Kroger v. Safeway

I covered in yesterday’s Kelly Letter several stock ideas for 2011, one of which was Safeway (SWY). From the letter:

Finally, a stock that I literally walked into while thinking about good stock ideas: Safeway. The lowly grocery store doesn’t compete well against the high-tech and exotic financial plays on the table, but it’s a business few of us would want to live without. Both Safeway and Kroger (KR) maintain wonderful stores with closely-monitored margins in a bid to keep pace with Wal-Mart’s (WMT) entry into the grocery business.

I’ve found, however, that our choice of grocery stores has about as much to do with their locations as it does with coupons or specials or much of anything else. When we say we’re going to the grocery store, we generally mean the one in our neighborhood or at least our usual one. Both Safeway and Kroger have done a good job staying that way even while facing the daunting price competitor of Wal-Mart.

Besides, Wal-Mart offers some things cheaper but not all things and not all the time. Most people eventually conclude that the pennies saved are not worth the inconvenience of going to a more distant store, which is why location is about the most important part of a grocery store’s plan. With the population growing and not being able to opt out of eating even in hard times, especially with some 43 million Americans receiving food stamps now, grocery stores are a good play on government bailouts that are not usually considered to be such.

Second only to location is a grocery store’s atmosphere. Here, Safeway shines over its peers, in my view. Wal-Mart tends to attract people who look like they really, really need a bargain and that’s not always a fun crowd to be around. Safeway, by contrast, has invested in converting almost 80 percent of its stores to its “lifestyle” format since 2003. Now that it’s done, the company is scaling back its capital expenditures and thereby boosting free cash flow. What’s it doing with the cash? Buying back shares to the tune of more than 40 million per year.

Safeway’s internal brand development team is top-notch, and has so successfully managed the O Organics and Eating Right store brands that most analysts think they’d be worth $4B each on their own. Another recent move has been putting in gas stations that offer a discount to Safeway card holders. That’s an excellent hook to get people to the store for gas and then inside to shop as long as they’re there. However, other grocery stores offer gas stations, too, so this angle may go the way of the point card itself in no longer exerting much retention power after every store offers one.

Overall, I think food is a good bet in this economy and that Safeway is a good bet within the food sector. After peaking last April at $27, the shares bottomed at $19 in August, shot to $24 in November, and closed Friday at $21.13. Morningstar thinks they’re worth $30 but should be held to $42. It suggests buying at $21. I added Safeway to our watch list at $20. From there, the implied upside to Morningstar’s fair value and suggested sell price is 50 percent and 110 percent respectively.

Subscriber Roger wrote in reply: “Peter Lynch once said when looking for investments ‘follow your money.’ A lot of my money goes to the grocery store. However, I asked the three important women in my life — wife, daughter, and daughter-in-law — where they would shop, Safeway or Kroger? The unanimous and very strong sentiment was Kroger. The ladies said Safeway does not have the selection and their prices are way too high. To quote all three ladies, ‘I would never shop at Safeway.’ It is the lady consumers that make or break a grocery store.”

Roger’s anecdotal observation made me think this is a fine time to try crowd sourcing. Via the comments section below, please let me know whether you prefer Kroger or Safeway stores, and why. Here are snapshots of each stock:

Kroger
One-year stock price chart for KR
Market Cap: $14B
Forward PE: 11
PEG Ratio: 1.4
Price/Sales: 0.2
Profit Margin: 1.4%
Dividend Yield: 1.9%

 

 
Safeway
One-year stock price chart for SWY

Market Cap: $9B
Forward PE: 12
PEG Ratio: 1.1
Price/Sales: 0.2
Profit Margin: -3.1%
Dividend Yield: 2.2%

 

 
What say ye?

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43 Comments

  1. Posted February 19, 2011 at 4:29 am | Permalink

    Hi there – I just wanted to chime in to leave a comment on a benefit that Kroger has over all other grocery retailers in the U.S. (Let me also disclose that I work for i-wireless).

    Kroger offers its customer the chance to earn free wireless service when they shop. If you are familiar with the fuel program, FREE MINUTES works a lot like that. For every $100 spent in-store on qualifying purchases (not fuel, tobacco, liquor or lottery), i-wireless customers earn a FREE MINUTES reward. This is based on the plan, but to simplify -either 20 FREE MINUTES or a $1 credit to the account balance. Best part -it doesn’t take away from your fuel discount, so you can use both.

    Again – I work for the company, but it is a competitive advantage that Kroger has over Safeway.

    • Posted February 21, 2011 at 10:39 am | Permalink

      Thanks, Kelly! I didn’t know that. It sounds like a cool program, very contemporary, and something to consider when choosing between the two. So far, they’re running neck-and-neck in the stock market.

