Big grocers under stress

As the low-cost grocer Winn-Dixie filed for bankruptcy this week, the news sent a shudder - and a sense of tragedy - through the world of stockholder-owned grocery stores.

The bankruptcy - one of the larger corporate collapses in retail food history - is the latest in some 26 recent supermarket chain bankruptcies, a parable of a trip to the grocery store gone awry amid changes in the very concept of dinner. The bankruptcy highlights a nation of increasingly cost-conscious consumers drawn as much by 32-cent avocados at Wal-Mart as by the sirloin and Charmin at Safeway.

It also underscores how much traditional supermarkets have been squeezed on the other end by speciality stores, selling everything from New Zealand lamb chops to free-range chicken. Other forces are bearing down on traditional grocery stores, too, from a trend in America toward eating out to a decline in family size.

"The whole culture of food and eating is changing right in front of our eyes," says Harvey Hartman, president of the Hartman Group Inc., a retail consulting firm in Bellevue, Wash. "Now we have a customer who has changed, who is moving forward, and these old established brands are irrelevant to them."

So, while old-line grocery stores like Dominick's in Chicago, Genuardi's in Philadelphia, and Tom Thumb in Houston are all struggling, today's consumers stray toward natural-food outlets with names like Whole Foods (whose new store on Manhattan's Lower East Side is eagerly awaited by gourmet-conscious New Yorkers), Trader Joe's, Ukrop's, and Wegmann's. There is also a slew of independents, from Fresh Market to Earth Fare. On the other end, there is the emergence of perhaps the biggest threat to traditional grocery stores - Wal-Mart.

This checkout conundrum has been sneaking up on middle-of-the-road grocery stores, which can now only wonder how they fit into the habits of the modern-day shopper. "Grocers don't know who they are," says Mr. Hartman. "They're fighting Wal-Mart on one flank. They have a store within a store to fight the natural-foods marketplace. They're doing prepared foods on another flank. They have lost any kind of meaning to a particular customer."

Part of the pressure on stores reflects changes in consumer tastes and buying patterns. In an age of compressed lifestyles, some 33 percent of shoppers now buy ready-made foods - chicken dinners and butternut-squash soup. Grocery chains have responded, putting in delis and salad bars. Some stores like Winn-Dixie, however, haven't kept up with the changes as much and have suffered as a result, analysts say.

"It's fashionable to say that you don't like supermarket shopping, but the fact is, people enjoy it," says Michael Banks, a retail marketing expert in Danville, Calif. "And supermarkets have worked hard to make shopping an experience and not so much a chore."

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