Save-A-Lot carves niche serving communities that Publix and others overlook
GULFPORT — Betty Duffey has a half-dozen several grocery stores vying for her business near her neighborhood in southern Pinellas County.
Publix Supermarkets is 2.5 miles down the road and she’ll pass by a Winn-Dixie and a Walmart Neighborhood Market on the way there. Two miles in the other direction is an Aldi and a Walmart Supercenter. But Duffey, 63, does most of her grocery shopping at Save-A-Lot.
It’s the closest grocery store to her house, but it’s also the cheapest.
“I’m on disability and really have to watch how I spend my money,” Duffey said. “At Publix, I’d spend $200 a month for groceries. At Winn-Dixie, I’d spend probably around $150. But at Save-A-Lot, I’ll spend $80 for the same amount of food.”
Save-A-Lot has operated supermarkets in Florida since the ’80s, managing mostly to fly under the radar. But in recent years, the Missouri-based discount grocery chain known for its discount prices and private labels on staple items from milk to spaghetti, has moved into Florida in a big way. Save-A-Lot made a push to double its number of stores in the southeast in 2009, and within three years opened 100 stores, including dozens more in Florida and a second distribution center. Florida is now Save-A-Lot’s largest market with more than 150 stores.
The company’s stores are smaller than the average Walmart or Winn-Dixie, and they’re often located in older shopping centers in parts of town where Publix Supermarkets has avoided. Because of this, coupled with Florida’s average wages still lagging behind the national average, Save-A-Lot has been able to carve out its own niche.
“Groceries are relatively inelastic in that people can eat less, but they still have to buy food,” said Steve Kirn, a lecturer who teaches classes on retail at the University of Florida. “Save-A-Lot is attractive because they are often the only grocery stores in a low-income market. But no matter where you live, their prices are pretty attractive.”
Save-A-Lot began opening stores in Florida in the mid 1980s. Most of their early locations looked like a hybrid between a grocery store and a convenience store, and were found mostly in rural communities like Plant City and Brooksville.
“Our goal is to be a neighborhood grocery store, which means we serve people who live within two to three miles of the store. Not that shoppers can’t come from farther away, but the model is based off providing access to groceries to those who live in a close proximity,” said Chon Tomlin, spokeswoman for Save-A-Lot. “The theory is that if you have to run up the street to get a gallon of milk, we want you to come to Save-A-Lot. We’ll have the lowest prices on those core, staple grocery items and we’re the closest to home.”
The company’s business strategy has stayed the same even with its rapid growth. Save-A-Lot has opened more urban stores, including several in Tampa, St. Petersburg and Clearwater, but they still serve areas that are often considered “food deserts,” or densely populated communities where it is difficult to buy affordable or good-quality fresh food.
“Save-A-Lot almost has no direct competitor because its business is mostly stock dry items and the model is based on convenience and price,” said Jeff Green, a retail analyst based in Phoenix. “Everyone else focuses on organics or fresh produce or customer service.”
Many of the shoppers who buy from the Save-A-Lot store on Gulfport Boulevard in southern Pinellas County walk or ride bikes from their homes nearby. The store is located in a mostly empty shopping center with a Family Dollar store next door and a handful of other independent stores. However, the Save-A-Lot store stays busy nearly all hours of the day. In a marked contrast to the atmosphere of a typical suburban supermarkets, an armed security guard stands at the front of the store.
“By moving into spaces where other grocery stores have closed or in lower-end centers where others won’t go, Save-A-Lot is paying a pretty low rent,” Kirn said. “That’s part of how they make the formula work. They can remodel at a lower cost than building a brand new store.”
Customers won’t find all the extra perks at a Save-A-Lot that they see at a Publix. There’s usually only a handful of employees working at the store at time. There are only four cash registers though usually only two are open at a time. Shoppers have to bag their own groceries. And most goods for sale are shelved in the cardboard boxes that they were shipped to the store in. There’s no seafood department and the meat section is very modest compared to other grocery stores. Baked goods are prepared off site and shipped to the store.
“Save-A-Lot is a convenience-oriented shopping trip,” said Green, the retail analyst. “It’s very price oriented too. But it’s for people shopping for a few things at a time, not a huge shopping trip, even if the number of customers they have in a day can be fairly high.”
This “lean efficiency” model helps keep costs down so Save-A-Lot can sell items at a greater discount, Tomlin said.
“Our stores employ about 20 people, and everyone is trained to do every job instead of just being tied to one function,” she added.
Save-A-Lot stores don’t sell the popular name brand names seen in most other supermarkets, like Kellogg’s cereal or Chobani yogurt. Instead it sells its own private label on all goods, from tomato sauce to paper towels. It’s another cost- cutting measure the company capitalizes on, one that has been fairly easy to do thanks to a longtime ownership by SuperValu, one of the largest wholesale grocery companies in the country. SuperValu announced in October that it will sell Save-A-Lot to Onex Corp., a Toronto-based private equity investment firm, for $1.37 billion.
Unlike other grocery stores, Save-A-Lot offers its own franchise-type ownership program. About 75 percent of the company’s 1,400 stores are owned by licensees, who own and operate the grocery store under Save-A-Lot’s leadership.
But Save-A-Lot’s secret might be out, as competitions heats up in the low-cost niche in Florida.
Adli, a German discount grocery chain, is opening stores in Florida at a rapid rate. While most stores are built brand new from the ground up, they often serve the same of kind of communities that a Save-A-Lot or a Walmart would, and are known for their discount prices. Lidl, another German value brand, is expected to make a big push into the U.S. for the first time this year.
“Some of these more traditional grocers, like Winn-Dixie and Publix, are starting to get hit on the lower end by discount stores like Save-A-Lot. It’s one of the fastest growing segments of the supermarket industry, with newcomers like Adli continuing to grow and Lidl coming into the U.S.,” Kirn said. He noted that Winn-Dixie’s promotion to rollback prices on staple items last year was a move to keep their value-based shoppers. “There’s clearly a big market here for house-branded items offered at a discount. Publix and others are going to start feeling the heat.”
Back in Gulfport, Duffey says she sees no reason why she’d ever stop shopping at the Save-A-Lot close to her home.
“I’ve never bought piece of produce that wasn’t fresh and the store is always clean,” she said, adding that most of the tenants in her nearby apartment building shop there too. “I wish they would remodel the store to make that center nicer, but it’s Save-A-Lot. They’re not going to, and that’s OK.”
Contact Justine Griffin at firstname.lastname@example.org or (727) 893-8467. Follow @SunBizGriffin.
Headquarters: Earth City, Mo.
Stores: 1,400 nationwide, 154 in Florida and two distribution centers in Pompano Beach and Plant City.
Sales: $4 billion in 2014 ( $17.8 billion by Supervalu, its former and most recent parent company).
Store size average: 15,000 to 16,000 square feet.
Known for: Discount prices, its own in-house brands and labels.
Competes with: Aldi, Walmart.
History: The company was founded in 1977 by Bill Moran as an alternative to large grocery chains. The first store opened in Cahokia, Ill.
Grocery store market share in Florida:
Save-A-Lot: 1,400 stores nationwide; 154 stores in Florida; 12 in Tampa Bay
Publix: 1,136 stores in the Southeast; 774 in Florida;
Winn-Dixie: 518 grocery stores in the Southeast; 358 stores in Florida; 56 in Tampa Bay
Walmart: More than 50,000 stores in the U.S.; 373 stores in Florida; 68 in Tampa Bay
Aldi: 1,600 stores in the U.S., (more than 10,366 including international stores); 99 in Florida; 15 in Tampa Bay