Supermarkets, Eager to Grow, Set Sights on Northern Virginia Page 1 of 4
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washingtonpost.com: Supermarkets, Eager to Grow, Set Sights on Northern Virginia Page 1 of 4 washingtonpost.com CORRECTION TO THIS ARTICLE A Jan. 3 Washington Business article incorrectly said that Wegmans Food Markets Inc. will open its second Washington area store in Fairfax City. The store will be in Fairfax County. Supermarkets, Eager to Grow, Set Sights on Northern Virginia By Michael Barbaro Washington Post Staff Writer Monday, January 3, 2005; Page E01 Get ready for a food fight in Northern Virginia. Over the next year, Harris Teeter will open three supermarkets -- all of them in Loudoun County. Safeway will open stores in Fairfax City, Herndon and Mount Vernon, but just one in Maryland. And Wegmans, which built its first Washington area store in Sterling, will open another one in Fairfax City. This year, the region's supermarket chains will focus their already fierce battle for customers on the Virginia suburbs, lured by its rapid population growth, high incomes and -- compared with other parts of the region -- available land. "It is no secret that grocers are targeting Northern Virginia over suburban Maryland," said Gregory H. Leisch, chief executive of Delta Associates, an Alexandria-based real estate research firm. "That is where the greatest growth is right now." The rest of the region won't be completely left out. There are to be a smattering of new stores this year in Maryland and the District -- including a long-promised Giant Food in the city's Columbia Heights neighborhood -- and the chains hint at more to come. Harris Teeter Inc., which operates six stores in the area, has signed leases for 10 new stores, eight of them in Northern Virginia, spokeswoman Jennifer Panetta said. The stores, mostly in Fairfax, Arlington and Prince William counties, are scheduled to open by 2009. The flurry of activity in Northern Virginia is part of a broader struggle across the region, as a wave of supermarket companies takes on the area's older and larger chains, Giant and Safeway. At stake for the supermarkets is the $8.2 billion a year that area shoppers spend on groceries. For shoppers it will mean more choice and, the newer chains say, more competition on price and service. For workers, it poses a challenge to organized labor because only Giant, Safeway and Shoppers Food Warehouse are unionized. Giant Food LLC, with 130 stores, controls 42 percent of the local supermarket business. Safeway Inc., with 107 stores, has 26 percent of the market. Shoppers Food Warehouse Corp. is a distant third with 39 stores and 13 percent of the market. The market figures were compiled by Food World, a Columbia-based trade publication. http://www.washingtonpost.com/ac2/wp-dyn/A42855-2005Jan2?language=printer 10/20/2005 washingtonpost.com: Supermarkets, Eager to Grow, Set Sights on Northern Virginia Page 2 of 4 There's plenty of room for more grocery stores, analysts said. Nationwide, there's an average of one grocery store for every 2,000 households. In this region, there's one for every 3,700 households, Delta Associates said. And Washington area grocery stores sell $591 per square foot annually, compared with a national average of $336 per square foot, Delta found, another indication that the market could support more stores. Those numbers have turned the entire region into "one of the hottest markets in the country" for supermarkets, said Les Sax, owner of Sax Realty Inc. in Bethesda, which represents grocery stores and landlords in the area. From 2000 to 2004, the number of grocery stores in the Washington region grew 10.1 percent, compared with a national average of 7.6 percent, according to Trade Dimensions International Inc., a retail research firm in Wilton, Conn. The arrival of new competitors already has slightly reduced the market dominance of Giant and Safeway. As for the fuss over Northern Virginia: "This is a gigantic sprawl that continues to grow," said Jeffrey W. Metzger, Food World's publisher. Harris Teeter, whose 50,000-square-foot stores are known for extensive wine and prepared-food departments, "is poised to become a major player in Northern Virginia," Metzger said. He predicted that Harris Teeter, a division of Charlotte-based Ruddick Corp., will soon have more stores in the area than Whole Foods Market IP LP , which has 13. Whole Foods plans to open a store this year in Alexandrai, said spokeswoman Sarah Kenney. Wegmans Food Markets Inc., whose 130,000-square-foot stores include full-scale groceries and extensive gourmet food and wine offerings, is considering several sites in Northern Virginia, said spokeswoman Jo Natale. Wegmans plans to open its Fairfax City store in February and is "seriously considering" another store in Leesburg, Natale said. But