Superior Supermarkets Background: The Company: Superior Supermarkets Superior Supermarkets is the smallest of the three supermarket chains

owned Hall Consolidated with sales of $192.2 million in 2002. The chain operates supermarkets in small trade areas in small cities and towns in the South Central US. Superior was ranked between 1 and 2 in its trade markets as measured by market share. Superior Supermarket chain was acquired by Hall Consolidated in 1975. Hall Consolidated is a privately owned wholesale and retail food distributer with sales of $2.3 billion in 2002. The company distribute food and related products through 12 wholesale centers to 150 company-owned supermarket units operating under 3 supermarket chains, and to some 1,100 independent grocery stores in the US. Decision Problem: - Adopt an everyday low price strategy in the Superior Supermarket¶s three stores in Centralia to enhance customer loyalty and improve the image of Superior Supermarket stores. Situation Analysis: Competitive Environment (Centralia ± central Missouri): - The area¶s total retail sales were $725 million in 2002. - Food and beverage sales were $62.3 million (increase of 4.6% over 2001). - 20 establishments sell food and beverages. - Population of 41,000 including 13,500 households. - Media age 35 years. - Median household income $36,000. - 80% of the population had a high school education or more. - 51.5% were employed by manufacturing, retail, education, health, and social services. Superior Supermarkets in Centralia: - The 3 supermarkets in Centralia were older than those of the competitors. - Sales of $14 million in 2002. - Gross profit margin 28.8% compared to the industry margin of 26.4%. - Sales and gross profit margin of the three superior stores:
Section Grocery Meat and Poultry Produce General Merchandise Bakery $ Deli Sales GP Margin 50% 30% 20% 18% 18% 30% 7% 33% 5% 50%


Offered a more limited variety of merchandise than the major competitors, but carried high-quality merchandise particularly in grocery items and fresh produce.
Page (1) of (4)

West Main Street. Competitors: .500 (0. .In 2002. The major strengths are the grocery and special purchase displays.This information was to be used in making store merchandising and renovation decisions.Second Study Results: (two focus groups ± 24 participants): . The highest priced food store in Centralia. It is considered as a secondary competitor to Superior. .More than 30% of the interviewees considered Superior¶s prices ³above average´. it advertises high-volume items at deeply discounted prices and features ³loss-leaders´ items.- - Spent $127. To determine the shopping behavior of these customers. To develop an updated profile of Superior shoppers.20% thought that the prices of Missouri Mart and Grand America were ³bellow average´. Well managed. . Ads for low prices in some items with huge quantities are displayed in the grocery section.000 to $35. clean. The store lacks the quality and freshness presented in the other supermarkets in the area. Its dairy department is highly regarded by Centralia shoppers. .Price: the most important store choice determinant. Consumer Research Initiative: . Customers come from residential areas similar to those of Harrison¶s. Harrison¶s perceived as having the best overall price.Grand American: the most modern store in Centralia with the finest fixtures and décor. and South Prospect) were all renovated in 1990s and 2000.Harrison¶s supermarket: captured most of the business of the middle and upper-income groups in Centralia ($40. Principal promotion theme is everyday low prices. 2.89% of sales) in advertising in 2002. (Newspaper advertising. a consultant to the company had concluded that the stores in Centralia failed to reach their full sales and profit potential because of the lack of a strong consumer image . Harrison¶s. Ads emphasize high-volume items and low prices.First Study Results: (telephone survey with 400 residents): . About 32% of Superior customers shop Missouri Mart regularly. Missouri Mart enjoys a sizable trade from outside Centralia (customers from larger geographical area).000. and Grand America).Three major competitors (Missouri Mart. .Missouri Mart: The principal competitor of Superior. Page (2) of (4) .Harrison¶s was thought to have the lowest everyday prices. circulars. Advertising positioning: Superior Supermarkets = Superior Value. . Enjoys the second highest sales of the major chain stores.000. orderly and attractive place to shop at and has an extremely favorable customer image. Most of it¶s customers are middle aged and older families with income of more than $30. It customers income ranges from $20. . However. and to question shoppers about what they like and what they dislike about superior stores. and the best bakery and (25%). what kind of retail image the stores had. Its three stores (North Fairview. radio spots.000) and more. and outdoor. . .Superior was thought to be the ³most convenient´ store (35%). No TV ads utilized by Superior or its competitors who spend about 1% of their sales on advertising).A study was conducted in mid-2002 by Hall Consolidated for two objectives: 1.

Savings can be used to bolster the advertising budget for the new everyday low pricing strategy. clean and convenient for customers. Superior is considered a good neighborhood store. well stocked and orderly shelves. High grocery.Their positioning ³Superior Supermarkets = Superior Value´ was questioned by consumers.- .Convenience: ease of getting into and out of the store.How much the prices should be lowered? SWOT Analysis: Strengths: .Meat: meat quality and displays is the second determinant.e. .Offer more limited variety of merchandise than its major competitors did. .89% of sales) than its competitors (1% of sales). meat. . . Harrison¶s is recognized as having the best prices.Adapt the strategy for all products or for a certain categories (i. .Produce: Harrison¶s was ranked the best in produce quality.Stores are renovated. There are so many things to buy. and seasonal and general merchandise) as they represent 57% of superior store sales.Spend less in advertising (0. Page (3) of (4) . Their advertising ³Superior Supermarkets = Superior Value´ was questioned. Weaknesses: .Can lower costs due to reduced inventory and tag handling jobs (labor cost). Their advertised specials are not actually specials according to the focus group.Has three stores in three different geographical area.Perceived as having a high-quality merchandise particularly in grocery items and fresh produce. and Missouri Mart received the lowest marks on meat. . and service. Grand America is often out of stock and usually over-advertised. carry-out service. and display. Everyday Low Pricing Strategy: . . dairy. . . and produce prices. Missouri Mart rated the lowest. Perceived as bad service. . quality. and helpful store personnel.Perceived by consumers as the highest priced food store in Centralia.The oldest Supermarket stores in Centralia.Shoppers have a relatively good idea of prices and they compare stores accordingly. . variety. . and offers. Implementation Consideration: . . quick checkout.Hall Consolidated had employed the everyday low pricing in market areas served by each of its 3 supermarket chains. courtesy.Superior was perceived as having the highest prices in Centralia. .Doesn¶t serve customers from other areas than Centralia compared to the competitors. At Missouri Mart ³you can¶t stick to your budget if you shop at this store´.Tends to work better if it is part of a broader store positioning strategy and supported with advertising. Harrison¶s was judged to have the best quality and variety of meat. . grocery.

and over-advertised claims.Align the pricing strategy with the overall strategy to provide more values and benefits to the consumers in addition to the low prices . variety. display. and the average prices of the other two competitors is way bellow Superior prices.Utilize the resources (advertising) to enhance a strong consumer image.Competitors enjoy sizable trade from large geographical areas outside Centralia.Opportunities: .The strategy is already pursued with the major competitor Harrison¶s. . Recommendations: . Threats: .Pursue the everyday low price strategy on items that has the highest sales and gross profit percentages (groceries and dairy). .Bad image of the stores (pricing). .Competitors ability to respond to the new everyday pricing strategy pursued by Superior. . .Perceived weaknesses of the major competitors produce quality.Maintain price stability in a way comparable to competitors prices.Evaluate competitors reactions and countermoves. . . . Page (4) of (4) .Continue the market research to evaluate the impact of the new strategy on the consumer image.Increased consumer awareness about brands and prices. bad services.