Grocery competition in the Dayton area has turned into a high-stakes slugfest among industry heavyweights — and so far, the only clear winners are shoppers benefiting from lower prices and more choices.
“There is nowhere hotter than the Dayton area right now when it comes to grocery-store development,” said Nate Filler, president and CEO of the Ohio Grocers Association. “It’s a weird perfect storm, and I don’t know how long it’s going to last.”
Filler said the intensifying supermarket competition in many pockets of the Miami Valley “will have a very positive impact on consumers,” as retailers strive to capture shoppers’ loyalty with low prices, good service, great variety and high quality.
The competition hasn’t touched every neighborhood in the region. Residents of downtown Dayton and some of its surrounding neighborhoods do not have access to the same level of shopping options as those who live in the suburbs of southern Montgomery County, which has evolved into the epicenter of the most recent grocery-store activity, or in some other suburban areas east and north of Dayton and in parts of Warren and Butler counties.
Within the past year alone, the local grocery market has added three new players: Costco Wholesale, which has a large grocery department in its Cornerstone of Centerville warehouse store that opened last November; Fresh Thyme Farmers Market, which has opened two smaller specialty grocery stores this year in Sugarcreek Twp. near Costco and in Beavercreek near the Mall at Fairfield Commons; and Whole Foods Market, which opened its first Dayton-area specialty market on Ohio 725 in Washington Twp. in early June.
But the heightened level of competition extends beyond the new entries into the market. Existing mass-merchandise retailers such as Target and Walmart, discount stores such as Dollar General, and drug stores such as Walgreen’s all have increased the amount of floor space to grocery items, in an effort to become “one-stop” shopping destinations for time-strapped consumers. That’s a national trend that isn’t going away anytime soon.
“Competition from mass merchandisers is expected to intensify over the next five years,” Will McKitterick, analyst for Los Angeles-based IBISWorld Inc., an independent industry research firm, wrote in a June 2015 SuperMarkets & Grocery Stores industry report.
Because of that competition, supermarket chains are offering “substantial discounts and promotions to drive foot traffic to their stores and strengthen consumer loyalty,” the IBISWorld report says. Those discounts and promotions will cause grocery store profits to stagnate over the next five years. Profits are projected to grow at an average annual rate of 0.5 percent to $610.6 billion through 2020 after a more robust 1.5 percent average annual growth rate of the last five years, the report says.
Some stores have already felt the pain from declining — or in some cases disappearing — profits and have called it quits.
When Doug Preston, whose father founded the Springboro IGA grocery store at Ohio 741 and Ohio 73 in 1958, announced in November 2014 that he would have to shut down the store the following month, he said, “We just can’t keep losing money week after week. With all the big stores around, it’s hard to compete these days.”
In Beavercreek, the independent Lofino’s Marketplace store in the Beaver Valley Shopping Center shut down just four months ago. The family that founded it also trace their start in the grocery business to the 1950s.
Owners of this region’s long-established grocery stores are determined not to let that happen to them. From independents to giant chains, the existing supermarkets’ owners are taking extraordinary — and expensive — steps to defend their turf. Consider:
• Kroger — the largest grocery chain in the U.S. — has launched several projects in the Dayton area, including a new $18 million Troy Marketplace store scheduled to open in early 2016 adjacent to an existing store; a significantly remodeled Sugarcreek Twp. store on Wilmington Pike near Ohio 725 scheduled for completion in spring 2016 at a cost of $5.5 million; and a store in Trenton undergoing a $5 million makeover that is scheduled for completion in late 2015.
The Cincinnati-based grocer also has submitted plans for a new, large Marketplace-style store in Fairborn, has purchased a shopping center adjacent to an existing store off Ohio 741 on the Moraine-Miamisburg border; and has developed plans for a proposed new store at the Cornerstone of Centerville development. Kroger’s total investment in the Dayton market over the next few years is likely to reach $100 million, according to company spokeswoman Patty Leesemann. Some stores have added online ordering, daily wine tastings and craft beer taps to cater to help capture shoppers’ loyalty.
