Safeway lowers prices

Grocery chain follows competitors as consumers look to cut expenses in recession

Marjie Amyot shops at the Safeway on Boston Street in Canton, where banners advertised lower prices; the company has been rolling them out gradually, but they officially take effect throughout the chain Wednesday. (Baltimore Sun photo by Tasha Treadwell / August 11, 2009)

Safeway is slashing the prices on thousands of items in its stores as the region's grocery market becomes more competitive and consumers look for deals to survive the recession.

The grocer, with 140 stores in the Baltimore and Washington area, has cut as much as 25 percent off prices on items in every department. It follows other supermarket chains, including Giant Food and Wegmans, which have cut prices because of the economy.

The economy has caused people to change their shopping habits, by using more coupons, buying more store brands and buying cheaper cuts of meat. At the same time, traditional grocery stores are facing more pressure from places like Wal-Mart and Target, which are expanding their grocery offerings.

"In this tough economy, as we gathered consumer insight, people are telling us they're looking for more value in their shopping experience," said Steve Neibergall, Safeway Eastern Division president. "They're trying to stretch their dollars further."

The price reductions, which the company has been slowly rolling out, but officially begin Wednesday, will be identified with yellow tags that show the old and new price. People with a grocer's club card can get more savings on some items.

"It should be evident and obvious around our stores that there are a lot of items that we reduced prices on," Neibergall said.

Giant began reducing prices on most items in its stores in 2006 and has credited the strategy with its first quarterly sales increases in years. Whole Foods has held classes on how to find deals in its stores. It also has a newsletter that features sale items and low-cost recipes. Wegmans announced last summer it was reducing prices on many items in its stores "for an extended period of time." Wegmans executives said at the time it was all right if the company made a little less in tough times.

"The average consumer is looking at price," said Jeremy Diamond, a supermarket consultant and owner of the Diamond Group in Baltimore. "Service, and to an extent quality, is becoming second in line. At the end of the day it comes down to price. That seems to be the underlying factor that consumers are looking at."

Another grocery analyst, David J. Livingston, said Safeway's price reduction is an example of a "price war" in the supermarket industry across the country as companies compete for consumers' shrinking dollar. Discounters are doing the best in this economy, analysts said.

Livingston and Diamond said Safeway might have been responding to pressure from Giant. The grocer regained market share after lowering prices.

"With Giant taking a lead on that, other stores have to follow," Livingston said.

Neibergall said the price reductions were something Safeway has been looking at for a while.

"I think the goal would be to draw more consumers into our stores, which would lead to increased sales and allows us to continue to grow our market share," Neibergall said.

Banners at the Safeway in Canton advertised the new specials Tuesday. Employees will also wear shirts promoting the new prices. A bottle of Downy fabric softener that once sold for $6.99 now costs $5.99. A package of shredded cheddar cheese made with 2 percent milk cost $3.49 before the price change and is now $2.99. Shoppers who use their club card pay $2.59.

Christine Cleary, 39, isn't a comparison shopper, but was happy when she found the yogurt she normally buys is now 40 cents cheaper.

"I'll take a better price," she said.

Margaretta Callanan, 66 and retired, said she noticed the lower prices while shopping and as someone who watches her budget was happy about it.

"I do appreciate it, especially since I am living in retirement," she said as she looked for bug spray to kill bees in her backyard in Baltimore.

Julie Anderson, 32, often travels past the Safeway near her Butcher's Hill home to go to Shoppers Food & Pharmacy, where she finds the prices lower. But she said lately she's noticed many of her favorite items are cheaper, like mushrooms and lactaid milk. The former teacher, who is going back to school for nursing, said she follows a tight budget.

"Now, I will be able to shop here and my dollar will go a little further," she said.

Copyright 2009, The Baltimore Sun