market and 37% of Manhattan's food shopping.

The Federal Trade Commission is currently challenging the acquisition of some Sloan's on the grounds that the combined Red Apple/Gristede's and Sloan's unfairly dominates some Manhattan neighborhoods.

The Crain's/Shapiro survey, however, suggests that Manhattanites spread their shopping around.

"Manhattan is the most fragmented market" in New York, Mr. Shapiro said.

Seven different chains were vis-ited by at least 10% of those surveyed in the past month.

Indeed, Manhattan is so crowded that John Catsimatidis, owner of Red Apple Cos., said he doesn't plan any more stores there.

For residents of Manhattan, store location is considered to be a critical factor.

"I shop the store in the bottom of my building-even going across the street is inconvenient," said Gail Appleson, a West Side resident.

Manhattanites are also more likely to visit more than just a supermarket. They intensely shop specialty stores such as Zabar's and Balducci's as well as neighborhood greengrocers.

"It's like the old days when people went to the butcher for meat and the bakery for bread," said Mr. Weiss, the Brooklyn resident who is president of Packaged Facts, a research company that tracks consumer products trends.

Not surprisingly, the Crain's/Shapiro survey found wide differences among shoppers through-out the city.

"Your shoppers in Manhattan are a different bunch than Staten Island," said Roy White, of Perspectives Group, a consultancy.

Manhattanites typically walk to the store and purchase on a meal-by-meal basis; Staten Island is more typical of the suburbs where consumers make a once or twice weekly trip.

The city's three other boroughs are more of a mixed bag. Pathmark and Waldbaum's are the top chains in these boroughs, but supermarket co-ops like Key Food also score well.

In Queens and the Bronx, shoppers are less likely to walk to a neighborhood store than those in Brooklyn.

Ms. Brookman is a correspondent for Crain's New York Business.

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