WAL-MART READIES SUPERCENTER EXPANSION IN THE GARDEN STATE 2004-11-22 (2)

Mark Hamstra

NEW BRUNSWICK, N.J. -- The Garden State will soon sprout supercenters operated by Wal-Mart Stores, Bentonville, Ark., and that should be of major concern for existing food retailers there, according to a report released last week by Rutgers, the State University of New Jersey, based here.

According to the report, the pending introduction of Wal-Mart supercenters and their rock-bottom prices on groceries to New Jersey -- one of the few states that has yet to host a supercenter -- will pose a "significant threat" to the state's current grocery operators.

"The economic and social backlash may very well be felt by workers, consumers, policy-makers and taxpayers from Trenton to High Point to Cape May," the report states.

Critics of Wal-Mart's supercenters cite the company's relatively weak wages and benefits compared with those provided by the supermarkets. In several New Jersey communities, traffic congestion also has been cited as a concern of local residents. Some local communities, along with the United Food and Commercial Workers union in the state, are battling Wal-Mart's growth as they have in California and in other communities around the country.

The Rutgers report -- the first of a two-part study -- also notes the pro-Wal-Mart stance that the supercenters will promote lower prices, create construction and retail jobs, and improve product availability and convenience.

Mia Masten, a Wal-Mart spokeswoman, told SN last week that it hasn't been any more or less difficult for the company to gain approval to open in New Jersey than it has in other states.

"When we're given the opportunity to explain what a supercenter is, the communities have been receptive," she said. "They've never had a supercenter there before, so we have to tell them what it's all about."

The first New Jersey supercenter is slated to open late next year in Turnersville at the outskirts of the Philadelphia suburbs in southern New Jersey. It will be an expansion of the company's first discount store in the state, which opened in 1991. Masten said the company also expects it will soon gain approval for the expansion of a discount store in Lumberton, and it is in the early stages of seeking approval in Toms River and Pennsville.

Wal-Mart already operates 37 traditional discount stores and nine Sam's Clubs in New Jersey.

Observers say it may be more difficult for the company to gain inroads in the New Jersey grocery market than it has been in other parts of the country for several reasons, including the lack of available real estate, the strong union presence and the strength of the existing operators.

"I don't think the existing chains are going to make it easy on them," said Matthew P. Casey, site-selection consultant based in Clark, N.J. "I think the New York-New Jersey metro area is probably the most cutthroat competitive grocery market that I've seen in the nation."

The state's No. 1 supermarket banner, Shop-Rite, has the strength of the Elizabeth, N.J.-based Wakefern cooperative behind it, he pointed out, while Pathmark, A&P, Stop & Shop and Foodtown also have been steeled through years of aggressive competition. In the southern and western parts of the state, where Wal-Mart has the deepest penetration of discount stores, chain supermarket competition also includes Weis Markets; Acme, a division of Albertsons, Boise, Idaho; Genuardi's, a division of Safeway, Pleasanton, Calif.; and Giant Food of Landover, Md.

Casey said he felt Shop-Rite was at a particular advantage relative to the others because of its status as a privately owned cooperative.

"They have a lot of leeway as far as what they can do in their stores," he said. "If they want to lower margins, they can do that. If they want to add labor into the stores to improve the service image, they can do that."

Wakefern spokeswoman Karen Meleta said she thinks the chain's local ownership also will give it an advantage in competing against Wal-Mart's supercenters.

"Each of our stores is independently owned and operated, and as a result of that, our members really can deliver, community by community, a unique offering," she said. "For example, in our bakeries, there's a lot of scratch baking, and we produce a lot of products that specific communities are looking for. We believe that presents a competitive advantage, and we believe our members' stores will have the products that customers prefer."

The UFCW has been active in opposing the influx of supercenters to New Jersey.

"Wal-Mart is the single biggest enemy, not just to the supermarket industry, but to the entire country," said Harvey Whille, president, UFCW Local 1262, Clifton, N.J., the largest supermarket local in the state. "When Wal-Mart takes jobs away from supermarkets that are paying $20 an hour, or at least in the high teens, and replaces them with jobs that are paying $6 and $7 an hour, that's bad for America."

Whille said he has been very vocal in expressing that view "whenever I get the chance to tell someone."

He recently appeared, along with representatives from the AFL-CIO, to protest the planned Wal-Mart supercenter in Toms River. He said additional protests were planned, and he indicated that the union might be backing legislative action to restrict Wal-Mart's development plans for the state.

"We've got some things going on in Trenton [the state capital]," he said, although he declined to disclose specifics.

Like Casey and Meleta, Whille said he believed Wal-Mart would face significant competition as it seeks to expand its supercenters in New Jersey.

"The supermarket companies that are here are not going to just say, 'Hey Wal-Mart, come on in and take our business,"' he said.

According to the Rutgers study, New Jersey is home to about 500 supermarkets operated by "major firms." It is the sixth-most unionized state in the country, with 19.4% of all workers represented by labor organization, according the U.S. Department of Labor, and 96.2% of all stores operated by major supermarket firms have union employees.

Supermarkets in the state employ about 67,530 workers, according to the Rutgers study.