'TOUGHEST FOOD FIGHT IN MODERN SUPERMARKET HISTORY' 2004-11-22 (1)

David Merrefield

The headline above this column sets out quite a claim, doesn't it? It's a paraphrase of a remark made by an industry observer with reference to the upcoming clash of supercenters in Michigan that will pit incumbent Meijer against insurgent Wal-Mart Stores.

You'll see much about what prompted such an observation in the news feature about the Michigan market that's referenced on Page 1, and that begins on Page 14. Let's take a look at what is at stake, particularly for Meijer. That company, based in Grand Rapids, Mich., has several interesting dynamics. Among them is that it's 70 years old this year, it now operates more than 150 stores, it's privately held, and it's the originator of the supercenter concept. It's impossible to walk into a Meijer without realizing immediately that Meijer supercenters are the model upon which Wal-Mart based its supercenters.

Now those companies are set to clash as Wal-Mart pours supercenters into Michigan. Right now, Wal-Mart has about 30 supercenters in Michigan. The expectation is the number will rise at a fast pace, although it isn't known how many are planned for the state. Several months ago, a Meijer spokesman told SN there were 50 supercenters in Meijer's competitive set, and as many as 350 may appear by 2007. That count acknowledges Target's supercenters, as well as Wal-Mart's. Meijer has stores in five states.

Meijer is getting ready. It has already instituted a couple of rounds of job cuts in a bid to sponsor a reduction of the price-point gap between itself and competitors. It has also been raising funds by selling some tracts of land. So it looks like there will be quite a battle ahead.

That raises a question: What are the thoughts of Meijer's executives concerning their prospects for success against the newly massing competition? It's not possible to know directly, since they weren't available to comment during the preparation of this week's SN news feature. Indeed, Meijer's executives are typically reluctant participants in the news-gathering process.

Luckily, though, on the Internet there is a question-and-answer session with Hank Meijer, chief executive officer, to which we're all privy at Meijer.com. In it, he alludes to competitive pressures, past and present. Hank is the grandson of Hendrik, the founder. Here's a little of what he says: "For the first generation [70 years ago], the challenge was competing against the early chain stores. Only a handful of independents survived against the big chains. There's some parallels there with what we're undergoing today." At another point, he says his grandfather and father were "animated ... to see how we could stand up to A&P." The second generation also launched the combined food and nonfood format, and "got people comfortable about buying their groceries and other merchandise under one roof."

Now, he relates, "we've gone from competing against enormous rivals, to a new format, to competing against enormous rivals in that new format. The only way to compete against the mega-chains is on our own merits."

Lots of truth in that.