  2. Sad at Safeway
    Posted February 18, 2011 at 12:05 pm | Permalink

    Jason, if you tried to respond at the other e-mail address, try this one instead.
    Another question – when you shop at different grocery stores, do you really notice a big difference in any of them?

    • Posted February 21, 2011 at 10:38 am | Permalink

      I’ll be responding in detail soon. Please check back in later this week, and thanks for the excellent discussion!

  3. Sad at Safeway
    Posted February 13, 2011 at 12:17 pm | Permalink

    You didn’t say much about Safeway’s customer service program. It is over-the-top and makes working there a miserable experience. I regret that I chose to work there instead of any other grocery company.

    Safeway spends millions in training (and probably loses as much in productivity due to the amount of time and energy it takes to indoctrinate the employees from store manager down to courtesy clerk) to enforce its customer service program, believing it’s what makes them successful. If it’s all about customer service, why did they have to lower prices? Another question is if the customer service program is the key to success, why have none of the other chains adopted a similar plan?

    • Posted February 13, 2011 at 5:46 pm | Permalink

      This is a double-edged critique. On the one hand, companies should have happy employees. On the other, they should have happy customers. A successful business needs to have both. I don’t understand from your comment why Safeway’s customer service program is so hard for employees to endure. What’s the “indoctrination” exactly? Please provide examples of what the company wants you to do and why you think it’s unnecessary.

      • Sad at Safeway
        Posted February 14, 2011 at 2:13 am | Permalink

        Thanks for responding! We agree that customers should be well treated and leave happy. That’s easy to do. What’s not easy is doing it at Safeway (& Vons, etc.). The company employs mystery shoppers, nine per quarter, who grade each dept. and one employee in each on a list of TWELVE different things, ranging from the displays to the employee’s actions. And they take names. In fact, at the store where I now work, employees must wear TWO name tags, one on the apron and one on the cap, in case the mystery shopper can’t read one of them.
        When I started working at Safeway less than four years ago, there were five things every employee had to do right to receive a perfect score on the “shop.” They were known in shorthand as “greet, anticipate, offer sample, escort to item and parting comment.” I had one store manager who would visit each department several times a day just to say “greet anticipate escort,” lest you forget.
        A couple of years ago, the service program was changed to something called “Sales Force.” All of us had to be retrained through videos and countless hours ( and I am not exaggerating the amount of time the company invests in this) of daily “service huddles” and occasional “service meetings,” which is what I mean by indoctrination.
        When a service huddle is announced, you must stop what you are doing (unless you’re helping a customer) and leave your dept., walk across the giant store to get to the break room or someplace like the floral dept., which is usually a less busy area of the sales floor, and listen to a store manager or assistant rehash the service program. It’s the same thing you’ve heard a thousand times before, but in case you didn’t get it the first thousand times, here it is again. They also go over the latest mystery shopper report and call out people who missed something. When you “miss on a shop,” that’s when you may get to go to an hour-long “service meeting” during your shift.
        All employees had to be retrained when Sales Force was implemented a couple of years ago. We sat through hours of videotapes and lectures instructing us on how to “engage the customer” – for example, look in the customer’s shopping cart and say things like, “Oh, it looks like you’re having a party…” or “how many children do you have?” All to find out what else we could sell them. We were instructed in how to “close the sale” by saying something like, “How many can I wrap up for you?” As a customer myself, I want to run from this kind of aggressive sales tactic and I feel very uncomfortable doing it to our customers. In fact, half of them try to shut you down right from hello.
        But you may be saying what’s wrong with all of that? Maybe nothing, under different circumstances. Don’t forget these stores are deliberately under-staffed to begin with, and many of the people you see working there are under-employed, working as little as 20 hours a week. The stores are enormous and it is all you can do to keep up with what you thought you were hired to do, meaning stock shelves, cut meat, bake bread, whatever. Turns out, though, how well you do those things matters far less than what the mystery shopper says about you, and of course, the shoppers don’t know or care about that part of your job.
        Recently, a script was devised for us to repeat by rote with every customer. It’s designed to meet the mystery shopper’s demands as far as Sales Force procedure. It goes like this:
        Hi! Our (blank)s are on sale this week for (price). It’s great price and it’s 100% guaranteed fresh. Can I pick one out for you?”
        The statement “it’s a great price and it’s 100% guaranteed fresh” supposedly meets the requirement of providing two pieces of information, except that it doesn’t provide the answer to the customer’s most FAQ, “But what is it?”
        Your department manager will ask you to make the statement each week when the sale item changes and you then have to sign off on it! In addition, there is a person in the district who comes around to check, exactly the way the mystery shoppers do, except that she or he works for the company, and, again, names are taken and reports are written.
        There is much more I could say. Grocery work is low-level, dead-end and unrewarding and that’s why the turnover rate is as high as it is. At this company, at least, we are treated like children and not very bright ones, at that. The managers, especially the assistant managers, are sometimes condescending bullies. I hope this begins to explain why I regret my decision to join this company. The happiest day of my life will be the day I give notice.
        But my two questions remain: if it’s all about the service, why did they have to lower prices and if it’s all about the service, why aren’t any of the others copying Safeway’s over-the-top ideas?
        I’d really like to hear what you think and thanks for listening.

