Operating in Wal-Mart Stores' most advanced grocery market, and against the three largest traditional supermarket companies, in a state where a liberal development climate and rapid population growth offers little shelter from competitors with deeper pockets, hasn't made things easy for independent food retailers in Texas.
Minyard's Food Stores, the 72-year-old family-run independent that recently agreed to sell its operations, acknowledged the Dallas-Fort Worth market in which it operated stores had become especially competitive in recent years and was a factor in the family's decision to sell. Observers said even national competitors in Dallas are feeling the pressure of trailing behind Wal-Mart and its rapidly growing supercenter base. The Bentonville, Ark.-based retailer holds the No. 1 market position in both Dallas and Fort Worth, operating 48 supercenters and nearly 20 Neighborhood Markets between them.
"This was the first major metropolitan area in the country in which Wal-Mart gained the leading market share, and that has become the overriding factor for all of Dallas-Fort Worth," Clay Smith, executive vice president of Dallas-based Staubach Retail, told SN. "Wal-Mart is dominating the market right now, and the grocers that have not been able to differentiate themselves from Wal-Mart have suffered."
Minyard became the second Texas-based independent chain sold in recent months. Houston-based Fiesta Mart, which operates five stores in Fort Worth and nine in Dallas, was purchased in August by its Houston-based supplier, Grocers Supply Co. Observers said both chains hope their new corporate parents can provide resources to better succeed in intensely competitive markets.
"Texas in general is among the most competitive markets in the country, if not the most competitive," Neil Stern, senior partner, McMillan-Doolittle, Chicago, told SN. "A lot of that has been driven by significant, significant growth by Wal-Mart. Lots of people talk about how Wal-Mart doesn't affect major metro markets, but Dallas is a major metro and Houston is a major metro and Wal-Mart has around 25% share in those markets. They've gone from being a niche player to being a market leader."
Dallas-Fort Worth is also one of the few areas in which the three "major" conventional chains -- Kroger, Safeway and Albertsons -- operate stores. Ultimately, their success may depend on which stores distinguish themselves the most from Wal-Mart and one another, said Smith.
"Safeway, which operates Tom Thumb here, has recently started remodeling their stores into their 'lifestyle' concept and they have been seeing significant sales gains," he said.
Minyard, according to Smith, was encountering particular difficulties at its conventional stores, which rank behind Wal-Mart and the three nationals in market share in both Dallas and Fort Worth.
"They were not as good operating big stores in the more affluent markets," he said. "They were very good at operating their Carnival stores aimed at the Hispanic market. And their smaller, urban stores did well, because Wal-Mart couldn't come in on top of them."
Stern said Minyard's effort to diversify its banners "was the right thing to do," but acknowledged "it takes a lot of discipline and the right resources to do that."