The transformation of the Northeast Ohio grocery business over the last 40 years has been dramatic.
It began the era as a handful of home-grown supermarkets — successors to family butcher shops, creameries, and fruit and vegetable peddlers — fighting for shoppers' dollars in a market that wasn't seeing population growth.
Now, the local food business is dominated by corporate behemoths.
Giant Eagle Inc. of Pittsburgh is the biggest player in the market, and others have sought to carve out their share, resulting in a grocery business that has been sliced and diced into segments.
While the result is more variety, the consequence is higher-than-average food prices in the region.
Local control over the business was already unraveling in 1980. The market was overstored, which led to periodic price wars among Fisher Foods (whose stores operated as Fazio's), First National Supermarkets (Pick-n-Pay and, later, Finast stores) and Stop and Shop. The fierceness of the competition drove several strong, national competitors out of the local market. Grocers such as A&P and Kroger could choose to put their resources into markets where margins were fatter.
But then, the price wars receded. It turned out the three local chains were prosecuted for a price-fixing scheme in 1982 that had pushed the area's food prices to more than 5% above the national average.
The settlement of the case cost the local companies dearly. The grocers had to pay shoppers back with $20 million of scrip, or $20 to each of 1 million Northeast Ohio households, that could be redeemed over time for groceries at any store, not just the offending chains. Had the region been growing, they might have recovered. However, without a growing population, retail sales lagged the rest of the nation. Food sales in Greater Cleveland actually declined by 2% between 1982 and 1987, according to a 1990 Case Western Reserve University report.
Fisher Foods closed 10 stores in 1983 before selling out in 1987 to a new company, Riser Foods Inc., that was formed by American Seaway Foods Inc., a wholesale grocer, and the Rini-Rego chain of stores that had been part of the Stop-n-Shop co-operative.
In 1988, First National sold an 80% interest (later 100%) to a Dutch retailer. In 1996, Koninklijke Ahold N.V. would close its Finast store headquarters and merge it with its Tops division, eventually changing the store names to Tops. In 1997, Giant Eagle paid $403 million for Riser Foods and its 36 Rini-Rego Stop-N-Shop supermarkets, later buying the independent Reider's and Russo's Stop-N-Shop stores.
In 2006, Ahold, which by then had 46 stores in Northeast Ohio, decided to abandon the region, selling 18 of its stores to Giant Eagle while three ended up with Dave's Markets, and Heinen's took over a Strongsville store. The rest of the locations were abandoned.
Today, Giant Eagle dominates the market. A 2009 survey for Progressive Grocery (the latest available) found the Pittsburgh-based supermarket chain held a 35.8% share of the Northeast Ohio grocery market. No. 2 was Walmart Inc. with 19.4% of the market. No local chain — not Akron's Fred W. Albrecht Grocery Co.'s Acme stores (4.9%), Heinen's (3.5%), Marc's discount drug store chain (3.2%) nor Dave's Markets (2.7%) — had significant shares of the grocery market.
Along with the large national chains, smaller, more specialized firms have taken slices of the market that might otherwise go to the local grocers. Whole Foods, Costco, Trader Joe's and Aldi's attract grocery shoppers looking for something different, either low prices or high-end products.
So, while the big chains employ thousands of local people, the profits go back to Pittsburgh, Bentonville, Ark., or elsewhere.
And, according to a 2013-2014 study of local consumer prices, the portion of a Cleveland household's budget spent on food, at 13.7%, was higher than the 12.8% U.S. average.
"There is no place in the country where there is more rivalry. It's unbelievable rivalry." — Julie Kravitz, chairman of Pick-n-Pay Supermarkets Inc., in 1977
"It's an intensely competitive market with little population growth to support new entrants." — James Wiggins, food industry securities analyst with Cleveland's McDonald & Co. Securities Inc., in 1991
"The loss of local control was kind of the inevitable result of consolidation. Change required too much capital to stay independent." — Richard Bogomolny, CEO of First National Supermarkets from 1975 to 1992, to Crain's in 2000
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October 18, 2020 at 03:00PM
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Crain's Cleveland Look Back: Slow growth wrests control of local grocers - Crain's Cleveland Business
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