Grocery wars in Florida: Publix vs. Walmart
As it strives to take share from Publix, Walmart’s advantages include its considerable heft, which lets it obtain goods efficiently and cheaply. Walmart’s U.S. grocery sales, at $156 billion, are more than five times Publix’s net sales. Walmart also can leverage other services, such as in-store banking, to draw customers. It can experiment anywhere and roll out solutions companywide. In Mexico, the Wall Street Journal reported earlier this year, Walmart might have solved online home grocery delivery. Delivery people, who supply their own vehicles or transport, are low-paid and use handheld terminals for payment so customers don’t have to give their credit information online. In Arkansas, it’s testing a convenience store designed by a Tampa architectural firm.
That heft, however, becomes a bull’s-eye at times. Walmart for more than two years battled to build a supercenter at the Midtown Miami development before winning approval.
And among its other challenges, Walmart has to face Publix.
It’s difficult to overstate Publix’s success and strength. Within Florida, it’s the second-largest on Florida Trend’s list of the top 225 private companies. It’s far and away the largest supermarket chain in Florida. Viewed nationally, Publix is the largest employee-owned company in the United States and the seventh-largest private company overall. At a time when grocers struggle to see growth in customer counts, same-store sales and total sales, Publix is surging. “A phenomenal operator,” Hertel says. Publix’s profit as a percentage of sales is 5.7%, the fattest among supermarket chains. Walmart’s is 3.4%. Publix has been on Fortune’s Best Places to Work list for 17 consecutive years.
Publix markets a warm image, but it’s a brutal competitor. The competitive juice shows as CEO Ed Crenshaw, in a rare interview, answers a question about whether Publix, with 52% market share in Florida, has saturated the market. “So the way I look at it, there’s 48% out there that we’re not touching. Lots of room for growth,” Crenshaw says. “I hate to come across as being selfish, but our fair share is all Of it.” Of the 44 new stores Publix has announced, half are in Florida.
The pursuit of even more growth is leading Publix into the competitive North Carolina market, where it has announced 10 stores and opened two. The overall market leader there is Walmart, which reportedly has overtaken Krogerowned Harris Teeter even in Charlotte, Harris Teeter’s home market.
“I’m not sure why anybody would want to get into that marketplace,” Hertel says. “On the other hand, Publix has managed to survive in Florida and other places going head to head with Walmart. They maybe have been emboldened by that.”
Publix first ventured out of Florida in 1991 to Atlanta with Crenshaw, then a 41-year-old, in the lead. On one of his first trips, he handed a rental car agent his company credit card. “He looked at it and said, ‘Poob-lix. What is that?’ So I knew then that our work was cut out for us,” Crenshaw says. The start looks promising. On a Saturday afternoon in June, a Publix in the Charlotte suburb of Fort Mill, S.C., was doing the business of a veteran store with a full parking lot and the store humming with customers.
For Publix, its road is paved with its service and employee-owner structure. The vehicle is whatever store size and format works. In the last year, it’s opened a 28,000-sq.- ft. Store in Huntsville, Ala., and a 59,000-sq.-ft. store in Orlando that included a cooking school. Analyst Lempert says Publix will continue to grow because its culture and approach has never been wedded to any business model other than meeting shoppers’ needs. “They’ve never lost their focus because they’ve never been stuck on a single focus,” he says. Publix even has proposed a residential tower in Coral Gables as it expands a store there [“Business briefs,” page 21].
Publix employees own 79% of the company. Employee ownership, what Crenshaw always calls the “special sauce,” is the legacy of founder Jenkins. Crenshaw’s office, in a massive green-glassed building just off the Polk Parkway, has a shelf full of Publix curiosities made by fans and employees, including a couple of jars labeled as Publix’s Special Sauce. “It’s an amazingly powerful thing when you have the people serving your customers that own the company,” Crenshaw says. “It’s a big deal. It is the differentiator.”
Publix looks for a servant’s mentality in hiring. It promotes from within. Employees who work at least 1,000 hours per year earn 8.5% of their pay in stock.
Publix tops the supermarket rankings in the American Customer Satisfaction Index, the only company to lead a category since 1994, and scores near the top on Consumer Reports’ similar survey. Walmart lags in both.
At this stage in the fight, Publix is far ahead in Florida. As of May, in south Florida, the largest Florida market, Publix held half the market to runner-up Walmart’s 15%, says the industry-watching Shelby Report. From Tampa across Orlando to the east coast, Publix’s lead is narrower, 43% to 29%. In north Florida and south Georgia, Walmart is on top 30% to 29%.
When the titans clash, smaller chains have suffered. Kroger pulled out of Florida in 1988. A much-diminished Winn-Dixie reorganized through bankruptcy court in 2005. Albertsons threw in what was left of its towel in 2012. Food Lion pulled out in 2012. Sweetbay closed stores and in 2013 was sold to Winn-Dixie parent Bi- Lo, which retired the name.
Outside Florida, in the states where the two compete, Walmart’s the clear market share winner. But nationally, Walmart in May reported its fifth consecutive quarterly drop in U.S. sales and declining store traffic. (Neither company breaks out financials by state.) As consumers have other low-price options and find more convenient stores, some wonder whether Walmart’s savings formula is as compelling. A bright spot, however, has been increasing sales at the smaller Neighborhood Markets that Walmart is building in Florida.
Look for the fight to go the distance. Says Walmart division chief Mundo, “We’ll see in 10 years what happens.”
Walmart takes its fight for grocery dominance to Publix’s home turf while Publix moves the battle to North Carolina.
Neighborhood Markets are less than a third the size of a supercenter and smaller than a typical Publix.