Wal-Mart Effect Moves Into the Grocery Aisle

On a recent weekend, Larry Chapnick did some of his grocery shopping at a Wal-Mart Supercenter. Then he dropped by a Vons and cruised the aisles, stopping to point at a box of saltines.

“I bought these same crackers for 99 cents down at the Wal-Mart,” he said. “They’re $2.29 here.”

Chapnick, a retired restaurant owner and hard-core comparison shopper, thought of another disparity: ginger snaps. At Wal-Mart, a 1-pound bag costs $1.18. “Here, a little box of them costs $3.50,” he said.

Chapnick isn’t fond of Wal-Mart Stores Inc. as a corporation. He disapproves of how it meagerly compensates its employees, he said, and how it has helped speed the demise of undersized rivals with its dandelion-like growth.

But Chapnick shops on price, and the Wal-Mart price structure is “cheap,” he said. “Why shouldn’t I take advantage of it?”

Eight months after the opening of the first Wal-Mart Supercenter in California, the early returns are what Wall Street expected and rival grocery chains feared.

The presence of the Supercenter here has altered shopping habits in a 25-mile radius of the Coachella Valley and siphoned business from many supermarkets in the area.

Dozens of shoppers interviewed in La Quinta, about 20 miles southeast of Palm Springs, said Wal-Mart’s prices were the lure. Indeed, an informal survey by The Times of 20 grocery staples showed that the Supercenter’s prices were the lowest overall, beating out Stater Bros., Ralphs, Vons and Albertsons.

Julian Saunders, a 76-year-old retiree of Palm Desert, said he had concluded that throughout the area, grocery prices have fallen about 10% since the Supercenter opened its doors.

“It keeps everyone on their toes,” he said.

Price tags aside, a Wal-Mart Supercenter is a tough opponent. Like most, the one in La Quinta covers about 225,000 square feet, with about one-third devoted to groceries, giving it about 50% more floor space than most major supermarkets. And the store boasts a bank, nail salon, portrait studio, embroidery shop and vision center.

There is a bazaar of products: yarn, televisions, fishing poles, electronics, jewelry, sporting goods, toys, mops, Christmas decorations -- and, of course, groceries. The decor is no-frills, with stark white walls, high ceilings, bright fluorescent lights and the smell of cheeseburgers wafting in from a McDonald’s near the front door.

Aisles are wider than in a typical grocery store, with items packed closer together, giving the shopper the feeling of being in a maze of smaller stores under one huge roof. There is, some shoppers said, almost too much to buy.

“I call it the $100 store,” said Jessica Araujo of Indio. “You can’t get out of here for less than $100,” she said, while standing in a line with a cart of groceries and household goods.

Before Wal-Mart opened, Araujo bounced among Ralphs, Albertsons and Stater Bros. stores, depending on what was on sale. Now, she’s in Wal-Mart at least once a week and rarely visits her old supermarket haunts.

Another convert is Kris Braunschweiger of Palm Desert. She used to make three trips a week to Albertsons. Her new schedule is one major shopping excursion a week to Wal-Mart, which saves her, she figures, about $60.

The only time Braunschweiger shops at Albertsons is on weekends when the Supercenter is too crowded and she needs only a few items. The big store, she said, has “changed our lives.”

A typical Supercenter does $400,000 a week in food sales, said Jonathan Ziegler of PUPS Investment Management in Santa Barbara. At that rate, he said, the La Quinta store will siphon about $20 million a year in food sales from grocery stores in the area.

But at the same time, the Supercenter will bring in as much as $850,000 a year in municipal sales tax revenue, the city of La Quinta calculates. And it laid out the welcome mat, giving the developer $2 million in infrastructure improvements as an incentive.

“These big-box stores are very important,” said Mark Weiss, La Quinta’s assistant city manager.

Several California communities, fearful of the effect on smaller businesses, have rebuffed Wal-Mart’s efforts to build Supercenters. The company, however, says it will open as many as 40 of them in the state in the next few years.

Even before the first one opened in La Quinta, Wal-Mart as a grocer cast a long shadow. The 4 1/2 -month supermarket strike in Southern and Central California that ended in February was staged in response to supermarkets’ desire to hold down costs, in part because the Supercenters were coming.

In La Quinta, Wal-Mart said, the lowest starting wage is $8 an hour. That is less than the $8.90 an hour that the lowest-level clerks earn at local Albertsons, Ralphs and Vons stores, according to the terms of their union contract.

