It Sucks To Be A Traditional Supermarket In Los Angeles

krogerKroger’s Food 4 Less in East Hollywood.

Photo: www.flickr.com

Within 3 miles of each other in Los Angeles there is a Sprouts Farmer’s Market, a revamped Whole Foods, a Target P-Fresh, a Trader Joe’s and a Fresh & Easy Express.There are also a bunch of boring, traditional supermarkets and they are getting killed, notes Jefferies Scott A Mushkin.

The onslaught of competition is clearly impacting the traditional supermarkets results, and makes us cautious on the longer-term market share for Kroger (KR, $23.43, Hold), Safeway (SWY, $20.07, Hold) and Supervalu (SVU, $8.26, Hold), especially with the current price positioning. Indeed, market share losses have been 4.9% at Albertsons, 1.9% at Ralphs, and 1.4% at Vons since 2005, according to Metro Market Studies. A fair read of Supervalu’s price position as well as the market share loses, leaves us quite concerned regarding the direction of the business.

Mushkin also notes the challenge to traditional North American packaged food manufacturers, as Whole Foods and Trader Joes and others stores market their own brands.

Los Angeles is near the pinnacle of the organic food movement, but the movement has clearly gone national. Whole Foods alone has 304 stores in the U.S., Canada and the U.K., with humble locations like Winston-Salem, N.C.

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