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Roundy's enters tough Twin Cities grocery market
by Bill Catlin, Minnesota Public Radio
June 18, 2003

A Roundy's official says the damaged sign on the Apple Valley store is emblematic of the store's condition when Roundy's took over. (MPR Photo/Bill Catlin)

Grocery shoppers are sampling the changes Roundy's has made to 30 Twin Cities Rainbow Foods stores. Earlier this month, Wisconsin-based Roundy's acquired the stores from Fleming Companies in a bankruptcy auction. Roundy's is taking on a market where the competition is expected to keep getting tougher.

St. Paul, Minn. — As workers washed windows and shelving, replaced price tags and restocked the Apple Valley Rainbow Foods store recently, Dale Riley showed off the entrance. Riley is a long-time veteran of the Twin Cities grocery wars and will oversee Rainbow for Roundy's.

He's clearing the deck. Literally.

	Out with clutter

"No more pallets of soda or chips or things like this in the entryway, because we want people just to walk in and have it be less encumbered so they can just get their shopping cart. That's what they came to get. We're not concerned about missing a few incremental sales if the in-store experience is going to be better for them," Riley said.

For Riley, the change is primarily about reducing Rainbow's negatives and attracting more of the shoppers in each store's trade area. He's getting rid of pallets overhead, and promotions at eye level. Riley says Rainbow has great locations, but the stores languished as parent company Fleming fell on hard times.

"So with a cleaner store, a brighter store, less clutter and improving the perishables, and a much greater emphasis on 'Fresh!' in perishables, we definitely feel there's an opportunity to grow the business," Riley said.

There have been some glitches in the huge transition. Some shoppers have complained about items being out of stock. Riley says employees are working around the clock to reduce the number of unavailable products.

But Roundy's new venture may face a greater threat from competitors. Consultant Jon Seltzer says the grocery industry is increasingly competitive. More non-grocers are selling food.

"The price clubs increased significantly the square footage in the market, as well as a discounter like Target, which is increasing both the square footage devoted to grocery, in their traditional Target stores, as well as their super centers. In addition, some of the drug stores, specifically Walgreens, they're adding significant numbers of grocery items," Seltzer said.

	Scrubdown

Target officials, for example, view food as a way to get customers into their stores more often.

Nationally, grocers have lost market share in total U.S. retail trade as super centers and discount clubs like Costco and Sam's Club have gained.

In the Twin Cities, competition will likely intensify with another low cost grocer, Aldi, expected to arrive later this year.

Economist Jean Kinsey, co-director of the Food Industry Center at the University of Minnesota says there's already lots of competition in the Twin Cities grocery market. She says the region lacks two features common elsewhere, a big national chain like Kroger or Safeway, and a dominant player with half the market or more.

"Even though we do have a large presence of Cub stores, and a large presence of Rainbow stores, they are not any of them over 30 percent of the market. And so we do have a big variety of grocery stores in the Twin Cities," Kinsey said.

Kinsey says the increasing competition should keep prices for consumers as low as they can be. And she says there's room in the market for a variety of approaches. Not all consumers want the same thing.

"They're split along lines of, well, 'Price is the most important thing to me;' 'high service is the most important thing to me;' 'really great, fresh cut meat is the most important thing to me,' or seafood, or whatever. And a lot of people will shop for the thing that's most important to them, let's say fresh meat, in one store, and then they'll go to another store to get their paper products and laundry products," Kinsey said.

Dale Riley of Roundy's says there's still plenty of room for the conventional supermarket that he's shaping Rainbow to be.

"The supermarket business hasn't changed all that much. I mean, the products change, new products are being introduced all the time, and a few new services, but it's principally the same. So, within your trade area, if you're servicing your customers well, typically they won't drive by the store that's closest to their home," Riley said.

Riley is hoping a traditional supermarket experience, with less clutter, will prompt customers to spend more of their food dollars at Rainbow.

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