Another Version Of the Future?
The first ever a supermarket carrying a full line of product beat out the Wal-Mart Supercenter as pricing king.
With this iteration, the Produce Business Wal-Mart Pricing Report reaches several milestones.
First, we hit double digits. This time we journey to Houston, TX, for our tenth city to be surveyed and analyzed.
Second, as we selected Houston as our target subject this month, it means for the first time we are returning to a state to look at a second city. The last time we visited Texas, it was to study Dallas. Third, and most important, for the first time ever a supermarket carrying a full line of product beat out the Wal-Mart Supercenter as pricing king. It was close, less than a third of a percentage point — in fact a statistical tie. But in the Produce Business Wal-Mart Pricing Report, as in horseshoes and politics, close doesn’t count.
So Fiesta Mart, the chain popularly perceived as being oriented to the Hispanic market, gets to carry the trophy in Houston. It is a significant occurrence. As we have studied market after market across the country, every conventional supermarket chain has failed to provide consumers with a better price point than Wal-Mart’s Supercenter concept.
A&P’s Food Basics beat out Wal-Mart in Detroit, but in order to include Food Basics in our market basket study, we had to severely restrict the market basket because Food Basics did not carry the full range of items we would normally study. Back in Dallas the Wal-Mart Supercenter lost as well, but it was to corporate cousin Wal-Mart’s Neighborhood Market. That small win we attributed to a fluke — either some Manager’s Special that was running the day of our study or an error in pricing. Generally the prices in the Neighborhood Market and the Supercenter were identical.
Wal-Mart Supercenter vs 3 Chains
Price Comparison — Houston, TX
September 2005 – Prices Available To The General Public
| STORE NAME | WALMART | HEB | KROGER | FIESTA | |||
|---|---|---|---|---|---|---|---|
| Produce Item | Price | Regular Price |
% Over Wal-Mart |
Regular Price |
% Over Wal-Mart |
Regular Price |
% Over Wal-Mart |
| Apples – Red Delicious – Large | $0.88 | $0.99 | 12.500% | $0.99 | 12.500% | $0.99 | 12.500% |
| Asparagus | $2.93 | $2.99 | 2.048% | $2.99 | 2.048% | $3.89 | 32.765% |
| Avocados – Small | $0.50 | $0.78 | 56.000% | $0.99 | 98.000% | $0.99 | 98.000% |
| Bananas – Yellow | $0.38 | $0.39 | 2.632% | $0.39 | 2.632% | $0.40 | 4.386% |
| Broccoli Crowns | $1.44 | $1.29 | -10.417% | $1.69 | 17.361% | $1.79 | 24.306% |
| Cabbage – Green | $0.48 | $0.44 | -8.333% | $0.44 | -8.333% | $0.49 | 2.083% |
| Cabbage – Red | $0.64 | $0.69 | 7.812% | $0.69 | 7.812% | $0.59 | -7.813% |
| Cantaloupe – Whole | $1.50 | $1.79 | 19.333% | $2.99 | 99.333% | $1.69 | 12.667% |
| Carrots – Whole 1# Bag | $0.58 | $0.69 | 18.966% | $0.59 | 1.724% | $0.59 | 1.724% |
| Cauliflower | $2.14 | $1.99 | -7.009% | $1.99 | -7.009% | $2.49 | 16.355% |
