BALL'S: FACING DOWN SUPER CHALLENGES

David Ghitelman

KANSAS CITY, Kan. -- A tug-of-war is being played out between two regional heavyweights here.

Industry sources told SN they were uncertain whether Ball's Food Stores here or Hy-Vee, West Des Moines, Iowa, had the leading market share in this metro market. Regardless, Ball's has spent the last 80 years concentrating solely on this market.

But both Midwestern natives now face a common foe -- Wal-Mart and its supercenter expansion.

Hy-Vee has 24 stores in the market. Ball's, which operates only in the Kansas City area, has 28, split between two formats: 13 upscale, service-oriented Hen House Markets and 15 price-impact Ball's Price Choppers. (There are some 25 other Price Choppers in the Kansas City market not operated by Ball's. Associated Wholesale Grocers here handles distribution for the Hen House and Ball's and non-Ball's Price Chopper stores.)

At the beginning of the decade, Ball's had a slight lead over Hy-Vee, whose stores are also upscale and high-service. But the situation has changed dramatically with the arrival of Wal-Mart Supercenters and others. Ball's competes with some 16 supercenters, according to industry sources.

Ball's executives declined to be interviewed for this story.

Further heating up the competitive scene, Wal-Mart Stores, Bentonville, Ark., has started to introduce its Neighborhood Markets format in the metro area, according to Alan Chapman, a supermarket industry veteran and partner in the marketing, advertising and public relations firm of Wilson-Chapman-Re here.

"Kansas City is a strange market," Chapman noted. None of the three largest U.S. supermarket companies -- Albertsons, Boise, Idaho; Kroger Co., Cincinnati; Safeway, Pleasanton, Calif. -- operates there. Chapman explained that in the early 1960s, the Kansas City market was divided more or less evenly among four major players, three nationals (Safeway, Kroger and A&P, Montvale, N.J.) and one local, Milgram. In the 1970s, however, the national companies left town, deterred in part by a highly contentious, strike-prone labor situation, Chapman said. Another factor, he added, was the rise of price-impact warehouse-style operators, like Ball's Price Choppers.

(Meanwhile, Milgram was a victim of industry consolidation, acquired in the 1980s by Wetterau, Hazelton, Mo., which itself was purchased by Supervalu, Minneapolis, in 1992.)

In the resulting calm, Ball's prospered. Founded in 1923 by Sidney and Molly Ball, the company opened a second store 11 years later that featured the then-innovative practice of having customers pay in cash instead of credit. When their son, Fred Ball, now the company's chairman, went into the family business in 1954, it had four stores. Currently, Fred Ball shares management of the company with his son David Ball, president and chief executive officer.

In an interview with SN last year, Fred Ball explained that limiting his company to the Kansas City region has played an important role in its success. "We have a good business where we operate, and we're just kind of satisfied with that," he said.

Innovation has played a key role in the company's success, Ball observed, citing the expansion of his stores' perishables offerings. "We saw that happening quite a few years ago," he said. "So we moved away from small departments and made those departments large and increased their variety."

More recently, however, the arrival of Wal-Mart appears to have become an even greater challenge. An industry source said Ball's has responded by unconventional ways of building sales, including in-store promotions and one-day advertisements.

Noted the source, "Like anybody else that has been hit with the onslaught of supercenters, they've not been able to grow. They're just learning to survive with all the added grocery square feet in the market."

Ball's

Market Position: N/A

Main Competitors: Hy-Vee, Wal-Mart

Distinguishing Features: Hen House Markets -- perishables, prepared foods; Ball's Price Chopper -- price

Biggest Challenge: Wal-Mart