Sacramento grocer RaleyÆs facing competition, retrenchment
The relentless advance of the big-box juggernauts into the Southwest grocery market has led at least one chain to take the advice of Sun Tzu and retreat in the face of overwhelming forces.
Following moves in the late 1990s into Las Vegas, Salt Lake City and New Mexico, Raley's grocery chain seemed poised to take a large share of the Southwest grocery market. Since then, firms such as Wal-Mart and Costco have launched offensives to capture sizable portions of the market, forcing firms like Raley's to retrench and retool.
Five years ago, the West Sacramento-based chain sold its Las Vegas stores. Last week's announcement that the firm was selling its 10 stores in New Mexico to Supervalu Inc.’s Albertsons chain for an undisclosed sum signaled a new tactic by the 130-store chain. The move, Raley's President and Chief Executive Bill Coyne said in a release, will allow the chain to “focus our energy and efforts on our core markets in Northern California, the Bay Area and northern Nevada.”
Despite Raley's assessment that the New Mexico stores were both successful and profitable, experts deemed the sale necessary to allow the firm to make a strong stand in the highly competitive Northern California market.
“Raley’s really had it their way for 25 years, and now for the foreseeable future Raley’s is in for the fight of its life,” Burt Flickinger III, an independent consultant based in New York told the Sacramento Bee. “Now they can reinvest capital in California, which is a smart strategic move.”
Unlike the 7 percent market the chain held in Albuquerque, Raley’s and its subsidiaries control 36 percent of the greater Sacramento market. However, just as Wal-Mart and others pried share away from Raley's in New Mexico, the same is happening in Sacramento, which has seen a spate of openings by discounters like Wal-Mart, WinCo and Whole Foods.
Previously entrenched Sacramento grocers such as the area's second leading chain, Safeway Inc., are also gaining market share and adding to the pressure felt by smaller chains like Raley's. In addition, if the impending Southern California invasion by British grocer Tesco proves successful, there is no doubt that a future march on Northern California would not be far off.
Sacramento grocer Raley’s facing competition, retrenchment