| Celery | $1.14 | $1.19 | 4.386% | $1.19 | 4.386% | $1.29 | 13.158% |
| Cherries | $2.96 | $4.99 | 68.581% | $4.99 | 68.581% | $3.99 | 34.797% |
| Coleslaw – 1# Bag | $1.38 | $0.89 | -35.507% | $1.49 | 7.971% | $1.59 | 15.217% |
| Cucumbers – Regular | $0.50 | $0.58 | 16.00% | $0.59 | 18.000% | $0.33 | -34.000% |
| Eggplant | $1.54 | $1.29 | -16.234% | $1.59 | 3.247% | $1.19 | -22.727% |
| Garlic | $0.39 | $0.50 | 26.904% | $0.50 | 26.904% | $0.49 | 24.365% |
| Grapefruit – Red | $0.68 | $0.89 | 30.882% | $0.59 | -13.235% | $0.50 | -26.471% |
| Grapes – Green Seedless | $0.98 | $1.99 | 103.061% | $1.79 | 82.653% | $1.29 | 31.633% |
| Grapes – Red Seedless | $1.44 | $1.59 | 10.417% | $1.69 | 17.361% | $1.69 | 17.361% |
| Green Onions | $0.94 | $0.59 | -37.234% | $0.59 | -37.234% | $0.50 | -46.809% |
| Honeydew – Whole | $2.98 | $2.49 | -16.443% | $2.99 | 0.336% | $1.69 | -43.289% |
| Jar Fruit – Del Monte | $2.98 | $2.99 | 0.336% | $3.99 | 33.893% | $2.99 | 0.336% |
| Kiwi | $0.25 | $0.33 | 32.000% | $0.33 | 32.000% | $0.33 | 32.000% |
| Lemons | $0.28 | $0.25 | -10.714% | $0.25 | -10.714% | $0.20 | -28.571% |
| Lettuce – Green Leaf | $1.18 | $1.39 | 17.797% | $1.49 | 26.271% | $0.99 | -16.102% |
| Lettuce – Iceberg | $0.77 | $1.39 | 80.519% | $1.19 | 54.545% | $0.99 | 28.571% |
| Lettuce – Red Leaf | $1.18 | $1.39 | 17.797% | $1.49 | 26.271% | $0.99 | -16.102% |
| Lettuce – Romaine | $1.18 | $1.39 | 17.797% | $1.49 | 26.271% | $0.99 | -16.102% |
| Limes – Bulk | $0.15 | $0.16 | 6.667% | $0.25 | 66.667% | $0.13 | -16.667% |
| Mangos – Red – Small | $0.33 | $0.50 | 51.515% | $0.50 | 51.515% | $0.99 | 200.000% |
| Mushrooms – White – Bulk | $2.32 | $3.49 | 50.431% | $2.99 | 28.879% | $2.59 | 11.638% |
| Mushrooms – White – Packaged | $1.34 | $1.49 | 11.194% | $1.79 | 333.582% | $1.69 | 26.119% |
| Nectarines – Regular | $1.67 | $1.99 | 19.162% | $1.99 | 19.162% | $0.99 | -40.719% |
| Onions – Red | $0.93 | $1.59 | 70.968% | $1.29 | 38.710% | $0.99 | 6.452% |
| Onions – Yellow | $0.63 | $0.99 | 57.143% | $0.79 | 25.397% | $0.79 | 25.397% |
| Onions – Yellow 3# Bag | $1.74 | $1.79 | 2.874% | $3.49 | 100.575% | $1.49 | -14.368% |
| Oranges – Navel Bulk | $0.48 | $0.50 | 4.167% | $0.50 | 4.167% | $0.50 | 4.167% |
| Peaches – Regular | $0.99 | $1.79 | 80.808% | $1.69 | 70.707% | $0.99 | 0.000% |
| Pears – Asian | $1.24 | $1.79 | 44.355% | $1.99 | 60.484% | $0.99 | -20.161% |
| Peppers – Bell Orange – Hot House | $1.68 | $1.29 | -23.214% | $1.99 | 18.452% | $1.29 | -23.214% |
| Peppers – Bell Red – Hot House | $1.68 | $1.29 | -23.214% | $1.99 | 18.452% | $1.29 | -23.214% |
| Peppers – Bell Yellow – Hot House | $1.68 | $1.29 | -23.214% | $1.99 | 18.452% | $1.29 | -23.214% |
| Peppers – Bell Green | $0.68 | $0.99 | 45.588% | $0.69 | 1.471% | $0.50 | -26.471% |
| Plums – Regular | $1.67 | $1.99 | 19.162% | $1.99 | 19.162% | $0.99 | -40.719% |
| Potatoes – Red Bulk | $0.78 | $0.99 | 26.923% | $0.99 | 26.923% | $0.69 | -11.538% |