  4. Posted January 21, 2011 at 4:46 pm | Permalink

    Jason,
    NIA just wrote another article covering food price increases and grocery stores.
    http://inflation.us/obamamisinformingpublic.html
    They also have a food price inflation report they came out with a few months ago. I can send you a pdf. Let me know if you want it. Or, it’s on their website still I think…

  5. Laurie
    Posted January 16, 2011 at 7:40 am | Permalink

    I’m in Northern California and have never heard of Krogers. The Safeways I’ve visited in the last couple of years hare very upscale and are trying hard to compete with Whole Foods; their prices are much better than WF, which makes them a good choice for us.

  6. Jeremy
    Posted January 12, 2011 at 2:07 pm | Permalink

    I live in Canada, no Krogers here. Basically we have Superstore (low end cheap), Wal-Mart (low end cheap), Save On Foods (midrange), Safeway (midrange) and an assortment of high end grocery stores. Safeway competes well with Saveon, good locations/prices. Walmart/Superstore you get what you pay for. Lighting is bad, food quality not great, no/poor produce.

  7. James Emmer
    Posted January 12, 2011 at 8:06 am | Permalink

    As far as which store between these two, my wife and I go to King Soopers (Kroger). I have to agree that Safeway in my neighborhood and directly across the street from King Soopers has made remodeling changes to improve the appearance of the store, I do have to agree with some previous posts that the stores seem less clean, and typically higher prices. I personally have found that I can almost always purchase anything I’ve been looking for at King Soopers. They have a nice line of gluten free, natural/organic and variety of produce. Anything out of the ordinary from a health or nutrition perspective, we will go to Whole Foods or Vitamin Cottage for. This past month, through promotional holiday offering, I even received a $.40 discount per gallon on gas at the pump at King Soopers.

  8. Pat
    Posted January 12, 2011 at 7:01 am | Permalink

    Living in Hawaii Kai, we don’t have a Kroger’s. Don’t know of one in all of Hawaii. Being retired military, we prefer the commissary even though it is a 12 mile drive; good products, good prices, good service. Costco and Safeway are nearby. We prefer Costco to Safeway, although only Safeway carries some products we need. There is a good Foodland store within a few miles but we rarely go there. Build a Kroger’s near here and we will give it a fair shot.

  9. ed cowen
    Posted January 12, 2011 at 2:45 am | Permalink

    We don’t have either of these groceries in my little town, but, believe it or not we have the largest Walmart in the U.S. They abandoned a smaller store they had and built this behemoth that just opened last year. My town has 15,000 people, and the surrounding U.S. area is thinly populated. We do have a canadian city across the river and a lot of them shop at Walmart. (They have an enormous VAT to support their healthcare system.)

    As for Safeway v. Kroger, one of the first things I look for in a stock is have they recovered from the 2009 debacle. One has, one hasn’t.

    My wife shops mostly at Super Saver around the corner. This is a part of the chain that is second only to Kroger in size. (They bought the Albertsons stores.) They operate under a number of names.

    Just incidently, we don’t shop Walmart for many things because 3 acres is just too much to browse through. The manager of the Super Saver lives across the street from me and has said that they haven’t lost much to Walmart

  10. Tom Luciani
    Posted January 12, 2011 at 1:01 am | Permalink

    Zacks Elite subscription says this:
    Shares of Supervalu (NYSE:SVU – Analyst Report) and Safeway (NYSE:SWY – Analyst Report) plunged 6.3% and 3.8% respectively, after Morgan Stanley downgraded both the stocks from “equal weight” to “under weight” and advised investors to reduce holdings on these stocks as rise in food costs would dent results for the forthcoming quarters. BMO Capital Markets also cut its ratings on Supervalu and Safeway from “outperform” to “marker perform”.

