GROCERS WILL PRICE TO WIN IN GAS CRISIS

STEPHANIE LOUGHRAN

COPPELL, Texas -- With gas prices expected to be in the $2-per-gallon range this summer, retailers and analysts said fuel centers attached to supermarkets are in a good position to compete on price and weather a possible downturn in gasoline consumption.

Supermarket operators, who are increasingly grabbing market share from traditional gas retailers, said aggressive pricing is their main strategy.

"I think it will be good for us because we're so competitively priced," said Ted Fullerton, vice president of retail operations for Minyard Food Stores here, which has 14 fuel centers at its Minyard Food Stores, Sack 'n Save and Carnival Food Stores. As retailers charge more and more for gas, "the consumer will start paying more attention to [price]."

Jon Hauptman, vice president of Willard Bishop Consulting, Barrington, Ill., also said price is a key factor when consumers are deciding where to go for a fill-up.

"All petroleum marketers will be hit hard," Hauptman said. "Those who aggressively sell at lower prices will be hit less hard."

This year, low supplier inventory, high seasonal demand and insufficient refining capacity have combined to drive prices higher heading into summer. According to the Heathrow, Fla.-based American Automobile Association's (AAA) Daily Fuel Gauge Report, the average price of regular unleaded gasoline increased more than 15 cents per gallon from late March to late April, to $1.63, and further increases were expected in May.

The New York Post recently reported that gas prices even went past the $2 a gallon mark in a number of gas stations in metropolitan New York.

As gasoline prices soared to $1.88 per gallon in California at presstime, some supermarket retailers there said they still hadn't felt any impact.

"It hasn't affected us yet," said Dave Huettl, assistant grocery sales manager for Albertson's 314-store Southern California division in Fullerton, Calif. If fuel prices skyrocket high enough to affect the retailer's sales, Huettl said Albertson's would address the situation.

One source at Ingles Markets, Asheville, N.C., which operates one Ingles Gas Express fuel center and has two more under construction, said gas sales will still flow nonetheless. "Sales-wise, we're not concerned," said Mike Setzer, assistant manager at Ingles' Fletcher, N.C., store. "People have to buy gas -- it's just one of those things, like milk and bread." He said the retailer tries to match its local competitors' prices.

Geoff Houlton, consultant for international energy industry consulting firm Purvin & Gertz, Houston, said supermarkets can weather a margin squeeze on gas better than gas retailers can. "It's not [supermarkets'] main moneymaker, so the margins necessary are not as great as a retail outlet solely selling gasoline," he said.

Because supermarkets have only gotten into the gas retailing game in the past few years, Hauptman of Willard Bishop Consulting said supermarkets' gas pumps are very technologically advanced, with state-of-the-art systems and pay-at-the-pump options.

"New technology is important," he said. "Putting in pay-at-the-pump alone increases inside merchandise sales, because there are no long lines waiting to pay for gas."