Grocery Wars: As Meijer Enters Mix, 'Something's Got to Give'
Meijer's plans to enter Wauwatosa and Sussex add to a rapidly crowding grocery market populated by Pick 'n Save, Target, Walmart, Costco, Trader Joe's and others. Is there enough business for everyone?
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Since everybody has to eat every day, usually several times a day, there is an inevitability built into the grocery business. There will always be somebody ready to fill that need.
But that doesn’t mean it isn’t volatile.
The retail grocery industry is highly competitive, and since the rise of the chain supermarket, it has typically been a high-volume, low-margin business. If the demand for food is always there out of necessity, it’s still subject to changing tastes, offers of better service or pricing, dips and turns in the economy, demographic shifts in customer bases and fluctuating commodity prices.
Over the past two decades, the grocery business in metro Milwaukee has changed radically, and it is about to change again. Nowhere is that more apparent than in the arrival in the Milwaukee market of Meijer Inc., builder of supercenter stores that focus more on groceries than consumer goods.
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And nowhere in the Milwaukee area is it more acutely apparent than in the west and northwest suburban arc of Wauwatosa, Brookfield, Menomonee Falls and Sussex — in a combination of commercial corridors criss-crossing the greatest concentration of wealth in Wisconsin.
According to a leading local industry analyst, those areas, and perhaps soon much more of suburban Milwaukee, is about to become the battlefront in a game-changing round of Grocery Wars.
Success draws competition
Consider, for starters, the intersection of West Capitol Drive and North 124thStreet. Just to the west, on Capitol at 127th Street in Brookfield, stands a Pick ‘n Save, and a highly successful one at that. Just on the Wauwatosa side, Target has added groceries to its store. And next door to it, opened last year, is a new Walmart Market — hoping to succeed in a refurbished building vacated years earlier by Jewel-Osco.
“The Pick ‘n Save on 127th Street is a very high-traffic store,” said David Livingston, whose firm, DJL, specializes in grocery market research. “You want to be near them. For Target and Walmart, it was a no-brainer.”
Like car dealerships or fast food restaurants, positioning your brand and offering a different product, shopping experience and selection near a successful competitor can pay off, as long as the market will bear the traffic — and in this case, it probably still does, there, Livingston said.
But now enters Meijer at North Mayfair Road and West Burleigh Street, across the street from the coming Mayfair Collection retail center with its main drawing card, a Nordstrom Rack store.
The Meijer location is just about halfway between the Capitol concentration of stores and another Pick ‘n Save at 1717 N. Mayfair Road.
“Meijer isn’t coming in to compete with Pick ‘n Save — they’re coming in to replace Pick ‘n Save."
“You have a lot of square footage,” Livingston said. “The Pick ‘n Save south of North Avenue — my guess is that one’s redundant. It has to compete with everyone. I would guess that if they had it to do over, they wouldn’t build that store.”
New players about an equal distance to the south support that challenge. A new Trader Joe’s and a Target with groceries settled in cheek-by-jowl late last year just inside Brookfield, straddling 127th Street on Blue Mound Road.
“Trader Joe’s is probably the highest performing store in the country, in terms of sales per square foot,” Livingston said. “Trader Joe’s never goes to a bad neighborhood. Again, you’d want to be next to that. Target? No-brainer.”
The rest of Brookfield, particularly on the south side along the mega-retail corridor of Blue Mound Road, has up to now been pretty solid Roundy’s territory, with its Pick ‘n Save and Metro Market banners dominating.
“You’ve got Sendik’s up on Capitol, but that’s pretty far out, not really part of this corridor,” Livingston said. “On Blue Mound you’ve got Graasch’s, but other than that it’s pretty much lined with Pick ‘n Saves.”
So is that solid for them?
“No,” Livingston said. “I won’t be surprised to see a Meijer come in there, too.
“Meijer isn’t coming in to compete with Pick ‘n Save — they’re coming in to replace Pick ‘n Save. It’s all going to even out. The market can’t support this amount of square footage. Something’s got to give.”
“Meijer will pretty much cap it out,” Livingston said. “More than one store will close.”
Roundy's portion of the pie
In the Milwaukee suburbs — and the entire state of Wisconsin — Roundy’s Inc. is the self-proclaimed market leader when it comes to grabbing those groceries.
Milwaukee-based Roundy’s operates 161 stores and 97 pharmacies under the Pick ’n Save, Rainbow, Copps, Metro Market and Mariano’s Fresh Market banners.