  11. Frank N. Webster
    Posted January 11, 2011 at 9:32 am | Permalink

    Jason,
    Thanks for the opportunity to make a comment. In the winter I live in the Coachella Valley in S. California, where we have Ralphs (Kroger) and Vons (Safeway). There is a tremendous amount of competition locally from high end grocers that attract the wealthy. There is not much to choose between Ralphs and Vons, they both service the lower end. That being said there are no bargains to be had at the upper end stores in fact the prices in comparison are astronomical. On balance I favour Vons, only because they do have have an upper end store they call Pavilions where the groceries are upscale but the prices moderate. Hope this helps.
    Frank

  12. Posted January 11, 2011 at 9:09 am | Permalink

    Thank you, everybody, for weighing in. This was instructive beyond analyst reports because it gives me a sense for what real shoppers think about various grocery options, with a focus on Kroger and Safeway. The collection of comments leans in favor of Kroger, which is important enough to send me back into the literature to see if I can’t find additional ways to favor Kroger over Safeway.

    On commodity inflation: I agree that it’s a critical macro risk. However, if commodity prices rise across the board, which do you think will be the last struck from must-have shopping lists? Food. That’s precisely why I’m interested in the sector. Non-discretionary spending is a defensive portfolio position, but could turn into a growth position if a greater percentage of consumers’ shrinking income goes toward it. Compressed margins will test management, and the strong will survive a shakeout to come. That’s why it’s important to choose carefully among a crowded field.

    More on this subject again soon.

    • Posted January 11, 2011 at 12:59 pm | Permalink

      Jason Kelly,
      I agree 100% that food will be the last thing that US consumers can cut. They will trade down (substitute) as much as they can to still get by. Either way, it will take a lot more money to have the same higher standard of living Americans currently have because I predict commodity price inflation worsening.

      Food and energy inflation is already occurring.

      As far as whether supermarkets are a good investment or not during these types of volatile and worsening macro conditions, let me clarify my argument further why I don’t think grocery stores are a good investment until there is less volatility in food and energy and other commodity prices.

      How easily will it be for supermarkets to pass food and energy increases (due to inflation) onto their customers (US consumer)?

      Will supermarkets be able to pass the full costs of the price increases on or will they be forced to eat a majority of those commodity price increases onto their customers 100%??

      To me, the market (lots of analysts cover these companies) is clearly betting that the supermarkets will NOT be able to pass 100% of their food and energy input cost increases onto their customers without having to get creative by reducing portion sizes or by eating the loss and sacrificing net profit margins, which were already thin.

      You are already seeing Kroger and Safeway and other grocery stores struggle and this is not super bad inflation yet.

      I expect things to get worse in terms of inflation over the next 2 yrs.

      What was a safe defensive portfolio position in the past, might not be a safe defensive portfolio position this go around.

      I don’t own any supermarket stocks and don’t think they are good investments for these macro conditions because of the volatility we are about to experience along with increasing commodity prices, but someone who does own these stocks or who was considering buying them, needs to pay VERY close attention to whether the management at these companies is keeping a handle on net profit margins quarter to quarter.

      If I am not mistaken, Kroger has recently already experienced some really bad margin compression and in terms of the inflation I forecast, this is nothing really.

      • Michael Nettrour
        Posted January 12, 2011 at 12:25 am | Permalink

        Commenting on the market compression issue. Both Safeway and Kroger are experiencing this. The profit margin in the grocery business has always been 1-3 % Both companies have some cash flow problems, Krogers is less severe than Safeways. As commodity prices rise, the have to pass their actual costs to consumers or they will go out of business. We will live to see consumers having to carefully choose at the market and make unpleasant choices of what they are going to give up. Many lower income families have lived with this all their lives. The supermarket chains will survive by reducing stores, going to more mega-types, the diversifying of services, gas, department store items, more automatic self check outs, etc…. My take go with the folks who consistently pay dividends, manage costs and cash flow best. I love this business and as I transition to retire for the second time, it sparks some business opporturnites that the weakening dollar and inevitable inflation will provide.

        • Posted January 12, 2011 at 6:46 am | Permalink

          Thanks Michael.

          I agree neither Kroger nor Safeway will go out of business during these tough macroeconomic times. I agree with the ideas you suggested for them to pass some input cost increases onto their customers. However, I think they will hope to tread water and will struggle to make any kind of a profit whatsoever. For many companies, the goal will be just to survive in the next 3-7 yrs in these macroeconomic events as they worsen. Many will just focus on treading water to prevent from drowning. Investors will NOT see record profits from holding these stocks. Wall St is convinced these large supermarkets will struggle mightily to control their profit margins and also to be profitable. My guess would be these stocks will drop further over the next few yrs and longer term investors can buy them at a further bargain the worse inflation gets. Once things stabilize, these companies should be great investments but I personally wouldn’t want to be holding them in my portfolio if they can’t make a profit for a few yrs.

  13. Wade
    Posted January 11, 2011 at 8:55 am | Permalink

    I’ll only shop at Safeway if I had my way – King Soopers (Krogers) parking lot is always packed (and so is the store). Hence, