Grocery wars heat up as stores vie to show value

Aug. 12, 2019

The grocery aisles at Hy-Vee now require a little more reading.

Almost every shelf has at least one sign – from “low price lockdowns” to temporary price declines, Fuel Saver offers and, more recently, comparison-based prices.

But no matter what the tactic, the underlying strategy is the same: Convince customers this is the place to save money.

“While our pricing strategies are proprietary information and not something that we publicly discuss, we can confirm that we are being more aggressive in our announcement about our great deals and pricing that we are offering customers to show the low-cost options and values that we, too, have at our stores,” Christina Gayman, Hy-Vee’s director of public relations, said in a statement.

While the new approach hasn’t been implemented yet in all Sioux Falls stores, it is a corporate initiative, Gayman said. It  will be coming to all seven Hy-Vee locations.

The comparison-based pricing in particular might catch customers by surprise.

In the Sioux Falls stores that have rolled it out, it’s prevalent. So far, most comparisons take on Fareway. The Hy-Vee at 57th Street and Cliff Avenue, for instance, was filled with signage comparing Hy-Vee prices on meat, canned vegetables and pancake mix to Fareway’s prices.

“Fareway has been proud to provide consumers with everyday low prices for 81 years,” Emily Toribio, Fareway’s corporate outreach and communications manager, said in a statement.

“Each Fareway store is comprised of tens of thousands of items. Most of these items are priced below like brands of our local competitors on any given day.”

Going head-to-head with Hy-Vee is nothing new, though. Each week, in markets where the stores compete, Fareway matches Hy-Vee pricing on its shelves.

“Our customers have told us for many years they appreciate this,” Toribio said. “Customers are smart; they understand how to properly compare prices on identical items and if they are saving money on their entire shopping list, not just a few items.”

Fareway also is in the midst of what Toribio calls a complete overhaul of its in-store signage program that will be rolled out by fall.

“Based on customer feedback, we have developed signage that will more clearly communicate to the consumer the pricing at the value represented at the shelf,” she said.

Hy-Vee’s liquor area also has posted comparisons to pricing at JJ’s Wine, Spirits & Cigars, prompting owner Tom Slattery to address it in an email newsletter to customers.

“Unlike this particular grocery chain, we don’t like to play with our pricing on a weekly basis. Instead, we prefer pricing stability tied to our VIP rewards program and quantity discounts, (which) will give the customer the best bang for the buck over a longer period of time,” he said. “That being said, we are trying to keep up and adjust prices accordingly, but please know that whatever price they are offering — or any other retailer, for that matter, in the Sioux Falls area — we will match or beat.”

The comparison-based pricing is a departure from previous Hy-Vee marketing strategies, acknowledged Phil Lempert, a grocery industry analyst, author and speaker known as The Supermarket Guru.

“I would say in today’s world everybody is a little nervous about money,” he said.

“We see what goes on with the stock market every day and tariffs, and I think it’s smart because they’re getting in front of that and they want to own the position of value. It’s not at the exclusion of their other values when it comes to health and wellness and everything else they’re doing, but for the average consumer, they are worried about money and financial security and the future … and I think this does reinforce them as the place to shop.”

Between weather events and trade wars, the grocery industry has found itself in a difficult market, he added.

“It’s tough. It’s really tough. A lot of unknown because of tariffs and because of climate change. We’re seeing prices going up, and the retailer is pushing hard to not have prices go up, so the people getting hurt the most are the consumer packaged goods companies because they have to absorb more of those costs.”

Some companies are beginning to reduce the size of their packages so they don’t have to raise prices, Lempert said. He predicts food costs will go up for the next year or two. But consumers, reluctant to spend, are placing their money where they feel they get the best value and quality, he said.

“I look at Aldi as a perfect example of a retailer that’s about to give great value and quality on their store brands, and we’re beginning to see more retailers push their own brands.”

At Hy-Vee, he’s also watching for a new clothing line being tested in its Twin Cities stores. The Joe Fresh line of apparel and accessories is being brought into Hy-Vee stores in Des Moines; Lincoln, Neb.; Omaha; Minneapolis; and Rochester, Minn.

It’s a departure from a clothing brand tried a few years ago that focused more on “fast fashion” and wasn’t brought into the Sioux Falls market.

“The other clothing line was probably too hip,” Lempert said. “This line is … more conservative styles and maybe higher quality and better priced.”

The emphasis on value also can be seen in Hy-Vee’s transition away from full-service restaurants within the store and toward a greater focus on quick-service options. Several Sioux Falls stores are converting parts of their former restaurant space into a more food court-style format that generally offers lower prices.

“It is a new world,” Lempert said. “They’re looking at that as a five-year if not longer trend that consumers and the economy will be a main concern for people.”

Grocery wars heat up as stores vie to show value

“We are being more aggressive in our announcement about our great deals.” Have you noticed Hy-Vee’s new emphasis on value? It could be a sign of the times.

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