| Potatoes – Russet 5# Bag | $1.57 | $1.99 | 26.752% | $1.99 | 26.752% | $1.49 | -5.096% |
| Potatoes – Russet Bulk | $0.73 | $0.88 | 20.548% | $0.89 | 21.918% | $0.50 | -31.507% |
| Potatoes – White Bulk | $0.73 | $0.89 | 21.918% | $0.99 | 35.616% | $0.69 | -5.479% |
| Radishes | $1.44 | $0.99 | -31.250% | $1.29 | -10.417% | $0.59 | -59.028% |
| Salad – Garden Bag 1# | $1.50 | $2.29 | 52.667% | $1.99 | 32.667% | $2.19 | 46.000% |
| Salad – Spring Bag – 5oz | $2.53 | $2.49 | -1.581% | $2.99 | 18.182% | $2.59 | 2.372% |
| Spinach – Bulk | $0.94 | $1.29 | 37.234% | $1.29 | 37.234% | $0.99 | 5.319% |
| Squash – Zucchini | $1.53 | $1.29 | -15.686% | $1.99 | 30.065% | $0.50 | -67.320% |
| Strawberries – Clamshell 1# | $2.67 | $2.49 | -6.742% | $3.99 | 49.438% | $2.39 | -10.487% |
| Tomatoes – Hothouse | $0.78 | $1.79 | 129.487% | $2.69 | 244.872% | $1.99 | 155.128% |
| Tomatoes – Roma/Plum | $0.74 | $1.59 | 114.865% | $1.49 | 101.351% | $1.29 | 74.324% |
| Yams | $0.88 | $0.88 | 0.000% | $0.99 | 12.500% | $0.69 | -21.591% |
| MARKET BASKET | $70.25 | $80.94 | 15.211% | $91.47 | 30.199% | $70.02 | -0.331% |
In some ways the outcome is surprising. HEB is widely recognized as one of Wal-Mart’s toughest and most successful competitors, albeit regionally. Industry insiders report that HEB has highly effective merchandising that has enabled the chain to compete well against Wal-Mart. That may be true, but what they don’t have is the lowest price point. HEB came in at 15.21% over Wal-Mart’s prices.
And Kroger, with its enormous national buying power, seems to simply not care —the Houston store in this study comes in 30% over Wal-Mart!
Fiesta Mart’s price competitiveness is in a way surprising. If you look at its promotions they don’t focus on price. Its slogan is “Your International Store”, and it focuses on the customer experience, as it says in its promotions: “Our approach is a simple one; by blending our variety of product selection and our special brand of customer service with an authentic ‘fiesta’ atmosphere, we provide a unique grocery shopping experience…”
Fiesta Mart, the chain popularly perceived as being oriented to the Hispanic market, gets to carry the trophy in Houston.
It is worth noting that in promotions filled with claims of offering “…the highest quality meat, grocery, fresh produce and seafood departments, world class delicatessens, beer and fine wines, as well as a variety of international food products,” I could not find a single reference to low prices.
Speak softly and carry a big stick, Teddy Roosevelt used to say, and in the area of produce pricing Fiesta Mart does just that.
Of course, technically speaking Wal-Mart can never lose price comparisons — it offers a low price guarantee. But recognizing that only a fraction of consumers even know about such a thing, much less are they willing to go through the rigmarole necessary to get the lower price, we think relying on publicly listed prices available without special request is a reasonable approach.
