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November 28, 2015
Grocery wars in Florida: Publix vs. Walmart


Grocery wars in Florida: Publix vs. Walmart

Mike Vogel | 7/28/2014

Fans of business as a competitive sport have enjoyed a treat of late in Florida. Walmart launched an ad campaign showing Floridians, with their grocery cash register tapes in hand, discovering how much they could have saved by shopping at Walmart rather than a competitor. That competitor: Publix, the home state giant.

Publix, in a move rarely tried against Walmart, counterpunched last year with its own ad campaign calling out Walmart by name. “Walmart doesn’t always have the lowest price,” its ads said. Ads showed side-by-side comparisons of items at the two stores, with Publix shoppers coming out on top.

Walmart, undaunted, landed a new blow on a hallmark of Publix marketing. In a test unique to Florida, Walmart began to match Publix’s buy-one, get-one free offers. Not only would Walmart match Publix, and Other competitors’ offers, but it also would do so at Walmart’s own lower price. “At the end of the day, what we are saying is, ‘we own price,’ ” says Martin Mundo, Walmart’s top executive in Florida. “That is who we are.

That is what our brand stands for, and we will make sure that no one messes with that — in a good way,” he added politely.

The business world has noticed. Says IBISWorld grocery analyst Jeffrey Cohen, “Publix and Walmart have really been duking it out this past year.” The contest indeed has become more pointed of late, but Walmart vs. Publix has been a hardy perennial of business journalism in Florida since Walmart opened here in 1982. As a fight card, it has much to recommend it. In this corner, the challenger … weighing in at 317 Florida stores … from Bentonville, Arkansas … the world’s largest retailer and the U.S. grocery sales leader.

In this corner, the champion … weighing in with 753 Florida stores … from Lakeland, Florida … Florida’s largest retailer and the leader in Florida grocery sales.

Both are among the most valuable retail brands in the nation, according to consultancy Interbrand. Both rank on Supermarket News’ list of chains most aggressively adding stores.

Their styles contrast: The lowprice legacy of Sam Walton vs. the high-service legacy of “Mr. George,”

Publix founder George W. Jenkins. Throw in a measure of hometown hero fighting Arkansas interloper — but only a measure. After 32 years, Walmart’s hardly a newcomer, and it employs 97,222 full- and part-time workers in Florida. Publix, meanwhile, definitely tops it in longevity, founded in Winter Haven in 1930, and in employment with 123,000 full- and part-timers in Florida. The two companies employ 1 in 88 Floridians, who spend $6 to $7 of every $10 they spend on groceries at either Publix or Walmart.

The title bout comes at a time of upheaval in the perpetually competitive grocery business, where the average profit is a deli-thin slice of 1.2% of sales. Supermarket chains have been losing to a host of players beyond Walmart. Start with wholesale clubs, dollar stores and drugstores. Walgreen’s now sells sushi in its prepared foods case.

Ranks of the usurpers in Florida are swelling: Fast-growing private- label value store Aldi, limited selection players such as Trader Joe’s and up-market stores such as Whole Foods and Fresh Market.

Supermarkets’ share of food and consumables has fallen to under 50% today from 90% in 1988, says Jim Hertel, managing partner for food retail consulting company Willard Bishop, and yet the nation still has 27,500 supermarkets — “too darn many supermarkets,” says Hertel. Elites head for pricey fresh stores, while the financially squeezed middle and lower end steer to the lowest price retailer. “A lot of traditional supermarkets have found themselves in what we call the unsustainable middle,” Hertel says.

Meanwhile, e-commerce threatens to disrupt the business in the very long term, while the convergence of operator and consumer needs drives a trend toward smaller stores. The average supermarket takes 400 full- and part-time workers; operators tire of having to stock five sizes of the same product, while consumers value quicker shopping trips and don’t need “100 brands of olive oil,” says retail analyst and “Supermarket Guru” Phil Lempert. “We’re in a sea of change.”

Walmart’s goal is to be Florida’s largest retailer in five years, Mundo says. Knocking Publix off its pedestal as the state’s largest grocer is the longer-term goal. “We know it’s not going to be easy because we have a great competitor here,” Mundo says. “We have a big dream, and we are working hard for it.”

Florida already is a key market for Walmart. Only Texas has more Walmarts. Mundo says it has been growing share year over year in Florida for three years, not just in low- and moderate-income areas but also in communities thought of as Publix turf, such as Windemere near Orlando, where the U.S. Census reports $105,000 in median family income. “We are making really good sales out of a Publix community,” Mundo says.

Mundo works out of a modest office park Walmart shares with a Miami-Dade welfare office and a military recruitment office. The park fits the Walmart frugal ethic. Mundo, 40, a soft-spoken native of Argentina, joined Walmart in 1994, two years after founder Walton died, as it entered his country. He spent his first year at a store in Missouri and then 14 years in Argentina before leading a buyer group in central America and now, as senior vice president operations, Florida and Puerto Rico.

As he sees it, Walmart has plenty of room to grow, while Publix is at a ceiling and has to worry about returns on new stores and cannibalizing sales. He brims with compliments for Publix and all competitors. As the founder stated 50 years plus ago, we learn from them and they make us better,” he says.

The road to No. 1 for Walmart is paved with its formula of price and assortment. The vehicle will be smaller store formats, the Neighborhood Market grocery store that’s less than a third the size of a supercenter and smaller than a typical Publix. Walmart has opened more than 50 stores in Mundo’s two years in charge of Florida. Companywide, Walmart wants to open 300 smaller stores nationally this year, with 25 new markets and supermarkets in Florida, which will employ about 4,000.

In opening smaller stores, Walmart wants to capture shop-Pers who don’t want to drive 20 minutes to a supercenter except for a major stock-up trip and likewise don’t want to slog across a cavernous supercenter just to grab milk and cereal for tomorrow’s breakfast.

Tags: Retail & Sales

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