Wednesday, October 28, 2009

The myth of low grocery prices

Every big metro area has that one local grocery store chain that claims to be the low price leader. Their weekly newspaper inserts are loaded with coupons which price conscious shoppers feverishly clip out because a coupon is always a good price. Around the Twin Cities our "low price" grocery chain is Cub Foods. They've been around for about 40 years and from what I can tell began as a warehouse-type store where boxes of products were displayed with one side cut off for access when placed on store shelves. It's a logical way to keep prices low.

However, they aren't the low price leader any more. Sure, their image - using the American Typewriter font - would seem to instantly convey low prices but they just aren't consistently cheap any more. Their ads are still littered with coupons but their new low price model seems to be that of raising the regular price and then marking it down for the sale. The buy one, get one free coupon this week for a 20 oz. package of Gold 'n' Plump boneless, skinless chicken breasts comes to mind. They claim savings of a whopping $6.99! That not only seems artificially inflated but downright insanely high for 1.25 lbs. of chicken. I am fairly confident that, if it weren't for that BOGO special, I could pick up two packages for at least a dollar each less at the local Super Target store.

The puzzling fact is that people still shop at the area Cub Foods store in hordes. They did so after a very nice Rainbow Foods Fresh Store opened across the street. Rainbow's prices were equal to or lower than on most products than at the neighboring Cub Foods store. That just goes to show that either Cub Foods has totally nailed their marketing and branding image or that Minnesotans are very loyal to certain brands.

But how, in the face of decades of successful branding and imaging, does a competitor succeed in winning over new customers? Rainbow Foods is really the only legitimate grocery-only competitor to Cub Foods in the Twin Cities. The services they offer are comparable and so are the prices but Rainbow Foods has fallen flat on their face countless times since entering the market. Their image has been all over the map and they have failed to gain footing on a community organization level (Boy Scouts, youth hockey, etc.) like Cub Foods has done so well. Rainbow has bombed, I think, because their radio ads are flat out pointless and needlessly gimmicky. The Cub radio ads feature real people and mention the specials of the week. This is one case where Rainbow would be better for imitating rather than trying to be original and unique. Grocery customers do not give a damn about unique, they want low prices and Cub Foods mentions their seemingly low prices and those numbers, voiced by a female "interviewing" Cub customers, stick with people far more than a male doing the same because women buy the bulk of a family's groceries.

But you don't have to look cheap to grab customers. Target has a simple, even classy image. They are so successful that years ago Dayton changed the corporate name to Target Corp. Which one of those two names is still around? Target has succeeded by offering not only low prices but a customer experience. The prices are comparable to competitors, the brands are recognizable but they stick out because of their customer service and image. They are the classy discount department store and, I'm guessing, are more successful in the grocery field in the Twin Cities than Rainbow Foods is or ever will be. Still, it pays to shop around so do it and find out for yourself which store gets you the best deal and listen to those radio ads - which ones grab your attention?

If you want something more entertaining, may I suggest the photos of Minnesota at MinnPics. Something fresh and engaging to look at every day.


Bill Roehl said...

I shop at both stores for some items while I do the majority of my food purchases at the co-op. Sometimes Rainbow is less, sometimes Cub is less but either way, Cub is always packed and Rainbow is generally empty.

I think, in our town at least, it has less to do with marketing, branding, or choice but more to do with the simple fact that people still associate Rainbow with those stupid cards and Cub with coupons.

snowelf said...

I've been so spoiled by shopping at SuperTarget, I feel like I'm ruined. I can't even shop in a regular grocery store anymore. They feel exactly like you commented--that they just raise prices to lower them and make you feel like you are getting a deal. 7.99 for a pizza is not a deal when I can get it for 4.99 at Target. Seriously.


Recovering Procrastinator said...

I do some shopping at Cub and some at Rainbow, depending on what is on sale. And I DO know when it's truly a sale and when it's just advertised as one.

But I've been finding that for regular priced items, you can't beat Aldis.

I'm working up a comparison spreadsheet of these three, as well as Target and Costco and will have it on my blog soon-ish.

Pesky said...

I avoid the Raibow store less than 1/2 mile form me in Maple Grove, MN. because no matter when I go in, it seems like the store is nearly empty, but they only have 1 register open, and people are lined up 5 deep at it.
I buy what I can at Costco, but the quantities are always large, so my wife and I can't get through most produce items before they go bad. What can't come from Costco generally comes from Super Target where the open registers are plentiful, the store is nice, and the prices are decent.

James said...

Wow, Cub Foods is still around? They abandoned Colorado years ago and I thought they went out of business. We don't even have Rainbow stores out here.

Jacki said...

I bounce around a few different stores here in our area, depending on who has the best deals. My favorite store is Wegmans because they have tons of gluten-free products, and a lot of the Wegmans brand items are cheap and gluten-free. And actually taste good!

I have found the best way to save money is to use coupons. I have it down to a science, and only buy what we need only if I have coupons for it.

Ed Kohler said...

Convenience plays a big role. And, there are some switching costs to figuring out where the nutmeg is in a new store.

I'm pro-Co-op these days because I'd rather not be tempted by aisle after aisle of crap I don't need to put into my body. And I don't want to end up in the news based on Cargill's next delayed recall of Franken-meat.

abrown said...

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Kearn said...

Personally, I'm still waiting for Hy-Vee to make it up here. They're an Iowa based chain. They're clean, have good selection and good prices, isles that are the right width to get through, and are organized in a way that makes sense to me. I was sort of disappointed when I moved up here that there isn't really an equivalent.

Sornie said...

Hy-Vee is the one grocery chain I'd love to see here too. I grew up in Austin and that was the place everybody shopped. The meat department is stunning and fairly priced and they have a real eat-in deli with excellent meals. They are truly full service and if they would enter the Twin Cities it would be a game changer.