Anita Hart marveled at the bargains she had loaded into her car at the new Pathmark supermarket at the North Philadelphia train station.
"A case of soda for $3.99," she said, pointing at the cartons of Coca-Cola and Sprite in the bottom of her cart. "Potato chips, 99 cents. That's good too."
Hart, who lives in North Philadelphia, has switched her shopping loyalty from the Thriftway near her house and a ShopRite in Germantown to the Pathmark, which opened in May.
"It's pretty decent," she said, praising the renovated North Philadelphia train station shopping plaza. "The whole area looks nice and clean and lit up. There's lots of security. It's real nice."
To Jeff Metzger, the publisher of Food Trade News, Hart's new supermarket is evidence of what he sees as a shift in Philadelphia's grocery business.
For the last five or six years, supermarket companies here have tried to trounce the area's sleeping giants - Acme Markets and Pathmark.
In 1992, Acme had 106 stores and commanded 38.2 percent of Philadelphia supermarket sales, compared with the 26.8 percent share it now holds. Pathmark was No. 2, with 11.4 percent of sales, compared with the 9.3 percent it now has.
"Now the race is between two local chains - Genuardi's and ShopRite - against [Acme and Pathmark], who have had a degree of rust, but are showing signs of shaking that rust," said Metzger, summarizing the local trade newspaper's annual supermarket study, which appears in this month's issue.
Both Pathmark and Acme, which have just begun to reinvest in their stores, stand to receive major infusions of capital, Metzger said.
Debt-laden for more than a decade, Pathmark simply did not generate enough money from operations to both pay down its debt and reinvest in its stores.
But in March, Pathmark's outlook improved with the announcement that Royal Ahold N.V., the international supermarket giant based in the Netherlands, would buy Pathmark's 132 stores for $1.75 billion, retiring the $1.5 billion debt in the process.
Now, Ahold's U.S. president, Robert Tobin, has promised to invest $500,000 per store in upgrades, not including a store-building program, Metzger said.
Ahold already commands a sizable chunk of the Philadelphia market. It owns both Giant Food Stores Inc., in Carlisle, Pa., which operates 16 supermarkets locally, and Giant Food Inc., in Landover, Md., parent company of the Super G chain with six stores in the region.
When the Pathmark deal is finalized, Ahold will own 44 stores in the Philadelphia area, second only to Acme's 94 stores.
"I wouldn't be surprised if down the road, Super G and Pathmark are merged," Metzger said. The stores are both unionized, and both operate under the high-low price philosophy of deep discounts on certain items every week. Giant stores, he said, are nonunion and follow an everyday-low-price strategy, which relies less on sales.
"Acme is really a tale of two seasons," Metzger said.
From the spring of 1998 until about mid-fall, Metzger said, "Acme continued to stumble along, plagued by the same issues that had troubled them through the decade - poor morale, questionable leadership, and a continuing catching-up in store improvements."
Acme's parent company, American Stores Co., in Salt Lake City, had gradually taken most of the decision-making away from Acme executives at the chain's Malvern headquarters.
"They had become so centralized, so paralyzed by process," Metzger said. "For a dozen years, Acme had been left untouched and was being milked" by American Stores, as its profits were being used to fund American Stores' acquisitions in other parts of the country.
Last summer, Acme's new general manager, Peter Lynch, took over at the chain's Malvern headquarters. "Lynch aggressively attacked the morale issue," Metzger said.
Meanwhile, American Stores began to reverse its tight hold, a process likely to accelerate in coming years.
In August, Albertson's, one of the nation's largest supermarket operators, said it would buy American Stores - including Acme - for $11.7 billion. The deal is expected to be concluded later this month.
"I think the Albertson's [decentralized] mind-set has already taken hold," Metzger said.
But Acme, Pathmark, and the rest of the supermarkets in the region face another challenge - the need to stem the flow of food dollars from supermarkets to alternative food outlets. Drugstores, discount stores, warehouse clubs and convenience stores now command about one-third of the Philadelphia grocery dollar.
Rite Aid sells more groceries than the 37-store Thriftway/Shop N Bag chain, while Kmart and CVS both do a larger grocery business than the 16-store Clemens supermarket chain.
Wawa is the fifth-biggest food retailer in the Philadelphia region, outstripping Super Fresh, Giant, Thriftway/Shop N Bag, Clemens and Super G.
"As a whole, this is the first year in the last five that supermarkets are finally beginning to figure it out," Metzger said. "They are working on their strengths."
Supermarkets are upgrading their produce and marketing it, while emphasizing the variety on their shelves, compared with the truncated offerings in other stores, he said.
There were some other highlights from the survey. "ShopRite was the biggest winner," Metzger said. The chain of independently owned supermarkets, stocked by a main supplier, edged Genuardi's as the region's No. 2 supermarket chain. Metzger credited ShopRite's ability to attract top-notch operators. This spring, ShopRite opened the biggest supermarket in the city, on Aramingo Avenue.
"When you have some winners, then you are going to have some losers," Metzger said. "Super Fresh was a company without direction in the Delaware Valley. I'm very unsure if they are going to make it."
Super Fresh has a new chief executive officer, Christian Haub, 34, the son of the controlling stockholder of the Tenglemann Group, the German food marketing company that owns a majority stake in Super Fresh's parent company, the Great Atlantic & Pacific Tea Co. (A&P).
Haub has said that he will exit any regions where A&P is anything less than first or second in the market. In Philadelphia, Super Fresh ranks fifth in supermarket sales, trailing Acme, ShopRite, Genuardi's and Pathmark. Wawa also sells more groceries than Super Fresh.
Haub also promised to close any nonproductive stores and has already shuttered one-third of the chain's 48 stores in the Philadelphia market, leaving it with just 32 stores as of the end of March.
"They have said they are going to make an attempt to resurrect Super Fresh," Metzger said, promising redos for some of the company's older stores, and four new ones.
"It's going to be an uphill climb."
