Competition heats up among Asian supermarkets

February 14, 2015

Lotte Plaza Market is no traditional supermarket. Korean cabbages, Asian pears and Chinese eggplants create a bold palette in the well-stocked produce bins. Dozens of different noodles and soy sauce varieties line one aisle, and the deli offers salted squid and octopus, Vietnamese rice sticks and bean thread rolls.

From its Ellicott City store, the grocer has served the growing Korean community and other Asian immigrants for more than a decade, specializing in ethnic foods customers would have trouble finding elsewhere.

Two years ago, the Jessup-based chain expanded to Catonsville, taking over a former Toys R Us space just down the road from rival Asian market H Mart. In December, H Mart snapped up a newly vacant supermarket space almost directly across U.S. 40 from the Ellicott City Lotte store. Thanks to shifting demographics, healthier eating and the rising popularity of ethnic cuisine, Lotte, H Mart and others in the international grocery niche see demand continuing to grow even as the competition heats up.

"This may be the only area in the Baltimore market where two [international supermarket] competitors are going head-to-head in two adjacent markets," said Jeff Metzger, publisher of Columbia-based Food World trade journal. Such markets "have a very steady growth curve. They're filling a need for the local community."

The battle of the Asian grocers is playing out as international supermarkets have become a fast-growing niche in the Baltimore-Washington region. In Food World's ranking of the Baltimore area's top grocery retailers, led by No. 1 Giant and No. 2 Safeway, international supermarkets as a group made it into the top 10 for the first time last year, with $132 million in sales and a nearly 3 percent share of the market. Growth is even more impressive in Washington's Maryland and Virginia suburbs. There the international markets collectively ranked fourth last year, with more than $1 billion in sales and 9 percent of the market, while mainstream grocers lost share, the Food World survey showed.

That makes sense because the D.C. region has become home to the nation's third-largest Korean-American community, behind Southern California and the New York and New Jersey region, said Kyeyoung Park, associate professor of anthropology and Asian-American studies at the University of California, Los Angeles. Ellicott City, too, has drawn many Korean-Americans with its strong schools. At two area elementary schools, Veterans and Hollifield Station, Asian students account for 46 percent and 42 percent of the population, respectively, according to data from Howard County Public Schools.

Besides appealing to the Korean community, Lotte has grown by striving to appeal to a broader customer base, said Alvin Lee, the retailer's director of operations.

"Over the years, we've evolved outside the Korean-centered market to serve the diverse community" that has sprouted in the Maryland, Washington and Virginia region, Lee said. "The amount of ethnic communities that have grown over the last 10 years has been explosive. We have been growing to serve that market."

Started in 1989 with one store in Rockville, the chain has grown to 10 in Maryland, Virginia and Washington and become the area's largest international market chain, Lee said.

Along with changing demographics, "people are... trying to find more healthy products," he said. "There's a diversification away from traditional meals to Asian or Latino or Indian cuisines, with the advent of the Food Channel. There has been a demand for something different."

As Lotte has grown, its stores have become larger and evolved from focusing on Korean, Chinese and Japanese food to add products from the Philippines, Vietnam, Thailand and Pakistan, Lee said.

That reflects the way in which Asian supermarkets have transformed over the past decade, growing from small or medium-size operations into bigger chains with large store formats that offer more than groceries and expanded ethnic food selections, Park said.

"And they are competing with each other," and increasingly with mainstream grocers, she said.

Often the chains keep prices low by running wholesale businesses that import directly from Korea and China.

"In Los Angeles, initially everything was more expensive at Korean markets, but over time it has completely changed," helping to attract new customers, Park said.

But transforming from small markets focused on produce to full-scale supermarkets won't necessarily lead to continued growth, said Jeremy Diamond, a director of Diamond Marketing Group and a food retail consultant in Baltimore.

"I don't think they're in touch with the neighborhoods where they put their stores," Diamond said. "I don't see them catering to the local ethnic flavor of each neighborhood. ... They do the same things across the board in all their stores. It seems to be the same marketing strategy across all their stores. They have their niche now, but I question how long it's going to last."

For now, there seems to be plenty of business to go around, as the Lotte and H Mart stores in both Catonsville and Ellicott City appear busy. Others also see opportunity in the area. The Great Wall Supermarket opened at the end of 2013 in Catonsville, farther east on U.S. 40, describing its mission as offering homeland favorites to Asian immigrants while introducing other shoppers to the culture.

In Ellicott City, Lyndhurst, N.J.-based H Mart moved into a former Shoppers Food & Pharmacy, built in 1999 as a state-of-the-art Super Fresh. In the reinvented store, customers are greeted by big jars of peeled garlic, prepared Korean kimchi and seasoned sesame leaves, and a selection of traditional Japanese deserts such as rice cakes with bean paste. But shoppers also will find aisles full of household products with familiar brand names.

H Mart, run by the Hanahreum Group with stores throughout the U.S. and Canada, started an Asian corner store in 1982 in Queens, New York, according to its website. The chain, which did not respond to requests for comment, moved into Maryland in 2001, opening in Catonsville, Wheaton and later Gaithersburg. The Ellicott City store was one of five new stores opened nationwide last year.

Customers Jenna Woo and Ham Kim, both 21, were curious about the new H Mart and stopped in on a recent afternoon, strolling arm-in-arm through the store and dropping items into a small basket.

Woo, who said she recently moved to Columbia from Florida, said she never had shopped in an Asian market before and typically shops at Wal-Mart, even for food. But after making her way through the store, she decided she'd be back.

"There's a lot of stuff I didn't know about," Woo said.

Lawrence Twele, CEO of the Howard County Economic Development Authority, said the area has grown increasingly attractive to a variety of cultures, drawn by job opportunities and strong schools.

"As a result ... you see businesses responding to that demand," Twele said. "It really is widespread, not specifically Korean, though that's one segment, but it's broader than that."

H Mart likely saw the former Shoppers space as "the right size, with the right visibility, with the right marketplace nearby. It's a demonstration that this is a diverse community with diverse needs," Twele said. "Their product is adding to the community."

The quick turnover for a store vacated by Shoppers just months earlier "is a testament that there is demand in the market," he said.

Lotte's Lee said H Mart's expansion is part of the overall competition his chain faces, not only from other Asian markets, but from additional channels -- such as mass discounters, club stores, dollar stores, and specialty stores and grocers that are expanding their ethnic cuisine offerings.

"What we have seen is increased competition from across the board," he said. Still, "we have grown tremendously over the past few years, and we will continue to expand.

"What draws the general public as well as the ethnic communities are the fresh departments, produce and seafood," he said. "While traditional grocers have tried to meet that demand, in terms of authenticity, international chains such as ours provide a more authentic array of products for those specialty cuisines."

That's the appeal for Ellicott City resident Jung Kim, who was shopping at the Ellicott City Lotte on a recent morning. Kim, who is from Korea and cooks traditional Korean dishes, said she shops at American supermarkets for some things but regularly buys produce at the Lotte and seafood at H Mart.

Nicole Shah, also of Ellicott City, has been a regular customer for eight years at Lotte, where she does about a third of her grocery shopping. Because she eats a lot of salads, it comes down to where she can find unusual and fresh ingredients for those meals, she said.

"I like the produce; it seems fresher," said Shah, shopping on a recent morning with her 5-year-old son. "It's one-stop shopping."