Albertsons Inc., Kroger Co.’s Ralphs chain and Safeway Inc., which owns Vons and Pavilions, are still reeling from the strike, which sent droves of shoppers to stores of rivals including Trader Joe’s, Stater Bros. Holding Inc. and Costco Wholesale Corp.

Ralphs and Vons are looking to sell as many as 20 of their underperforming Southern California stores, according to industry sources. In Coachella, about 10 miles east of La Quinta, Vons closed a store in September, acknowledging that it was a victim of the one-two blow of the strike and Wal-Mart.

Taking another tack, Stater Bros., which has 159 markets in the Inland Empire, is opening new stores near planned Wal-Mart Supercenters. After all, the two Stater Bros. near the La Quinta Supercenter haven’t felt much pain, said Stater Bros. Chief Executive Jack Brown.

“We’re doing even better than I expected,” he said, with sales running ahead of last year’s levels.

Brown said that with relatively low prices, big produce sections and full-service meat counters, Stater Bros.’ markets can put up a serious fight. At some of the stores, six butchers are on duty at any given time, scooping out hamburger and chops and chatting with customers. Wal-Mart doesn’t employ butchers, Brown noted, and all of its meat is shipped from the factory in airtight plastic packages.

But for some people, nothing can beat a Supercenter.

Every two weeks, Pam and Bill Prince drive there from their home in rural Mecca, a 45-mile round trip.

“Price-wise, the other guys just can’t compete with Wal-Mart,” said Bill Prince, mentioning Wal-Mart’s deal on chicken quarters for 39 cents a pound. “You can’t find that anywhere else.”

Price, however, isn’t what really sells him. Rather, it’s that the Supercenter’s offerings are so bountiful, and all under one roof, that he can pick up everything he and his wife need and not have to go near a store for 14 days.

“I hate to shop,” he said.

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Price comparison

The Times surveyed rival supermarkets near Wal-Mart’s super-sized store in La Quinta. In this survey of 20 items, Wal-Mart’s overall cost was the lowest of the big supermarket chains.

*--* Grocery list Albertsons Ralphs Vons Stater Bros. Wal-Mart Iceberg lettuce, head $0.99 $0.99 $1.49 $0.99 $0.76 Kraft Macaroni and Cheese, 5.5-oz. box 1.19 1.29 1.19 1.19 0.76 Tropicana orange juice, 64-oz. carton 3.29 3.50 4.29 2.50 2.50 Pampers Cruisers diapers, size 3, 38-count 9.99 10.49 10.49 9.99 9.44 Foster Farms fresh Skinless chicken breast, 1 lb. 4.99 5.99 4.99 5.99 4.44 Nonfat milk, gallon 3.39 2.69 3.39 2.49 1.98 Dozen large white eggs 1.99 1.99 1.99 0.99 0.78 Oroweat 100% whole wheat bread, loaf 3.39 3.39 3.29 3.19 3.02 Cheerios, 20-oz. box 4.89 4.99 4.99 4.89 2.97 Tide liquid laundry detergent, 100-oz. jug 9.29 7.99 8.99 6.99 6.92 Scott paper towels, 3-pack 3.99 3.59 3.89 3.49 2.58 Tillamook medium cheddar slices 4.99 3.99 6.39 3.99 3.24 Roma tomatoes, 1 lb. 2.45 1.85 2.57 2.00 1.65 Bananas, 1 lb. 0.60 0.59 0.85 0.49 0.49 Diet Coke, 2-liter bottle 1.67 1.77 1.77 1.33 1.36 Sun Chips, 13.5-oz. bag 3.49 3.49 3.49 3.49 3.14 Ground beef 15% fat, 1 lb. 4.99 3.29 3.99 2.99 2.78 Prego spaghetti sauce, 1 lb. 10-oz. 2.69 2.69 2.59 2.49 1.50 Oscar Mayer bologna, 12-oz. package 2.49 2.99 2.39 1.00 1.86 Jif creamy peanut butter, 18-oz. jar 2.99 2.89 2.99 2.79 1.98 Club discount -1.94 -5.68 -8.29 Total 71.81 64.77 67.73 63.27 54.15

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Grocery club cards were used whenever possible. Tax was not included. Two substitutions had to be made because of a missing item. At Stater Bros., a similar-count package of different size Pampers was purchased. At Wal-Mart, two big rolls of Scott paper towels with the same length as the 3-pack was purchased.

Source: Times research