GARLAND, Texas — Celebrity chef Tim Love performed a recent cooking demonstration at a Save-A-Lot store here, whipping up a batch of hot Texas chili.
![Aldi made its debut in the Dallas market last month and has big growth plans.](http://supermarketnews.com/images/0405_SNAldi.jpg)
The event featuring the cowboy-hat-wearing chef of Fort Worth's acclaimed Lonesome Dove Bistro and television programs Iron Chef America and Top Chef Masters could be seen as Save-A-Lot's first counterpunch to a new offensive from Aldi, which a week before opened its first 11 stores in the Dallas market. Aldi, the limited-assortment discounter based in Batavia, Ill., has another 10 Texas openings planned this month, six on the schedule for May, and at least two more this fall. St. Louis-based Save-A-Lot operates 12 Dallas-area stores with another three scheduled to open later this year.
That's a bowlful of hot discount competition for Dallas, a market where the success of Wal-Mart Supercenters has long since illustrated the power of price.
“I see an interesting battle between Aldi and Save-A-Lot coming, because they're similar in many ways,” Bob Ginsburg, vice president of Dallas real estate services firm CB Richard Ellis, told SN in an interview last week. “They are going after a similar customer.”
That customer, Ginsburg noted, isn't necessarily defined by income or ethnicity, but by their attitude toward saving money at the grocery store. And Dallas, he said, has long rewarded retailers who can deliver on that message.
“Aldi doesn't seem to care if the customer is of average income, below-average income or above-average income,” he said. “They've taken on North Dallas — an affluent swath all the way up to Plano — and opened stores in that market. It seems to me, Aldi feels that their message is heard by all the economic classes.
“Value always resonates with the consumer here,” Ginsburg added. “If you are successful in communicating to the consumer that they have value and quality, you will be very well received here.”
A strong value message — along with convenience in a sprawling and at times congested market — helped Wal-Mart overtake conventional supermarkets for the market share lead in the Dallas market more than five years ago. Demographers consider the Dallas market to include 11 counties and the cities of Dallas and Fort Worth. Population in 2009 edged over 6.5 million.
While Wal-Mart has made its own recent pronouncements over price, the threat of discounters delivering superior pricing — along with an appetite for value strengthened by the recession — could nip at the giant's heels, sources said. Wal-Mart had market share in 2009 of more than 30% of the food share between its Supercenters, Neighborhood Market stores and Sam's Club warehouses, according to Metro Market Studies, Tucson, Ariz.
“For 50 years, conventional grocery stores have had the leading market shares and when new competition came in, the share came out of the supermarkets because they have the most to lose,” explained Neil Stern, senior partner at McMillan Doolittle, Chicago. “That is not the case in Dallas, which has been overrun by Wal-Mart.”
Stern in an article in SN on the Dallas market five years ago noted the growth of Wal-Mart had put a tremendous strain on “big three” conventional operators Kroger, Albertsons and Safeway, which all had a presence there. “It's a classic situation where somebody's going to wind up leaving,” he said. “There are too many players and too much competition for it to be a viable market for everyone who is there now.”
That prediction played itself out as Albertsons — a one-time Dallas market leader — and Minyard Food Stores were sold and shed dozens of stores between them. Both brands retain a presence in Dallas, but significantly smaller ones than they held in 2005.
Beneficiaries included Cincinnati-based Kroger Co., the only of the three conventionals to have increased its market share since 2005, Metro Market Studies figures show. In January, Kroger opened its first food-and-general-merchandise Kroger Marketplace store in Frisco, and is planning a second such store in Fort Worth next year. Kroger has tended to build Marketplace stores where it already has a strong presence.
Specialty, ethnic and discount operators — including Aldi, which has crafted its Dallas footprint in part from former Albertsons stores — are also rushing to fill the void, Ginsburg said. Newly arrived Asian-focused retailers including H-Mart and 99 Ranch are tapping into demand from large South Asian populations, and specialty Hispanic stores led by Fiesta Mart — whose Houston-based parent, Grocers Supply Co., acquired 37 stores from Minyard in 2008 — have also grown rapidly.
“I'd say the size of the market of Hispanic concepts has at least tripled over the last five years,” Ginsburg said. “And that only stands to reason — there is a large Hispanic population here.”
A flight to value has also helped natural-food purveyors with a value image — Sprouts Farmers Market and Newflower Farmers Market — to establish a recent foothold in the Dallas market while upscale-leaning retailers, including Safeway's Tom Thumb and Whole Foods, scrambled to get pricing in order.
“Tom Thumb kind of missed the mark the last few years because they'd begun remodeling stores to a more gourmet, upscale look, and when the recession hit they had the wrong message for the time,” Ginsburg said. “But they've responded well since then, promoting value and price points. I think we'll see Tom Thumb get some customers back, now that they're confident that they're not overpaying.”