Grocers eager to open up shop in North Texas
North Texas has plenty of new rooftops, and that means more mouths to feed.
It’s good news for the grocery business that Texas has eight of the 15 fastest-growing large U.S. cities and five of the 10 cities that added the most people over the year, including Dallas, Fort Worth, Frisco and McKinney, according to U.S. census data.
After focusing on Dallas neighborhoods with new stores and remodelings, chains are looking again to the suburbs for growth. Some are making bigger investments by opening their own distribution centers.
Idaho-based WinCo plans to open several large-format supermarkets in North Texas beginning next year.
Aldi, which opened its first Texas store in 2010, now has 41 stores in the region and expects to double its Dallas-Fort Worth store count in a few years. The German-based grocer opened a store on Loop 288 in May, four years after opening a distribution center in Denton.
Target has opened a distribution center in Denton dedicated to food. Market Street just bought out its distributor in Roanoke, signaling that it wants to open more stores.
And the region appears to have passed a litmus test with Trader Joe’s. It’s opening its third area store in Dallas in August and its first Texas distribution center in Irving later this year. That will allow it to ratchet up its Texas expansion.
Whole Foods will have new stores in Colleyville and Flower Mound next spring. Whole Foods’ planned Uptown Dallas store is scheduled for early 2015, and it’s scoping out an in-town Fort Worth location. North Carolina-based Fresh Market is reportedly coming into Dallas after opening in Houston this summer.
And Wal-Mart, which has the largest market share in Dallas-Fort Worth, added 10 stores to the region in the last year and has others under construction in North Dallas and South Dallas.
Wal-Mart’s local market share increased 1.1 percentage points to 27.8 percent, according to newly published data for the year ended in March.
“There’s still plenty of opportunity for Wal-Mart in D-FW. We’re still looking for ways to grow here,” said Wal-Mart regional general manager Dacona Smith. “It’s not a mature market for us.”
The world’s largest retailer has a whopping 109 Supercenters and Neighborhood Market stores in Dallas-Fort Worth. It also operates 20 Sam’s Clubs here, including one in Denton.
Depending on who’s counting, the region’s grocery business is worth $14 billion to $17 billion a year.
Grocers ask themselves, “Where can we find growth?” said Craig Rosenblum, a partner in the grocery industry consulting firm Willard Bishop LLC. “Retailers come here because of the diversity, spending habits and demographics.”
Population growth is fueling “higher comparable-store sales across the market for us,” said Scott Huska, Aldi’s regional vice president. “We continue to see new customers in all our stores.”
But population growth isn’t lifting all boats.
Among conventional supermarkets, only Kroger increased market share last year, to 14.5 percent, up 0.2 percentage points, according to the 2013 annual report published by Tucson, Ariz.-based Metro Market Studies. Last year, Kroger opened three stores, remodeled 10 and added six fuel centers. Kroger will open 120,000-square-foot Marketplace stores in Wiley in July and Forney in November.
Tom Thumb and Albertsons continued to lose market share. “I'm not sure what kind of recipe for profits that is. The market is growing, and Tom Thumb and Albertsons are losing market share,” said Ed Fox, a marketing professor at Southern Methodist University.
Especially out in the farthest suburbs, shoppers have shown they prefer to shop in big-box stores, Fox said. “Wal-Mart’s market share increase is very significant. Kroger is holding its own. It’s very aggressive.”
Albertsons and Tom Thumb declined to comment.
Tom Thumb opened a store in Flower Mound in October and will open one in Frisco this fall. This month, it closed a store in East Dallas and remodeled an existing store.
Flower Mound has become a grocery magnet: In addition to Whole Foods, Market Street has a store under construction there, and Tom Thumb opened its fourth store there in October. Kroger is expanding one of its stores there.
“The Roanoke distribution center gives us an opportunity to grow again. We went from 2009 to 2013 without opening a store in the market,” said Market Street spokesman Eddie Owens.
Market Street, a division of Lubbock-based United Supermarkets, has six stores in the area, and all of them have “seen solid sales growth” in the last year, Owens said.
WinCo, which has so far disclosed McKinney and Fort Worth locations, believes its large stores and low prices will win shoppers over. WinCo stores are about 90,000 square feet, or twice the size of a traditional supermarket. The Boise-based chain is also employee-owned.
“We plan for Dallas-Fort Worth to be a significant market for us,” said WinCo vice president Michael Read.
WinCo’s focus on low prices is going to be interesting to watch.
When Aldi came into the market, milk and egg price wars ensued. Aldi’s Huska said he thinks the market has become less competitive. Milk and egg prices are up from last year, he said.
The Dallas market was one of the first where Wal-Mart started doing its basket challenge ads. The ads, which have been running since April 2012, compare Wal-Mart prices to those at Kroger, Tom Thumb and Walgreens.
Wal-Mart has said it has invested $1 billion in lowering prices as it also feels competition from dollar stores, Rosenblum said. “It takes time to get credit for that.”
Wal-Mart spokeswoman Molly Philhours said that in markets where the campaign is running, stores have higher comparable-store sales and traffic.
Shoppers say they don’t think prices are lower, especially if you’re trying to eat healthy.
“For me, my husband and our two children, it costs us about $1,600 a month to eat healthy. That’s sad. It shouldn’t be that way,” said Jahilyn Isaksson, 34, of Dallas. “If we ate fast food, of course, it would be a lot cheaper.”
Isaksson has noticed that Wal-Mart has beefed up its organic and fresh foods, but she says those items are more expensive there, too.
Mark Grogan, 59, of Dallas said overall prices have been creeping up over the past year. He shops around: Wal-Mart and Sam’s Club for larger items, Whole Foods for oat bread and traditional chains for convenience.
“Packages of things like paper products and crackers are getting smaller at the grocery stores, but the prices aren’t,” Grogan said.
Leaving a Tom Thumb in North Dallas on Monday, Grogan said he needed some ingredients for a cake.
“In a case like this,” he said, “when I need sour cream and marmalade, I just came to the store closest to my house.”