SUPERMARKETS Wal-Mart pulls shoppers away from grocery chains

Traditional supermarkets face lower sales in face of new competition.
CROSS LANES, W.Va. (AP) -- To find the cause of the nation's three supermarket strikes, just follow Judy Ranson's shopping cart.
An inveterate bargain hunter, Ranson used to chase down the best grocery deals at three stores: her local Kroger in Cross Lanes or down the road at a Fast Check in Dunbar and at a Poca Supermarket in Poca.
Now she makes one trip a week, to the Wal-Mart Supercenter, which opened five years ago a mile and a half down the road and across Interstate 64 from Kroger.
Ranson, who is 57, spends about $90 for herself and her husband. She estimates that she saves $40 to $50 off what she'd pay at the supermarket.
"Kroger's prices are too high on a lot of stuff," she said. "I figure $100 ought to be enough to feed anyone for a week."
Stiff competition
Officials at Cincinnati-based Kroger and the nation's other dominant supermarket chains -- Ahold, Albertsons Inc. and Safeway Inc. -- cite competition from Wal-Mart Stores Inc. and other box stores moving into the grocery business as a reason to hold the line on labor costs.
Those costs include health-care benefits that are the sticking point in United Food & amp; Commercial Workers strikes of 3,300 workers at 44 Kroger stores in West Virginia, Kentucky and Ohio; 70,000 workers at three Southern California chains; and 10,000 workers at three chains in Missouri.
Similar struggles are expected within the next six months as UFCW contracts expire in the Phoenix and Washington, D.C., areas.
"Box stores are a very real threat," said Archie Fralin, a Kroger spokesman in Roanoke, Va. "Their lower labor costs make it imperative for us to manage costs. That's just a reality."
Biggest in grocery business
Wal-Mart doesn't break out earnings by division, so it's hard to calculate how much food it sells. But analysts say in just 10 years it has become the biggest player in the grocery business, last year capturing anywhere from 5 percent to 15 percent of the industry's $680 billion pie.
Traditional supermarket sales have dropped about 3 percent in the past year, estimates The Food Institute, a New Jersey-based trade group.
"The supermarket chains are still profitable, but executives see their market share down more than 5 percent over five years and they're frightened," said George Whalin, president of Retail Management Consultants in San Marcos, Calif.
Lower labor costs for nonunion workers make up part of the advantage of box stores such as Wal-Mart.
Including pension and health benefits, Kroger estimates it pays workers on average $6 an hour more in West Virginia than Wal-Mart. Burt Flickinger, managing partner of Strategic Resource Group in New York, says the difference in other parts of the country runs as high as $10 to $14 an hour for full-time workers.
At the Cross Lanes Kroger, striking UFCW workers say Wal-Mart's opening five years ago cost their store $100,000 in weekly receipts -- between a third and a half of the store's income.
In response, workers say, Kroger has slashed the store's payroll from 86 to 45 full- and part-time workers.
Fralin wouldn't comment on individual Kroger store sales.
But he said industry studies show that Wal-Mart often takes as much as $100,000 a week from existing supermarkets, and he hypothesized that a store losing that much would see labor costs cut similarly.