Kash n' Karry must feel like an aging Chevy chasing a new Lexus - while watching a Hummer bearing down from behind.
The Lexus is Publix Super Markets, the dominant and upscale grocery chain in the Tampa Bay market and throughout Florida. The Hummer is behemoth Wal-Mart, which is busy building its Supercenters, complete with low-priced grocery stores, across this metro area and others in the Sunshine State.
What's a Chevy to do?
On Thursday, Kash n' Karry unveiled a fresh attempt to build a stronger niche for the middle-of-the-road Tampa grocery chain. Kash n' Karry will close 34 underperforming stores among its 137 locations. No stores will close in the Tampa Bay area. Most of the closings will occur in a stretch of territory from Lakeland east to Orlando and Melbourne and north to Gainesville.
Kash n' Karry will cut 1,500 jobs or 13 percent of its employees, leaving a work force of 10,000. That's a sizeable layoff by Florida standards. The chain will redirect those cost savings to improve its store look and image in its core Tampa Bay market and along the gulf coast.
(Full details of Kash n' Karry's cutbacks and plans appear in Times reporter Louis Hau's story.)
That's not all Kash n' Karry has in mind. If the grocery chain is making a conscious commitment to go more upscale, it looks likely the dated Kash n' Karry name will be dropped later this year for a brand name with a bit more prestige.
A little context. Kash n' Karry is not making this decision on its own. The Florida grocery chain is part of a corporation that owns several supermarket chains, including Hannaford Bros. of Scarborough, Maine; the recently purchased Harveys in the south Georgia and Tallahassee areas; and Food Lion in Salisbury, N.C. Together, these chains boast 1,515 U.S. locations and are part of Delhaize America. Delhaize America is, in turn, owned by the Delhaize Group in Brussels, Belgium.
The point? Aside from the pressing competition in Florida, Kash n' Karry's future will be influenced by international managers and distant corporate decisions about the direction of multiple grocery chains.
Just as Kash n' Karry rolled out its new strategy Thursday, Belgian parent Delhaize reported improving sales trends and cited its Florida unit's gains since new management arrived in mid 2003.
Kash n' Karry clearly is following in the upscale footsteps of Hannaford rather than the low-price strategy of Food Lion. In June, Kash n' Karry named Shelley Broader, a former Hannaford executive, as its new president charged with cutting costs and reshaping the Tampa chain in Hannaford's image.
It's the right move in a very tough market, says Paul Solomon, a marketing professor at the University of South Florida's business school and a close observer of Florida's grocery business. Kash n' Karry was caught in that vague middle-market position, competing neither on best price nor on best selection and service.
Now Kash n' Karry may find it must compete more head to head with Publix for upscale customers, Solomon said. But that's a better fate than trying to drop prices and compete against the likes of Winn-Dixie, a struggling and vulnerable chain, and the rapidly expanding Wal-Mart grocery stores.
"It is one of Kash n' Karry's few options," Solomon says.
And if Kash n' Karry really wants to pursue more yuppie customers, it would be very wise to change its name. The chain's current name smacks of discounts, convenience stores and an era before credit and debit cards.
"It's easier for Kash n' Karry to do a name change than to change its current image," Solomon says. The Kash n' Karry name has been around since 1962. Before that, the grocery chain was known as Big Barn. (No chance they'll bring that name back.)
While explaining company cutbacks and new direction on Thursday at a remodeled grocery store in Tampa, Kash n' Karry spokeswoman Camille Branch-Turley said a decision to adopt a new name had not been reached.
But the parent corporation seems pretty sure. Wire reports on Thursday said the Delhaize Group was taking a $60-million charge to cover the costs of Kash n' Karry store closings. And it was taking another $28-million charge to write off the intangible value of the Kash n' Karry name in anticipation of rebranding the Florida grocery chain.
If Wal-Mart is the brash Hummer in pursuit of Kash n' Karry, Publix has also noticed the giant U.S. retailer in its rearview mirror. USF's Solomon says Publix, in a rare marketing departure, is starting to run television ads that focus more on its competitive prices than its upscale image.
Could Kash n' Karry's strategy to be more upscale prompt a grocery war over yuppie customers with Publix, Florida's No. 1 chain?
There's probably room for everybody in a state with a growing population. Solomon suggests Kash n' Karry's plan may work, if the company can really deliver what it promises.
"It's all execution," the professor says. "And it's tough to out-Publix Publix."
