Rural Route Grocers
Independent stores cater to local communities, giving them an edge over larger chains in customer service.
Mike Sanders, president of Discount Foods Inc., was the pioneer of the cost plus 10 percent pricing concept decades ago. Today, Discount Foods owns seven stores in Calhoun and St. Clair counties.
Photo by Ginger Plunkett
Independently owned grocery stores may not be as prevalent in Alabama as they were before the proliferation of national and regional chains, but they are holding their own and often thrive within the communities they serve.
Individuals, families and small, privately-held corporations that own independent grocery stores in Alabama typically operate one to seven stores in neighboring areas. A prime example is Discount Foods Inc., which owns seven stores within a 60-mile radius in Calhoun and St. Clair counties. An exception is family-owned Autry Greer & Sons Inc., based in Prichard, with only 16 of its 29 stores in Alabama. Both companies work hard to maintain their successful enterprise in an economy where price and value are critical.
“I’ve been in the grocery business for 56 years. The only constant is change, because in this business you have to stay competitive,” says Mike Sanders, president of Discount Foods, which has 177 full- and part-time employees. Sanders was a pioneer of the cost plus 10 percent pricing concept decades ago.
Currently, Alabama independent grocers make up about 26 to 27 percent of all grocery stores in the state, the Alabama Grocers Association estimates, based on reports from wholesalers. “Chains may have their competitive advantages, but independents do as well. Independents, for instance, have greater flexibility in catering to the needs of their particular communities,” says Ellie Taylor, president of the association.
Western Supermarket, in affluent Mountain Brook, has developed a top-notch wine department that rivals boutique wine shops and offers a wide selection of gourmet foods. “All of our ‘over-the-mountain’ stores offer products that appeal to an upscale clientele,” says Ken Hubbard, CEO of Western Supermarkets Inc., which owns seven Birmingham area grocery stores, employing 350 full- and part-time workers.
His two Food Depot stores, in more value-conscious areas of Birmingham, operate on a cost-plus basis. “Customers appreciate that when we are able to get a better price from the wholesaler, we pass it on with a simple cost-plus 10 percent formula,” Hubbard says. “We run ads keeping our customers informed on what current deals we’re offering.”
The ability to significantly alter store policies and product mix to meet local preferences is just one of a number of advantages independents have, say Taylor and Lorrie Griffith, editors of grocery trade publication The Shelby Report of the Southeast.
Other advantages include a closer bond to the community through owners and managers volunteering, supporting local charities and being on a first-name basis with customers.
“Independents tend to do a great job recognizing their customers when they come in and making them feel welcome,” Griffith says.
According to data compiled by her publication, wholesalers that serve Alabama independents at least slightly increased their multi-state regional market market share during October-November 2011 vs. March-April 2011. Walmart dropped 6.2 percent in Birmingham, Huntsville and Montgomery areas and 4.7 percent in Mobile and Gulfport areas.
The only wholesaler that lost market share, Associated Grocers of the South, lost just 0.1 percent in the Birmingham, Huntsville and Montgomery areas during the same period. That being said, Walmart is still the biggest player in the same markets, accounting for more than a third of the market share in regional metropolitan areas.
Other major chains with a significant presence in Alabama include Winn-Dixie, recently purchased by Greenville, S.C.-based Bi-Lo LLC, and Publix.
While Walmart and the other chains have a volume pricing advantage, independents also have pricing strategies, augmenting their buying power through wholesale distributors and cooperatives, says Ferrell Franklin, president and CEO of Retailer Owned Food Distributors and Associates of Gardendale. “ROFDA helps give those cooperatives an even greater competitive advantage.”
Alabama-based wholesale cooperatives include Associated Grocers of the South in Birmingham, and Piggly Wiggly Alabama Distributing Co. Inc. in Bessemer. To clarify, Piggly Wiggly grocery stores in Alabama, as well as those across the country, are independents that license the Piggly Wiggly brand.
A third Alabama wholesale distributor to independents is privately-owned Mitchell Grocery Corp., of Albertville. “There are upfront costs to join a cooperative, so someone who is just opening their first grocery store might opt to reduce their initial investment by going with a distributor like Mitchell,” Franklin says.
Some independents buy from wholesalers or are members of cooperatives that are based outside of Alabama. Autry Greer, for example, is a member of Kansas City-based cooperative, Associated Wholesale Grocers.
Independents also are able to access a pricing advantage from secondary suppliers and manufacturers that deliver fresh goods directly to their store. “Say if a produce distributor has a large quantity of something they want to move fast, an independent can more easily take advantage of that by offering their customers a special promotion,” Griffith says.
Alabama has a relatively high percentage of independent grocers compared to many other states, because it is so rural. Gateway Foodland Inc., based in Double Springs, which owns six grocery stores in Winfield, Curry, Moulton, Russellville and Woodstock, is an example of an independent that caters to smaller populations.
“There has to be a certain population level within driving distance of a potential location before a national chain will consider opening a new store,” says Harrell Garrett, president of Gateway Foods. Garrett currently serves as chairman of the Alabama Grocers Association.
But a number of Alabama independents are successful in urban environments, including Western Supermarket stores in the Birmingham area, Autry Greer in the Mobile area and beyond, and a number of Piggly Wiggly branded independents.
Autry Greer gives national chains a run for the money with its deli bakeries.That department now offers event catering, thanks to executive chef Lucy Greer. The company, which has more than 600 full- and part-time employees, including seven family members, also specializes in supplying commercial marine vessels. “We want to continue the success of our family venture that first began in 1916, so we’re always looking at new business opportunities,” says Robert Greer, vice president and secretary of the corporation.
Will independents continue to thrive alongside the chains in Alabama? Independents and industry experts believe there’s room in the market for both. “The real competition these days isn’t as much between the chains and the independents as it is between grocery stores and restaurants,” Taylor says. “When it comes to the food dollar, either families are going to spend it at grocery stores or restaurants.”
Through Alabama Grocers Association, independents and chains work together to push the economy and health of choosing to buy food at the grocery store. “Whereas the average price of a meal in a restaurant is $12 per person, the average price for a meal at home is $5 per person. A family of four can save $1,500 just by reducing the number of times they eat out a week by one,” she says. “Check out our website eatathomealabama.com for more information.”
Kathy Hagood is a freelance writer for Business Alabama. She lives in Birmingham.