February 5, 2014

WinCo brings more low prices to hyper-competitive grocery market

The employee-owned supermarket chain, based in Boise, Idaho, open its first Tarrant County location on Thursday at 8000 Crowley Road in southwest Fort Worth.

An already heated grocery store scene will intensify this morning with the opening of a large new steep discounter — WinCo Foods — in far southwest Fort Worth at 8000 Crowley Road.

A second store will open in McKinney.

If you’ve never heard of WinCo, you’re not alone. The Boise, Idaho-based, employee-owned company hardly ever advertises and has been known mainly as a Northwest chain. Of its 93 stores in seven states, the nearest ones to North Texas are in Phoenix, Ariz.

But three more area stores are planned for the next 12 months, including one in North Richland Hills.

And depending on a number of factors, the region could support 10 to 12 Winco stores eventually, predicted Michael Read, a company attorney who also serves as a spokesperson.

He said WinCo expects to do $5.6 billion in annual sales for the fiscal year ending in late March. A closely-held corporation, it doesn’t release net profit figures, but Read says that it meets the industry average profit margin of 1.4 percent.

While its signature “wall of values” immediately give the first-time visitor the impression that WinCo is a warehouse store, beyond that pallet-stacked aisle lies a 94,500-square-foot store that resembles a typical, but spartan, supermarket — one with no pharmacy, gas pumps, florist shop, sampling stations, demo kitchen, sushi bar, dry cleaner, bank or roving wine adviser.

There is an on-site bakery, where the French-style breads are made from scratch and other items are baked from defrosted dough.

And the seafood counter is full-service and staffed, but there is no meat counter. However staffers will, if asked, custom cut a chop on demand, said Robert Rhodes, the Phoenix-based regional manager. Otherwise, film-wrapped meat and poultry items are in refrigerated cases.

Also missing are dedicated sackers at the checkout. But if an elderly or disabled person needs help, someone will be summoned to bag, Rhodes said.

What WinCo promises is very low prices, which it has honed during years of going nose-to-nose with Wal-Mart. And that will be reflected throughout the store, including the rows of bulk items, more than 750 varieties, from grains and flours to nuts and herbs, extra-virgin olive oil and three types of honey. The honey tank carries a tongue-in-cheek warning: “Danger: Do not lift lid. Bees will escape.”

There is a separate wall of different roasted coffee beans — expected to be priced at $5.98 a pound, but like other items, quickly altered, depending on market competition.

A sampling of other prices include milk expected to go for $1.88 a gallon (by comparison, Kroger has a $2,29 special this week); bananas, 48 cents a pound; garlic salt, $1.59 a pound; 24-ounce can of Hunt spaghetti sauce, 78 cents; 9.6-ounce Totino’s frozen pizza, $1 each; 13-ounce box of Cap’n Crunch cereal, $1.98.

Daily price checks at rival chains on 100 top items are aimed at keeping prices competitive, Rhodes said. As a courtesy, it hasn’t sent out staffers until this morning so that rival stores will have a chance to look over their price tags, he said.

Surprisingly, WinCo is a late-comer to private-label items, which numerous chains increasingly have used to keep prices low and profit margins up while building customer loyalty. Read said WinCo didn’t have the buying power to economically justify a line of its own house brands until last year, and in this market it will augment some 700 items with the Best Choice brand of its distributor, Associated Wholesale Grocers.

Dallas-Fort Worth had long been considered among the most competitive markets for groceries even before Aldi, Trader Joe’s, Sprouts Farmers Market and HEB entered the fray within the past three years.

Strong national contenders had been scrambling for the region’s food dollar, pitting a concentration of Wal-Mart Supercenters and Neighborhood Market stores against Kroger, Albertson’s, Whole Foods and Safeway’s Tom Thumb. The national grocers also contended with feisty regional chains like Brookshire’s, HEB’s Central Market, and a number of Latino-oriented banners, including Houston-based Fiesta Mart. And there are still 14 Minyard Food Stores, including one in Fort Worth’s Meadowbrook neighborhood.

“We need another supermarket chain?” asked Doug Renfro, president of Fort Worth-based Renfro Foods, maker of Mrs. Renfro’s salsa line, which has sold to WinCo for 14 years. “That’s like putting another steakhouse in Sundance Square.”

Aside from yet another outlet for Renfro’s salsa and chowchow, the new entrant is a win-win for consumers, providing another quality shopping choice, while weaker store competitors may be shaken out, he added.

Kroger spokesperson Gary Huddleston asserted that the nation’s largest traditional grocer won’t be impacted by WinCo, predicting instead: “Wal-Mart and Aldi will be affected. We will continue to be the market leader with exceptional customer service, great variety and low price.”

But a number of chains, with the notable exception of Wal-Mart, lowered their milk prices when Aldi sold the staple item below cost — 99 cents a gallon — for months after its 2010 opening in the region.

Unlike Wal-Mart, which has faced withering criticism for the number of its employees receiving government welfare benefits, WinCo provides full health insurance to even part-time workers who put in 24 hours or more per week. The monthly premium for a family of four is $42 with an annual deduction of just $200, with a 20 percent co-pay, Read said.

And like full-time employees, 20 percent of their pay is invested in a company-stock retirement fund, that has been averaging annual returns of more than 19 percent since 1985, the spokesman said.

“Four hundred and seven front-line workers — non-management — have retirement accounts in the seven figures,” he went on. Last year, WinCo paid out $172 million in returns.

It hasn’t been all smooth sailing. A 2007 article in the Boise newspaper The Statesman said the chain was struggling in the late 1970s, closing as many stores as it opened. Former CEO Bill Long negotiated an employee buyout from the founders in 1985, then known as Waremart and Cub Foods. Changed to WinCo, for Winning Company, following an employee naming contest, stores now have average sales of about $55 million, up from $11 million 29 years ago, the paper said.

Rhodes insists that much of the chain’s success lie in the employees’ commitment to the company that they own. When they see a co-worker messing up, they feel it affects their stake, he said.

Moreover, each store ends up creating an employee committee that can uphold, or over-rule, a management decision to fire an employee, the district manager added.

It’s a different kind of store.

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