Grocery retailers across the United States have slowed their expansions in favor of refurbishing old sites and beefing up specialty departments, but in the Baltimore area a handful of chains are racing to build stores in a battle for market share.
Supermarket construction has reached a frenzied, nearly unprecedented pace as local and national companies extend their reach into the region, real estate experts say.
By the end of next year, more than 40 new or expanded stores will have opened in just over a three-year span, according to a study by KLNB Inc., the Towson real estate brokerage firm.
Leading the expansion are Metro Food Markets, a division of Richfood Holdings Inc. of Richmond, Va., and Food Lion of Salisbury, N.C., each of which will have opened nine new stores in the area during the period.
Super Fresh, a division of A&P; of Montvale, N.J., and Weis Markets Inc., of Sunbury, Pa., will each have opened six supermarkets, according to the study. Safeway Inc., of Pleasanton, Calif., will have opened or refurbished seven stores.
Giant Food Inc. has opened stores on Edmondson Avenue in Baltimore and in Lynwood Square in Ellicott City. The chain is No. 1 in the Baltimore market, with 29.3 percent of the area's $3.84 billion in gross annual sales, according to the trade journal Food World.
"We've been on a heck of a boom for building," said Patrick A. M. Miller, a commercial specialist and partner at KLNB. "It's a function of the financial wherewithal more than anything else. They've got the pockets to come in and do a major expansion program.
"Baltimore is a strong retail trade area, where we have continued growth and prosperity," he said. "As a result, the food store chains see that as a viable place to conduct that expansion."
Five of the chains are building stores of about 55,000 to 65,000 square feet, while Food Lion is building no-frill stores in the 39,000- to 48,000-square foot range. Most, however, stress convenience and variety, with departments that offer everything from in-store banking to sushi and gourmet cheese.
Metro even has plans to construct discount gas stations in the parking lots of its stores.
Busy areas with strong demographics, such as Timonium and Cockeysville, have been especially hot for new store development. Six stores have opened or are planned in those two communities alone.
"We consider the Baltimore market definitely a growth market for Food Lion," said Chris Ahearn, spokeswoman for the chain, which opened its first store in the region just over two years ago and last year opened 11 of 79 new stores in Maryland.
"There is good potential for supermarkets entering the market. As we build more stores, we're building momentum and building a customer base. That enables us to seek more sites."
Chains with large-format stores have dominated, but niche merchants Aldi Food and Sav-a-Lot have also discovered the area.
With typically smaller stores -- about 15,000 square feet -- the chains use a no-frills concept targeting the most price-conscious consumers. These stores have prospered in inner-city and suburban areas that border cities, according to the KLNB study.
For consumers, rapid growth should be a plus and help drive prices down, KLNB's Miller said.
But growth will come at the expense of weaker merchants in inferior locations. In the next three to five years, Miller expects the supermarket landscape to shift radically as the more vulnerable chains close stores or go out of business altogether.
"First [new store growth] will eat away at less productive older units, and then you'll get to the point of too much food store square footage for the trade area," he said, adding that the region hasn't reached the saturation point yet.
But others say the area already has too many stores. The flurry of activity is not so much an increase as it is a sign that big operators are getting bigger, at the expense of the dwindling independent chains, said Jeff Metzger, publisher of Food World, the Columbia-based trade journal.
"The balance of power in Baltimore has definitely shifted over the last five years, as it has nationally," Metzger said. "You're seeing the guys with the deeper pockets expanding their operations. The lineup is such that in many areas it is the big guys, and they're duking it out."
It's unclear how well the region can sustain all the new supermarkets over the long term, especially as mass discounters become more competitive and consumer loyalty diminishes.
Even though a well-capitalized company might maintain an unprofitable store longer than an independent, "there will have to be fallout," Metzger said. "Call it ego or supreme confidence, these guys think they have a better mousetrap."
For Safeway, Baltimore represents the fastest-growing part of the company's Eastern Division, said Greg TenEyck, a division spokesman. The chain opened stores last year in Baltimore and in Columbia, as well as expanded units in Columbia and Pasadena. Safeway also is building stores in Bel Air and Westminster, and plans another in Crofton.
"We plan to continue that expansion over the next few years," TenEyck said. "We just feel that there are markets that are under-served and we feel Safeway has the correct strategy to reach those shoppers. When we find an area that's under-served, those would be areas we would target for a new store."
For Metro, rapid growth is part of a strategy to boost market share, said John Ryder, the chain's chief executive officer. Five more stores will open this year.
"We've been expanding every year, but we've accelerated it," Ryder said. "We're building more than anybody else."
While the pace of building remains brisk in the Baltimore area, it has slowed somewhat nationally, according to the Food Marketing Institute of Washington.
In 1998, 4.1 percent of existing supermarkets closed, while stores opened at a rate of 3.7 percent, said Carole Throssell, a spokeswoman for the institute.
"When you factor in the variables, overall the number of stores is holding steady and that has been the case two years in a row," Throssell said. "There have been so many mergers and acquisitions in the industry, and a lot are not opening new stores. They are investing money in refurbishing old stores and in new departments in response to consumer convenience, opening pharmacies and photo development labs or partnering with food service organizations [to offer prepared meals]."
Not since 1994 have store openings outpaced store closings. For each of the first four years of the decade, stores closed at a rate of 2.8 percent, on average, while stores opened at a rate of 4.1 percent, Throssell said.
The recent brisk pace of local building is more common to the mid-Atlantic region as a whole, she said.
"The mid-Atlantic area is one of the areas in the country that has not had as many stores as others," she said.
Pub Date: 3/14/99