“I think in the whole Wisconsin market, we are the market leaders,” said Jim Hyland, Roundy’s vice president of investor relations.
In fact, Hyland said, the company is now focusing most of its expansion efforts outside Wisconsin in the Chicago area. Hyland said the company has been successful with its Mariano’s brand in that market.
However, there’s no denying that Roundy’s is sharing real estate with plenty of other grocers hoping to attract customers in the suburbs. Besides the approach of Meijer, Walmart and Woodman’s have all aggressively expanded in the suburbs.
Hyland says that’s all just part of the business, and it can’t steal Roundy’s focus on what it does.
“The grocery business is robust, and we get new competition all the time,” he said. “We are aware of it, and we focus on the consumer and their experience rather than the competition.
“There will always be competition in this business. But we try to keep our focus on leadership, our brand, and a better customer experience.”
Roundy’s has also opened its own version of the supercenter in Menomonee Falls and on 76th and Good Hope Road in Milwaukee, said Roundy’s spokeswoman Vivian King.
“The bottom line is that the suburban customer wants convenience,” King said. “They may shop once a week, and we want to provide one-stop shopping for customers.”
Meijer prepared for competition
For its part, Meijer sees it much the same way, a spokesman said.
“Our offerings will be something that shoppers in the Milwaukee area will like,” said Frank Guglielmi, director of public relations. “We have everything from urban sites to stores that are out in the country.
“We’ve developed a format that does well in a lot of different markets, but it’s always based on serving the customer," he added. "There are a lot of different offerings out there at every level from price-point leaders to the most upscale. And there’s competition at every level, but ultimately the winner is the customer.”
“Competition is good for everybody,” Guglielmi said. “We’re in markets now where there’s a lot of competition – we’re in Detroit, we’re in Chicago. It keeps our game up. We are used to competing in the private marketplace, and we’re good at it.”
Saturated near Menomonee Falls, too
Meijer is also opening a store in Sussex, which Livingston sees as a slightly different move than the one in Wauwatosa. Meijer will compete head-to-head in the community with only a Piggly Wiggly nearby, but a Costco store in Pewaukee will be its natural rival.
It could be still to come, but Meijer may be taking a pass Menomonee Falls for now because that market is already full of new stores. The state's largest village, by geographical boundaries, is home to Pick'n Save, Super Pick'n Save, Woodman's, Piggly Wiggly and a newly constructed Walmart Nighborhood Market. Furthermore, a Walmart Supercenter opened within the last five years just a five-minute drive north on Appleton Avenue in Germantown, and an Aldi sits between Falls and Germantown on County Line Road in that area.
“In Menomonee Falls, Pick ‘n Save overbuilt,” Livingston said. “Woodman’s came in and is really making an impact. Then you have a Walmart superstore in Germantown, and now a Walmart Market (in Menomonee Falls).
“People in Menomonee Falls don’t have to go far to get groceries.”
Besides Wauwatosa and Sussex, Meijer is also coming to Grafton, Franklin and now Oak Creek — five stores in one new metropolitan market. It’s a lot from a privately held chain that since 1962 — when Meijer invented the supercenter concept — has amassed only 200 stores so far.
But Guglielmi said the company was well-positioned to enter Milwaukee now.
“If you look at our geography, we’re already strong in Northern Illinois,” he said, “so we’re not that far away. It’s been well-publicized that we’ve bought the new distribution center in Pleasant Prairie.”
With that purchase, Meijer could be in position to announce even more stores, as Livingston predicts they will. Besides the possibility of a Brookfield location, a Pewaukee store has been rumored, but not confirmed by Meijer.
CBRE commercial properties broker Peter Glaser said that for Roundy’s, major competitors — nationals like Walmart and Target and major regional like Meijer — “haven’t been in this market (before), and they see this as a natural progression to enter the suburban market.
“When you have someone who is dominant in the market, there will always be other brands that want to get in.”
“Grocery store development is probably one of the most active categories of retail right now.” Glaser said. “I’m seeing a mix right now. We see the upscale, smaller sized concepts and more large-scale discount stores. However, we’re not seeing a ton of growth on the traditional 55,000-square-foot store.”
Something like it has happened before, Livingston said, although on a more local scale. Kohl’s was once a major player in the Milwaukee grocery market. But in the early 1990s, Roundy’s made a move to capture unquestioned dominance.
Kohl’s went out of the grocery business for good, and most its stores became Pick ‘n Saves.