Wegmans is not planning to expand rapidly. Nationwide, it opens only two or three stores a year. Nevertheless, Wegman's is a challenge to the region's biggest supermarket chains. In 2004, its first store, in Sterling, booked sales of $114 million, more revenue than Harris Teeter's six stores combined, according to Food World. And Mark Ferrera, a Wegmans senior vice president, said the chain eventually could have as many as five stores in the market. Other chains may spread their Washington area stores more widely over the next few years. Gourmet grocer Trader Joe's Company Inc., which has a dozen stores in the area, is to open as many as six more by 2006, with half in Northern Virginia, said Brandt Sharrock, the chain's vice president of real estate for the East Coast and Midwest. http://www.washingtonpost.com/ac2/wp-dyn/A42855-2005Jan2?language=printer 10/20/2005 washingtonpost.com: Supermarkets, Eager to Grow, Set Sights on Northern Virginia Page 3 of 4 Shoppers Food Warehouse plans to open four to five stores a year for the next several years, said spokesman Rick Rodgers, although he would not say where. To better compete against chains like Harris Teeter and Wegmans, the chain is adding to its warehouse format stores with pharmacies and expanded bakery, produce and international food departments. Salisbury, N.C.-based Food Lion LLC, one of the region's fastest-growing grocery chains, plans two new stores this year, one in Dale City, the other in Woodbine, said spokesman Jeff Lowrance. In choosing store locations, each chain uses its own formula to reach target demographics -- and wealth is usually high on the list. That helps explain why some parts of the region will, at least for now, be left out of the supermarket expansion even if they have relatively few stores, brokers said. Harris Teeter and Wegmans in particular are chasing after high-income households, said Peter Framson, principal of Green Light Retail Real Estate Services LLC in Bethesda. "Everyone can sell Folgers coffee, but not everyone can sell some of these more exotic foods," he said. Giant, however, said it is close to announcing a store in the District's Congress Heights neighborhood, in economically depressed Ward 8, which could open in 2006, said Barry F. Scher, a Giant vice president. Some grocery executives and retail brokers said Giant and Safeway are vulnerable -- Giant because of its merger last year with Ahold USA Inc. firm Stop & Shop Supermarket Co., which executives acknowledged did not go smoothly, and Safeway because of a prolonged employee strike on the West Coast. "They are taking their eye off the competition because they are focusing on internal things," Rodgers said. Scher said Giant "will have to become much more competitive." This year, Giant plans to open four stores in the region: two in Northern Virginia and one in suburban Maryland in addition to the Columbia Heights store. Giant plans to also remodel three stores -- a major priority for the chain, because its average store is 8.7 years old and Stop & Shop executives say they want stores remodeled about every nine years. "We want to remodel in a quicker manner than we have in recent years," Scher said. Safeway, meanwhile, is rolling out a new, upscale store format in the region with remodeled service departments. Inside, there is a broad lineup of gourmet food, including an olive bar and gourmet cheese section. Kiosks replace traditional service counters. And there is extensive use of mahogany and recessed lighting. The first Washington area store to use the format opened in April in Hanover. Safeway plans to open four local stores this year, several of which are to use the new format, said company spokesman Craig Muckle. Muckle said Safeway "is not complacent. Our goal is put stores where people want them." But with competition heating up in a region dominated for nearly seven decades by just two grocery chains, Muckle said he expects that some shoppers "will look for something new and different." © 2005 The Washington Post Company http://www.washingtonpost.com/ac2/wp-dyn/A42855-2005Jan2?language=printer 10/20/2005 washingtonpost.com: Supermarkets, Eager to Grow, Set Sights on Northern Virginia Page 4 of 4 Advertising Links What's this? What's Your Home Worth? Thinking of selling your home? Wonder how much it might be worth? You can find out with a free home or property valuation at HouseValues.com. Click here to get started. www.housevalues.com Real Estate Airline Miles & Award Points With Washington Mutual Home Loans, CitiMortgage, Chase Home Finance and Wachovia. www.awardsformortgageandrealestate.com Real Estate License - CA, VA, TX or WA CA, VA, TX or WA real estate license. DRE-approved online and traditional courses with a proven 98% state-exam pass rate. 110% money-back offer. 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