Wal-Mart Supercenter vs 3 Chains
Price Comparison — Houston, TX
September 2005 – Advertised & Card Holder Prices
| STORE NAME | WALMART | HEB | KROGER | FIESTA | |||
|---|---|---|---|---|---|---|---|
| Produce Item | Price* | Regular Price |
% Over Wal-Mart |
Regular Price |
% Over Wal-Mart |
Regular Price |
% Over Wal-Mart |
| Apples – Red Delicious – Large | $0.88 | $0.50 | -43.182% | $0.99 | 12.500% | $0.33 | -62.500% |
| Avocados – Small | $0.50 | $0.78 | 56.000% | $0.50 | 0.000% | $0.50 | 0.000% |
| Cabbage – Green | $0.48 | $0.44 | -8.333% | $0.44 | -8.333% | $0.33 | -31.250% |
| Cantaloupe – Whole | $1.50 | $0.87 | -42.000% | $2.00 | 33.333% | $1.69 | 12.667% |
| Cherries | $2.96 | $4.99 | 68.581% | $3.99 | 34.797% | $2.99 | 1.014% |
| Coleslaw – 1# Bag | $1.38 | $0.89 | -35.507% | $1.49 | 7.971% | $1.29 | -6.522% |
| Garlic | $0.39 | $0.50 | 26.904% | $0.14 | -64.467% | $0.49 | 24.365% |
| Grapes – Green Seedless | $0.98 | $1.69 | 72.449% | $1.79 | 82.653% | $1.29 | 31.633% |
| Grapes – Red Seedless | $1.44 | $0.87 | -39.583% | $1.69 | 17.361% | $1.69 | 17.361% |
| Jar Fruit – Del Monte | $2.98 | $2.99 | 0.336% | $2.50 | -16.107% | $2.99 | 0.336% |
| Lettuce – Green Leaf | $1.18 | $1.39 | 17.797% | $0.79 | -33.051% | $0.99 | -16.102% |
| Lettuce – Iceberg | $0.77 | $1.39 | 80.519% | $0.99 | 28.571% | $0.99 | 28.571% |
| Lettuce – Red Leaf | $1.18 | $1.39 | 17.797% | $0.79 | -33.051% | $0.99 | -16.102% |
| Lettuce – Romaine | $1.18 | $1.39 | 17.797% | $0.79 | -33.051% | $0.99 | -16.102% |
| Limes – Bulk | $0.15 | $0.16 | 6.667% | $0.10 | -33.333% | $0.13 | -16.667% |
| Mangos – Red – Small | $0.33 | $0.33 | 0.000% | $0.50 | 51.515% | $0.33 | 0.000% |
| Nectarines – Regular | $1.67 | $1.49 | -10.778% | $0.67 | -59.880% | $0.99 | -40.719% |
| Onions – Yellow | $0.63 | $0.99 | 57.143% | $0.79 | 25.397% | $0.33 | -47.619% |
| Oranges – Navel Bulk | $0.48 | $0.25 | -47.917% | $0.50 | 4.167% | $0.50 | 4.167% |
| Peaches – Regular | $0.99 | $1.29 | 30.303% | $1.69 | 70.707% | $0.39 | -60.606% |
| Peppers – Bell Green | $0.68 | $0.44 | -35.294% | $0.69 | 1.471% | $0.50 | -26.471% |
| Potatoes – White Bulk | $0.73 | $0.89 | 21.918% | $0.99 | 35.616% | $0.50 | -31.507% |
| Salad – Garden Bag – 1# | $1.50 | $1.50 | 0.000% | $1.50 | 0.000% | $2.19 | 46.000% |
| Spinach – Bulk | $0.94 | $1.29 | 37.234% | $1.29 | 37.234% | $0.69 | -26.596% |
| Squash – Zucchini | $1.53 | $0.89 | -41.830% | $0.57 | -62.745% | $0.50 | -67.320% |
| Strawberries – Clamshell 1# | $2.67 | $1.99 | -25.468% | $2.00 | -25.094% | $2.39 | -10.487% |
| Tomatoes – Hothouse | $0.78 | $1.49 | 91.026% | $2.69 | 244.872% | $0.88 | 12.821% |
| MARKET BASKET | 70.25 | 74.55 | 6.115% | 79.47 | 13.118% | 64.09 | -8.772% |
Fiesta Mart’s success in pricing is interesting because the Fiesta Mart of today is not the simple independent chain it was prior to its acquisition in 2004 by Grocers Supply Co., a significant wholesaler and exporter based in Houston, TX.
Fiesta Mart’s innovative merchandising is now paired with formidable logistic capabilities from Grocers Supply Co., and this may signal a direction for the industry.
