The closure of 12 grocery stores in New Hampshire in the past two weeks could leave the impression that consumer choices are narrowing when it comes to food shopping, but nothing could be further from the truth, according to industry observers. Stop & Shop and Shaw's, which have announced plans to close six stores each, are leaving a crowded landscape, said Mike Berger, senior editor of the Griffin Report of Food Marketing, based in Duxbury, Mass.
"There are more food venues than ever," he said. "You have your traditional grocery stores and the big box locations — the Walmarts, Costco, Target. You have Whole Foods and Trader Joe's. I went into a hardware store the other day, and there was a little food section. Everybody is selling food, including the drugstores, which are making a big impact — Walgreens, CVS, Rite Aid."
Just about every vendor on Berger's list could benefit from the contraction of big players like Shaw's and Stop & Shop, but the biggest winner in the midst of this shake-up is the consumer.
Price-cutting competition has become the name of the game in the grocery store business as the aftershocks of the Great Recession continue to change consumer behavior, perhaps permanently, according to University of New Hampshire economist Neil Niman, who said Shaw's and Stop & Shop are burdened by business models designed for more prosperous times.
"You are seeing a shift in the grocery store industry that's a reflection of the sluggish economy," he said. "Look at the business model of a Shaw's or a Stop & Shop. Those models were created when the economy was growing. These stores were not profitable because their business model isn't designed for the kind of economy we're in."
Both stores put an emphasis on prepared foods, consumer convenience, premium products and loyalty programs.
"In a roaring economy where everyone is employed and incomes are rising, that model made sense," Niman said. "But the economy hasn't really recovered. Incomes are flat. So consumers aren't looking for convenience. They're more concerned at this point about lower prices. You can view this shift in the market as sort of a validation of Market Basket's business model, which has been focused solely on low prices."
In its newest stores, Market Basket is going beyond pricing to offer conveniences of its own, like Market's Kitchen prepared foods and dine-in cafes with WiFi and big-screen TVs.
David J. Livingston, a national consultant to the supermarket industry, said strong-performing Market Basket, Hannaford and Walmart locations will continue to compete on price, to the benefit of the consumer.
"I think the stores that are going to be left are going to be very good choices," he said.
The partial retreat by Shaw's and complete retreat of Stop & Shop from the state strengthens the hand of the small independents and creates opportunities for new big players, Berger said.
Trader Joe's has enjoyed considerable success in the Nashua market, having recently moved its store across the border from Tyngsboro, Mass., expanding it in the process, and opening another store in Newington. Fresh Market, a chain of gourmet supermarkets based in Greensboro, N.C., opened its third New Hampshire store in Bedford last year.
Many in the industry are keeping an eye on Wegman's.
The Rochester, N.Y.-based company, which has 72 stores, opened its first store in Massachusetts in Northborough in 2011, a massive complex that includes a Market Cafe, with indoor and outdoor seating, a wine and spirit shop inside the store and a pharmacy.
The company's stores are huge; they are known for low prices and have been widely recognized for progressive employment practices, Berger said. With two other Massachusetts stores scheduled to open in 2014 — one in Newton and the other in Burlington — New Hampshire could be next.
"You haven't seen Wegman's in New Hampshire yet," said Berger at the Griffin Report, "but eventually you will. How long it will take, I don't know. But they are on a competitive level with Market Basket. It would be like the Patriots and Broncos."
All about real estate
Jeanne Colleluori, a Wegman's spokeswoman, said the company has no immediate plans for New Hampshire. "We grow our business very slowly," she said. "We have a list of sites that we are already committed to and that will get us through the next several years. Although our plans do change, and something that was anticipated for the future could move closer."
One factor influencing that decision could be the sudden availability of grocery store locations in the Manchester and Nashua area, as a result of the Shaw's and Stop & Shop closures.
"Grocery stores are really all about real estate," Niman said. "It's about locking up a good location. So Shaw's and Stop & Shop might leave, but there are other potential chains that could decide to enter New Hampshire."
Business owners who operate smaller shops or restaurants in the same strip mall or development once occupied by Shaw's or Stop & Shop will be anxious to see that space filled, said Thomas Farrelly, executive director at the commercial real estate firm of Cushman & Wakefield in Manchester.
"In situations where that grocery store was the anchor tenant, that is bad news to a co-tenant who chose that location because of the traffic that those grocery stores provided," he said. "It's a small- to medium-sized retailer's nightmare when the grocery anchor, or any anchor, goes dark."