Food retailers aren't expecting too many surprises this holiday season.

Buoyed by a shift toward more at-home dining and buffeted by strong price competition and frugal consumer spending habits, supermarket operators told SN they expect those trends to continue through the end-of-year holidays.

“Our sense is, consumers are still a little apprehensive about what 2010 will bring, so we're holding the line for the holidays,” Greg Sandeno, chief operating officer for C&K Market, Brookings, Ore., told SN.

“With the slowdown in restaurant business, we believe that throughout the holidays people will stay home and bake and put out good holiday spreads, so we look for sales to remain right at our trend line, with no drop-off — maybe not hugely better, but we expect to hold the line.”

Analysts are forecasting consumer spending to be about even with year-ago levels — perhaps up 1% or so — but still below the level of spending in 2007.

Steven Wieting, an economist for Citigroup, said in a recent conference call that after a year of penny-pinching, consumers have some “pent-up demand” to splurge this season, which could help propel sales. Any gains in consumer spending, however, could be tempered by rising gas prices, which he expected would be up about 50% over year-ago levels, he cautioned.

Food retailers said they will be especially competitive with basic items, and some said they have to be ready both for the budget-pressured shoppers and for those who are ready to spend a little extra.

Steve Smith, chairman, president and chief executive officer of K-VA-T Food Stores, Abingdon, Va., said although many consumers might want to splurge for the holidays, he's not sure a lot of them are capable of doing so, given the high level of unemployment.

“At K-VA-T, we are going to have to appeal to both ends of the spectrum — to those who want to have that special ham or special dessert or special party tray — but we also have to make sure we have the commodities out there at prices people can afford, with one or in some cases both spouses out of work,” he explained. “You can't be everything to everybody, but in this case you do have to have something to appeal to those that have the money to spend and those that don't.”

He said he expects competition to be highly price-aggressive throughout the season.

“What do grocers do when they are competing for a smaller piece of the pie? They promote some, and give up margin, something grocers have been doing for years and years and years,” he said. “I think it will be one of the more aggressive holiday periods, and we have already seen some of the moves by some of the big guys.”

Wal-Mart Stores came out swinging late last month with price cuts on both popular holiday foods and on toys and other seasonal goods, seeking to position itself as the one-stop shop for holiday savings.

“I'm afraid it is going to be more aggressive and maybe downright vicious,” Smith said of the current holiday season.

At K-VA-T, he said the chain, which operates under the Food City banner in Kentucky, Virginia and Tennessee, will focus on “stealth” marketing, with targeted offers to the company's best customers.

“We want to make sure they purchase all their holiday items at our stores,” he said. “I'm sure others will do that as well, but we are going to step up those offers above and beyond what we have done in the past.”