“No market, including Dayton, can be taken for granted,” Leesemann said last week. Kroger is “committed to continually investing in Dayton through our associates, high-quality products and our facilities,” she said.
• Meijer is in the midst of a $50 million renovation and expansion of four of its Dayton-area “super-center” stores in Kettering, Beavercreek, Miami Twp. and Englewood. Each of the stores is adding a drive-through pharmacy, remodeling fuel stations, and upgrading heating, refrigeration and lighting, among other improvements. “Our customers expect high standards from us, and our investment in these stores will ensure they enjoy the best shopping experience we can provide,” Meijer co-chairman Hank Meijer said in announcing the projects.
The Grand Rapids, Michigan-based retailer also is planning to test-market a new online ordering and curbside service in its Huber Heights store and perhaps others in the region, a Meijer spokesman said.
• The locally owned three-store Dorothy Lane Market recently completed a $1.3 million major facelift to its Oakwood store that included new flooring, lighting, bakery and deli display cases; a “Jack’s Grill” to cook food to order for shoppers; and a renovated mezzanine that hosts wine tastings and space for customers to dine. Another $300,00 project involves renovating the store’s basement kitchens where deli foods are prepared.
DLM also is adding a 7,200-square-foot expansion to its bakery at the Washington Square Shopping Center that will accommodate its growing Killer Brownie business, which markets the brownies to other grocery stores and specialty markets nationwide. The bakery also recently installed an bread-baking oven imported from Germany to automate and upgrade the preparation of its European-style breads.
“We’re constantly trying to create faster than the competition can steal,” said Norman Mayne, CEO of Dorothy Lane Market.
• The discount-grocery chain ALDI recently completed extensive renovation projects that shut down two of its stores in Kettering and Huber Heights for two months while workers reworked each store’s interior, upgrading its refrigeration systems, enlarging the existing store’s sales floor and adding a fifth aisle to what had been a four-aisle, 10,000-square-foot store. The increased retail space allows ALDI to add a wider range of healthier options such as organic produce, USDA Choice-grade beef, a recently introduced gluten-free product line and other offerings, ALDI officials said.
Dan Gavin, Springfield division vice president for ALDI, called the newly remodeled stores “the new look of ALDI.” The chain, which operates 1,400 stores in 32 states, said it now carries nearly 70 varieties of fruits and vegetables, including several organic produce items, ALDI officials said.
• Specialty grocer Trader Joe’s in the Town & Country Shopping Center, is expanding by 25 percent, adding 2,500 square feet to its existing 10,000-square-foot store, according to a spokeswoman for Casto, the Columbus-based firm that co-owns and operates the shopping center. The Kettering store is the only Trader Joe’s location in the Dayton area for the California-based chain. Trader Joe’s is completing their internal buildout of the expansion space now and “should be completed in October,” the Casto spokeswoman said. Trader Joe’s officials have declined to discuss the expansion.
Such rapid responses by existing grocer-store owners to counteract their new competitors set the Dayton market apart, the Ohio Grocers Association’s Filler said.
Other metropolitan areas in Ohio, including Columbus, have seen a recent surge in smaller, specialty grocers. But other cities haven’t experienced the same level of investment into extensive makeovers of existing stores as Dayton and southwest Ohio have, the OGA president said.
Sometimes the local independent grocers find ways to compete that don’t involve large capital expenditures. The locally owned two-store Dot’s Market has begun utilizing digital marketing, including social-media advertising, email blasts and online coupons, according to Dot’s CEO Robert Bernhard Jr., whose stores are in Bellbrook and the northeast corner of Kettering.
Dot’s also recently added a new line of beef that Bernhard said is at the top end of “choice” grade and which has been well-received by shoppers. The Dot’s stores have cultivated a strong reputation for its meat department, and Bernhard said that will continue.
“We’ll focus on what made us,” he said. “That’s how we’ve been successful for our model.”
