SAFEWAY SEATTLE UNCORKS REDUCTION IN WINE MARGINS

RICHARD TURCSIK

SEATTLE -- Safeway's Seattle division here has reduced its wine margins by 5% to a 25% markup, putting Safeway on par with Albertson's and several leading independent wine shops.

Local observers told SN the move last month is an attempt to recoup sales and market share lost in recent years as Safeway slashed scores of slow-moving wine stockkeeping units from its inventories in an effort to make the department more profitable.

"It seems to me that Safeway's taking a 5% decrease is a last-ditch effort to regain some market share. It may affect the rest of the market if they can pull enough away, but it is too early to tell," said an industry observer.

Tom Stockley, the wine columnist at The Seattle Times, told SN that in recent years Safeway "has been left in the dust" as other retailers have increased their selections and sharpened their prices.

"Without question, Safeway used to be the leader here in the Northwest. They had fabulous wine departments and they had a wine specialist to wait on you; but in recent years they have just cut way back on their wine," he said.

"They just do not have the wine selection that they used to, and Albertson's, Quality Food Centers, Larry's Markets and Fred Meyer have just gone far ahead of them both in selection and, in recent years, pricing, and in having knowledgeable people to wait on you," he said.

Officials at Safeway's regional office here declined to comment, referring calls to Safeway's corporate headquarters in Oakland, Calif. Debra Lambert, a Safeway spokeswoman, said each division operates autonomously and has the authority to set its own prices.

"We're always adjusting our prices to be competitive in the marketplace," she told SN.

A wine clerk at one Safeway here said the chain has put up new shelf tags reflecting the lower prices. Case discounts of 10% are still offered on items that are not featured in the weekly ad, he said.

Stockley said Safeway's announcement may very well help it win back some lost sales.

"Safeway was really cutting back on their wine selection and inventory a lot, much to the frustration of all of the wholesalers here who had new things they wanted to show them, but Safeway wasn't interested. I'm certain that has hurt their wine sales, but they sort of bounced back with this announcement the other day, and it stirred a lot of interest," he said.

"It will be interesting to see if people do indeed start returning to Safeway who instead might have gone shopping at QFC or Larry's because the selection was better," he said.

But the industry observer said Safeway definitely has its work cut out in attempting to win back market share.

"Safeway's service level went down the tubes when they decided to cut back on inventory and service. That effectively killed their carriage trade. They know that the wine market is very viable and profitable in Seattle, but I doubt they will be able to offer the same kind of selection and quality service that the wine customers in Seattle have come to expect.