Many of Wal-Mart’s competitors have substantial expertise in distribution and logistics, while others are innovative merchants. Fiesta Mart is one of the few organizations really able to take advantage of both capabilities. Many supermarket mergers have been simple failures, as great merchants, often bought at premium prices, lost their distinctiveness when integrated into larger chains’ distribution and logistics apparatus.
In this case, because Fiesta Mart and Grocers Supply Co. were in related but different businesses, it seems like they have synced together well with Grocers Supply Co. providing the heft and logistics efficiency needed to keep costs low and Fiesta Mart providing the merchandising flair to keep the stores fun.
In addition, the fact that Grocers SupplyCo. is owned by the prominent, philanthropic and homegrown Levit family probably has given Fiesta Mart a positive image in Houston as opposed to an Arkansas-based outfit.
Doubtless, though, the focus on fun and quality in marketing material is only partially correct. Long catering to Hispanic immigrants, though now with a lot of attention paid to the second and third generation of immigrants, Fiesta Mart clearly has a focus on offering low prices and, probably, on not letting Wal-Mart steal its customers.
After all, Wal-Mart is not only a giant in the United States, it is a giant in Mexico as well. In fact, one of the great mysteries of retailing today is why Wal-Mart has not developed an Hispanic-themed store. With its supply chain in Mexico and low price appeal in the United States, it is simply a natural. And doubtless such a concept would do very well right in Houston. Perhaps at the expense of Fiesta Mart.
Still, until that day comes, Wal-Mart has to struggle to deal with an aggressive pricing competitor in this market.
How They Stack Up Against Wal-Mart Supercenter
| Region | Store | % Over Wal-Mart |
Store | % Over Wal-Mart |
Store | % Over Wal-Mart |
|---|---|---|---|---|---|---|
| Connecticut | Super Stop & Shop | 23% | Shaws | 34% | Big Y | 36% |
| Salt Lake City | Harmon’s | 2% | Smith’s | 6% | Albertson’s | 12% |
| South Florida | Super Target | 22% | Publix | 31% | Winn-Dixie | 52% |
| Dallas, Texas | Albertson’s | 23% | Brookshires | 7% | Kroger | 19% |
| Neighborhood Market | -1.2% | Tom Thumb | 27% | |||
| Portland, OR | Albertson’s | 30% | Fred Meyer | 22% | Haggen | 27% |
| Phoenix, AZ | Albertson’s | 22% | Bashas’ | 25% | Fry’s | 15% |
| Palm Springs, CA | Albertson’s | 19% | Jensen’s | 60% | Ralphs | 16% |
| Detroit, MI | A&P’s Food Basics | -17% | Farmer Jack | 24% | Kroger | 28% |
| Meijer | 3% | |||||
| St. Louis, MO | Dierbergs | 22% | Schnucks | 14% | ||
| Houston, TX | HEB | 15% | Kroger | 30% | Fiesta Mart | -0.3% |
One reason Wal-Mart seems to have accepted this situation is that on normal prices, Fiesta Mart is actually higher priced than Wal-Mart. It is the sale items integrated into our market basket that really tip the scale.
On the 11 items Fiesta Mart has on sale this week, six of them beat Wal-Mart by double-digit margins. On the more limited total market basket of items put on sale this week by either Fiesta, HEB or Kroger, Fiesta Mart comes in 8.772% under Wal-Mart’s prices. Many of its onsale items are 40% or 60% under Wal-Mart prices. Since the larger market basket was a virtual tie, these deep discounts on sale items mean that Fiesta Mart is actually more expensive than Wal-Mart on its non-sale items.
Texas is a big state known for big ideas, and an interesting idea coming out of the Houston version of the Produce Business Wal-Mart Price Report is this: Whereas big national chains like Kroger seem to have given up on competing on price and great regional performers like HEB seem to feel they don’t have to compete on price, an amalgam of innovative merchandising with sophisticated logistics may offer another vision of the future.
Can it be replicated? How profitable is this privately owned company? All things we don’t know but things that will all be revealed in time as the Produce Business Wal-Mart Pricing Report rolls across the nation to more markets.