PRICE WAR COULD TEST WAKEFERN'S LEADERSHIP IN N.Y. AREA

Mark Hamstra

One of the first things I was told when I moved into my former neighborhood in New Jersey 12 years ago was not to shop at A&P.

"ShopRite has much better prices," an elderly woman who lived upstairs advised.

But changes are afoot in the Garden State, and elsewhere in the New York-to-Philadelphia corridor, that may soon put her grandmotherly wisdom to the test.

After A&P's agreement to sell off its Canadian division for about $1.475 billion last month, and with Pathmark buoyed by an infusion of $150 million from Yucaipa, some analysts believe the region is poised to enter a much more price-competitive era. Those companies, the thinking goes, will need to show some sales growth in return for their investments, and they are likely to try to drive that growth with aggressive promotions, markdowns and store renovations.

That's great news for my former neighbors, but it could lead to some serious bloodletting among the chains there. Wakefern's ShopRite banner has always been the most aggressive of the local operators in terms of price, with its twice-yearly "can-can" sales and limited-time, promotional offers. Pathmark has tried to be price-competitive, often with mixed results, and A&P has only recently had some success positioning itself as a low-price operator with the introduction of its Food Basics banner.

Adding to the mix is the advance of Wal-Mart Supercenters into the area. By next year New Jersey is slated to see the first supermarket-and-discount-store combo units from the Bentonville, Ark.-based company, which is also determined to bore into the Big Apple.

The impending price war, if it does come to pass, could set the stage for what many believe will be a shakeout that leads to consolidation. Speculation about a possible A&P-Pathmark merger has been hot lately, now that both are supplied by C&S Wholesale Grocers, but Albertsons, Kroger and Delhaize have also been reported to be potential suitors for retail real estate in the region.

Although ShopRite is likely to suffer some blows from the influx of fresh capital to the area, it will just as likely remain the supermarket banner to beat. The company's entrepreneurial spirit and rock-solid history of low-price leadership will help it to endure the assaults of its rivals, much as chains like H-E-B and Hy-Vee have defended their turf in Texas and the Midwest, respectively. As SN observed during a visit to Wakefern's annual meeting this year, Wakefern is powered by the collective experience of 42 battle-hardened operators with a thorough understanding of their local markets.

One area that can be expected to remain isolated from such a battle is Manhattan, where high prices are as much a part of the tableaux as pretzel carts and street-corner marketers stuffing fliers into tourists' hands. A news feature beginning on Page 18 illustrates that Manhattanites also tend to be "foodies" who are willing to pay for a gourmet experience. As my elderly neighbor explained to me one night, as she waited for her date, a man 20 years her junior driving a convertible, sometimes there's more to life than looking for low prices.