Kroger’s investments to solidify its customers’ loyalty should come as no surprise from a company that has expanded its nationwide market share to more than 15 percent — more than twice as much as its two closest competitors, Safeway (6.2 percent) and Publix Super Markets (5.5 percent), according to the IBISWorld industry report.
“Across the country, they’ve established themselves as a major player,” Filler said. “And Kroger also has reported 47 consecutive quarters of same-store sales growth.”
Kroger spokeswoman Leesemann said the company’s research “indicates that Dayton continues to provide great market potential for Kroger.”
The entry of Whole Foods Market into the Dayton-area market may be driving some of the robust response from established grocers. Whole Foods opened its first Cincinnati-area store 15 years ago, so Dayton-area shoppers have long speculated about when the Austin, Texas-based chain that specializes in organic and other health-conscious foods would come to this region.
Whole Foods spokeswoman Katie Malloy cited the highly competitive nature of the grocery business in not responding directly to this newspaper’s questions regarding how the new Washington Twp. store has performed since opening in June.
The new store’s employees “have been excited to meet new customers every day,” Malloy said. “We look forward to continuing to grow and serving even more (customers) as we aim to be a community gathering place, especially at our in-store pub.” The store’s pub offers 13 craft-beer taps, store-wide wine tastings with live music on Friday nights, and serves mixed drinks — the first Whole Foods Market store in the region to serve spirits.
The new Whole Foods store is located between Dorothy Lane Market’s Washington Twp. and Springboro stores, and the grocery association’s Filler predicted DLM “will be a fierce competitor” in the most recent grocery wars. “I think they’ll be a tough code to crack” for the new players that have moved into the market, he said.
DLM’s Mayne said, “When you have new competition, you know you are going to lose some sales, because shoppers have more choices. Then it becomes our job to reclaim lost sales. And so far, we are very satisfied with our results.”
Grocery industry at a glance
Revenue: $596.5 billion
Profit: $7.2 billion
Wages: $58 billion
Average annual growth, 2010-15: 1.5 percent
Projected avg. annual growth, 2016-20: 0.5 percent
Source: Supermarkets & Grocery Stores in the U.S., June 2015 Market Report, IBISWorld
DEVELOPMENTS AT AREA GROCERIES
The largest grocery chain in the U.S. is investing up to $100 million in expansions or new stores in the Miami Valley in the next few years, company officials said. Included in the plans are:
• New stores in Troy, Fairborn, Centerville at the Cornerstone of Centerville development, and on Ohio 741 at the Moraine-Miamisburg border.
• More than $10 million in remodeling at stores in Sugarcreek Twp. on Wilmington Pike and in Trenton.
Costco Wholesale opened a 149,000-square-foot warehouse store, the first in the Dayton area, at the Cornerstone of Centerville development in November. The new Costco includes a gas station, bakery, deli, optical department, photo center, pharmacy, tire center, hearing-aid center and food court.
Meijer is undergoing $50 million in renovation and expansion at four of its Dayton-area “super-center” stores in Kettering, Beavercreek, Miami Twp. and Englewood. Each of the stores is adding a drive-through pharmacy, remodeling fuel stations, and upgrading heating, refrigeration and lighting, among other improvements.
DOROTHY LANE MARKET
The locally owned Dorothy Lane Market has made more than $2 million in expansions, remodeling and new equipment at its three locations in Oakwood, Washington Twp. and Springboro.
Specialty grocer Trader Joe’s in the Town & Country Shopping Center in Kettering is expanding by 25 percent, adding 2,500 square feet to its existing 10,000-square-foot store.
Whole Foods Market opened its first Dayton-area specialty market on Ohio 725 in Washington Twp. in early June.
FRESH THYME FARMERS MARKET
Fresh Thyme Farmers Market opened two smaller specialty grocery stores this year in Sugarcreek Twp. near Costco and in Beavercreek near the Mall at Fairfield Commons.
The discount-grocery chain ALDI recently completed extensive renovation projects at its stores in Kettering and Huber Heights.