Jewel Seeks to Build an Advantage

Discussion
Oct 03, 2006

By George Anderson


Jewel is undertaking its most aggressive new store expansion in the Chicagoland market in years, according to Crain’s Chicago Business.


The chain, owned by Supervalu, is looking to build at least 12 new stores over the next 18 months. Currently, it operates 175 stores in the market and holds a 41 percent share
of the local grocer business.


“For Supervalu to be investing money like this in Chicago so soon after the acquisition demonstrates their confidence in Jewel and its position in the marketplace,” said George
Redfearn, vice president of development at Tucker Development Corp.


Neil Stern, a senior partner at McMillan/Doolittle, said the new stores are needed. “Albertsons (the former owner of Jewel) was always capital-constrained. They seemed to be
fighting fires someplace else and starving Jewel in Chicago. Now, Jewel is being fed for the first time in a long while by a parent company not afraid to invest money.”


Jewel is looking to push its advantage over Dominick’s and better position itself against the likes of Wal-Mart.


Many of the planned stores are in areas where Wal-Mart has yet to establish a presence. The thinking is Jewel will beat Wal-Mart to the customers in areas such as New Lenox,
Elburn and Sugar Grove.


“No question, Wal-Mart will have an impact on Jewel,” said Bill Bishop, president of Willard Bishop Consulting. “Wal-Mart has demonstrated a willingness to go into surprisingly
small communities.”


Discussion Questions: What are Jewel’s current strengths and what will it need to do if it is to continue outperforming the competition in the areas
it serves? What is the biggest threat to Jewel’s continued leadership in the Chicagoland market?

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7 Comments on "Jewel Seeks to Build an Advantage"


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David Livingston
Guest
15 years 7 months ago

Wal-Mart is probably the biggest threat, but Wal-Mart could also be Jewel’s friend. Especially if it helps eliminate Dominick’s. Jewel sort of got a lucky break when Steve Burd decided to dummy down Dominick’s. Dominick’s has remodeled a few token stores with the lifestyles format, but they are still operated by Safeway which restricts their full potential. At 41% market share, they are nearing their peak. Hopefully Cerberus will come through and sell the Cub stores to an inadequate operator, however rumors are they might go to Stack & Van Til, who is quite capable. For now, perhaps they should make life miserable for Dominick’s, force them into selling out to an even less capable operator, and hope to move towards 50% market share. And maybe Wal-Mart will lend a helping hand.

Art Sebastian
Guest
Art Sebastian
15 years 7 months ago
Let me preface my comment by noting that my opinion will be slightly diluted since I spent 8 years of my career with Jewel Osco. I think that this is a very good move on Supervalu’s part. Jewel Osco is one of the most dominant regional grocers in the country. It’s primarily mentioned along with HEB, Publix, and HyVee as one of the strongest regional players. From a Jewel Osco perspective it’s definitely essential to expand. They recently sold 70+ free standing drug stores that, although they did not add to their profit line, they helped in terms of market share and customer awareness. They also surrendered a substantial number of scripts along with a substantial alcohol dollar number. During my final years in Boise, we developed a prototype format based on our success at Jewel Osco. The legacy ABS folks along with some “new-to-the-industry” associates continued to make modifications to our format just for the sake of making changes. Now that Jewel Osco is owned by SV, I think they will have the autonomy… Read more »
Justin Time
Guest
15 years 7 months ago

What a turnaround! Finally, someone is treating Jewel like it should be treated, the Jewel in the crown of grocery stores acquired in the Albertsons acquisition. And maybe Supervalu might see the light and dump the Acme stores while it concentrates on Jewel, Albertsons and Shaws/Star.

Jewel is a Chicagoland favorite. They have great locations, and provide good prices, good service, quality, and selection.

But Chicagoland has always liked value oriented stores. So Supervalu might have to fine-tune Jewel. The combo stores with Osco have done well. Should they be revamped, incorporated with a Save-a-lot, perhaps? Supervalu execs will have to look at the possibilities, especially inside Chicago’s city limits as well as the nearby suburbs.

Charlie Moro
Guest
Charlie Moro
15 years 7 months ago

Jewel has a great brand in Chicago and with Supervalu in a position to finally add capital, it can only get better. One of the advantages of running CUB stores in the market for so many years is that it gives the Supervalu management team a unique perspective of how to compete against the market leader. And, the management team has personal experience with the successes and failures of those marketing initiatives

Supervalu should be in a great position to use that information in reverse and strengthen their market position to withstand the entry of Wal-Mart as well as other competitors in the market.

Mark Lilien
Guest
15 years 7 months ago

With 175 locations and a 41 percent market share, Jewel can advertise less expensively than any other grocer in Chicago. No other Chicago competitor comes close to this leverage, and since effective advertising drives volume, Jewel can use this advantage for a long time to come. Long-term competitive advantages are few and far between in the supermarket business, where it’s usually very easy for anyone to be copied quickly.

Joseph Peter
Guest
Joseph Peter
15 years 7 months ago
From a retail designer perspective: The latest prototype that Albertsons laid out for the Jewel Osco store, the store in Dyer, IN in particular is a beautiful store! The entire ceiling is exposed and the lighting and finishes are very up tempo and cheerful. I hope Supervalu keeps rolling out this wonderful airy prototype. Dominick’s used to be ahead of the game when it came to design, when compared to Jewel stores. There was a time when Dominick’s was rolling out stores in the late 1980s under the Dominick’s and Omni Superstore format that were remarkably more exciting in design than the Jewel Stores. For example, Jewel opened a store in 1988 in Michigan City, IN with a drop ceiling, rather simple plain graphics and fluorescent lighting. Dominick’s, on the other hand, opened a store in Matteson, IL with exposed structure, exposed piping/HVAC, bright floor tile patterns, neon signage and bold wall graphics, HID high bay lighting and an ethnic food section. This was way ahead of Jewel, but of course the tables have turned!!… Read more »
Jim Wisuri
Guest
Jim Wisuri
15 years 7 months ago

Maybe I’m looking in the wrong places, but I’ve never seen a Whole Foods ad. My hunch is that their Chicago-area ad costs should be very competitive with Jewel’s, quite possibly lower on a per-customer basis.

And my nearby West suburban Jewel has been paying plenty of attention to Whole Foods ever since they showed up in town.

The produce section got a dramatic overhaul several years ago — and other high-end features (e.g., organic aisle) have crept into the store to mimic what Whole Foods introduced locally.

So, yes, the far-flung suburbs are the new frontier for Jewel. But Supervalu shouldn’t lose sight of the inner-ring suburbs, and the competitors who want to take away the core of Jewel’s Chicago area strength.

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