GAS PRICES: PIZZERIA'S PAIN BECOMES SUPERMARKETS' GAIN

David Orgel

Like almost all places in America, Wyndmoor, Pa. has been heavily impacted by rising fuel prices. During a recent visit I saw the results along Willow Grove Avenue, a major thoroughfare. The fuel station price postings were causing sticker shock. A sign in front of the local True Value Hardware store read: "Save Gas, Shop Local." The proprietor of nearby Tony's Pizza City lamented a slight falloff in sales as squeezed families began to eschew eating out in favor of shopping in grocery stores.

You know business is tough when the pizza places are hurting.

This could be a tailor-made period for supermarkets to strut their stuff. If a segment of consumers around the nation cuts back on eating out, then food stores will be seen as the alternative. Call it restaurant- meal replacement (RMR), to turn a recent industry phrase on its head.

An ACNielsen consumer survey released last week found that 31% of respondents are eating out less often. Jonathan Ziegler, an analyst with J.M. Dutton & Associates, El Dorado, Calif., said in an SN article this week (Page 12) that higher fuel prices will mean more reliance on supermarkets as opposed to food-service outlets. He predicted that consumers will trade down to private brands, which he expected will increase retailer margins.

To be fair, many supermarkets haven't yet reported a bump in sales from consumers abandoning restaurants. But some are beginning to notice or anticipate the trend. "It started with the high-end restaurants feeling it a little bit, and now the middle-of-the-road restaurants are starting to feel the pinch," said John A. DeJesus, president/CEO of 11-unit Foodmaster Super Markets, Chelsea, Mass., in an article in this week's SN (Page 1). "The only way [consumers] are going to make their dollars last longer is to buy groceries and cook at home, and cut out the extraordinary expenses -- and going out to eat is one of them."

Supermarkets will be victimized by higher fuel-related costs on the transportation and cost-of-goods side. But at the front end they have a rare opportunity to reintroduce themselves to a clientele looking to save money. Those customers will hope to replicate the restaurant experience as best they can with inexpensive meal solutions from supermarkets. There's no better time to make sure supermarket delis, bakeries and meal centers are in good shape. Same thing with cross merchandising strategies for meal planning. Those supermarkets with fuel stations have an opportunity to more closely link fuel and food marketing programs to further save customers money.

It can't hurt to remind customers that the one-stop-shopping approach of supermarkets is a gas-saver. That point takes on patriotic overtones now that President Bush has asked Americans to conserve gasoline by driving less. Of course, supermarkets don't have a corner on the one-stop-shopping market, which is also a prime appeal of supercenters.

The key point is that there's a limited window of opportunity for supermarkets. Even if retailers pick up only a modest amount of incremental shopper traffic, they have a chance to influence future consumer behavior patterns. But the window will close quickly if fuel prices head downward or if consumers become accustomed to a new norm. At that point, supermarkets will no longer be in the driver's seat.