By Larry Sussman
Pick 'n Save was the original low-price leader.
In frugal Milwaukee, the chain’s first store, Pick ’n Save Warehouse Foods, opened on Blue Mound Road in 1975 like a revelation. Milwaukeeans went wild for its ramshackle décor, unfinished floors and bargain-basement prices. They overlooked its meager selection of produce, complete lack of fresh meat and paper-thin staff. They gleefully etched prices onto their purchases using crayons, plucking the jars and cartons from shipping containers repurposed as sales displays.
Grocery supplier Roundy’s Inc., founder of the store, hadn’t bothered to hire enough workers to affix price tags to the jars of mayo, bags of chips and tubs of ketchup it was hawking. It hadn’t bothered to hire baggers, either, which was a bold move considering how the Kohl’s Food Stores that were ubiquitous in those days were known for generous and attentive customer service. The first Pick ’n Save really looked like a warehouse, but so many thousands of customers poured into its parking lot – and into what local news described as a new wave of “warehouse food stores” – that police had to direct traffic.
By the early 1980s, Kohl’s was playing second fiddle to the Pick ’n Save phenomenon. The first warehouse-store led to about a dozen more in southeastern Wisconsin and a hardball marketing campaign. “You can’t afford not to shop Pick ’n Save,” read a boastful ad in the Milwaukee Journal in 1980.
Oh how the tables have turned. Now Pick ’n Save faces a similar threat from a price-cutting powerhouse – Wal-Mart. To date, Wal-Mart is runner-up in the race to control Milwaukee’s grocery trade, though the fight has intensified as all comers step up their game.
The most visible sign, of late, of a knock-down, drag-out food fight has been an ad war between the top two players. Here’s a taste: In mid-June, Wal-Mart ran a full-page color ad in the Milwaukee Journal Sentinel showing the side-by-side grocery receipts of a woman who shopped at a Wal-Mart Supercenter in Muskego – and also at a nearby Pick ’n Save. According to the ad, one of several Wal-Mart ran telling similar stories, she paid 14 percent less at the former for the same 28 items. The tagline repeated Wal-Mart’s core slogan: “Save money. Live better.”
A week later, Pick ’n Save fought back in a half-page ad that slammed Wal-Mart for shipping in beef and not cutting it freshly in its stores. “And good luck finding a butcher there at all to help you,” it added, turning the screw. Not to be outdone, another Wal-Mart plug highlighted its stores’ “USDA Choice Premium Beef” and guaranteed, in small print, “If you don’t love our steak, bring your receipt back for a full refund.”
Such ads are par for the course in Milwaukee’s grocery industry. Wal-Mart has even taken to TV to snipe at Pick ’n Save and Milwaukee-based Roundy’s, the chain’s owner. It’s unusual for retail competitors to slap each other around as publicly as this (think of all the furniture outlets promising to beat the prices “at those other stores”), but the stakes are high. For many years, Pick ’n Save has captured more than half of the money spent in Milwaukee on take-home groceries, according to David Livingston, a grocery analyst based in Waukesha. And Livingston would know: He served as Roundy’s market research manager for 16 years, until 2002, when a Chicago-based private equity firm, Willis Stein & Partners, snatched up the rapidly expanding grocery company for a cool $750 million.
But Roundy’s grip on the city, which makes it hard to drive anywhere in the metro area without running into a Pick ’n Save, is in danger. The company owns about 60 supermarkets in metro Milwaukee, plus three Metro Markets, essentially high-end Pick ’n Saves in Downtown Milwaukee, Mequon and Brookfield – but it faces a slew of new supercenters opening across the city. By and large, they’re attempting to undercut Pick ’n Save on price. The scope of this retail build-out is hard to overstate. “I guarantee that there will be 50 new supermarkets in southern Wisconsin before [Gov. Scott] Walker’s first term is over,” Livingston says. “Ten or 15 years ago, Pick ’n Save was pretty much considered the low-price leader in the Milwaukee market. But right now, Aldi, Wal-Mart, Target, Costco and Woodman’s are the low-price leaders.” And they’re swinging for Roundy’s, he says. “They consider Pick ’n Save the weakest competitor.”
The multitude of grocery chains can seem amorphous from a distance, but each has a distinct identity. Wal-Mart, the big-box king, is the nation’s No. 1 merchant in grocery sales. Costco, a members-only competitor of Sam’s Club, inspires fierce loyalty in some of its customers. Woodman’s, the Janesville-bred grocer, carries on the warehouse strategy pioneered by Pick ’n Save Warehouse Foods. Aldi is run by a hyper-efficient German company obsessed with streamlining costs. Piggly Wiggly pushes “Certified Angus Beef” and advertises that “The Pig’s the Place for Low Prices.” Target is marrying low-cost groceries to its more sophisticated brand of big-box retail. Sendik’s stores are impressively upscale, and Sentry, once a powerful chain here, has supermarkets proudly run by independent owners. (“It’s your community. It’s your Sentry,” said a recent ad.)
For Roundy’s, an alarming number of these competitors are skewing to the market’s low end, including Woodman’s. “Pick ’n Save hasn’t had a lot of everyday low-price competition,” says Woodman’s Vice President Clint Woodman. “But now, people in Milwaukee are getting used to seeing options out there.”
A recent market survey suggests that these food fighters – especially Wal-Mart – have already put a dent into Pick ’n Save’s pre-eminence. Earlier this year, Scarborough Research, part of Nielsen, asked 2,128 adults in southeastern Wisconsin where they bought most of their groceries. Forty percent said Pick ’n Save, down from 48 percent in 2008, and 14 percent responded “Wal-Mart Supercenters,” up from 12 percent. Next were Piggly Wiggly (11 percent), Aldi (10 percent), Woodman’s (9 percent) and Sentry (5 percent).
And don’t look now, but Meijer Co. of Grand Rapids., Mich., is expected to open several supercenters around the metro area in the next few years. The family-owned company, which builds Wal-Mart-style supercenters offering groceries, home décor, electronics and pharmacy items, has almost 200 stores in Michigan, Ohio, Indiana, Illinois and Kentucky. Meijer spokesman Frank Guglielmi confirmed that the company is interested in Grafton and Franklin locations. “We’re in the early stages of due diligence,” he says.
In other big-box news – which is appropriately voluminous – Woodman’s is completing a new Waukesha location. Trader Joe’s, a stylish national chain with a hopping store at Bayshore Town Center, is expected to open another next spring in Brookfield, near a new Target that also sells groceries. Wal-Mart just opened new “Neighborhood Market” stores in Wauwatosa and Milwaukee and started construction earlier this year on another in Menomonee Falls. Configured like small supermarkets, these are the first such stores in Wisconsin.
New Wal-Mart Supercenters are also under way in Greendale, South Milwaukee and West Milwaukee, according to Wal-Mart spokeswoman Delia Garcia. She’s unapologetic when asked about the company’s hardball ad campaign targeting Pick ’n Save. “Families are trying to make ends meet, and we believe that this message resonates with them,” she says. “We want them to know that Wal-Mart is an option for affordable groceries and general merchandise.”
Livingston predicts that even more Wal-Marts will follow those that have already been announced. And for good reason. The most important question for consumers, he says, is not, “Who’s got the prettiest store?” but, “Who’s got the lowest price?” – and that’s a question Wal-Mart loves to answer.
“The prettiest stores aren’t very impressive in Wisconsin,” he says. That’s why price-cutters, and Wal-Mart in particular, are seeing “a tremendous opportunity in Wisconsin right now, particularly in Milwaukee. The biggest chain isn’t providing the customers with the lowest prices.”