Giant Steps

by Russ Roberts on November 30, 2004

in Competition, Regulation

The other day I blogged on how the Montgomery County Council voted to make it harder for Wegmans and Wal-Mart to compete with Giant Foods in the Maryland county just outside of Washington, DC.  The Washington Post reports on remarks to stock analysts by executives from Royal Ahold NV, the Dutch conglomerate that merged Giant with Stop & Shop stores:

The merger of Giant Food with its corporate sibling hurt employee morale at the Washington area’s largest supermarket chain, the chief executive of the combined operation said Monday.

"We need to win our people back," Marc E. Smith said in a presentation here to stock analysts who cover Royal Ahold NV, the Dutch conglomerate that last year combined its 200-store Giant chain with Stop & Shop, a 348-store operation based in the Boston area.

Further on in the article, we learn of what might be an even bigger problem facing Giant in the DC area:

Discussing the merger, William J. Grize, the head of U.S. retail operations for Ahold, told the analysts the company is "not totally pleased with the results to date," adding, "We will make it better."

During his presentation, Smith said Giant and Stop & Shop must offer more competitive prices and renovate aging stores to compete against an influx of new food retailers in both the Washington and Boston regions.

Giant, in particular, he said, will require a major investment in store renovation and replacement. Smith said the average Giant stores is 8.7 years old, compared with an average age of 6.4 years for Stop & Shop’s stores. "The Giant number calls out for a significant amount of investment over the next few years," Smith said.

No hurry on those renovations or bringing down prices, of course.  Without Wegmans or Wal-Mart breathing down their neck, Giant can take its time.

(Hat tip to Daniel Lurker)

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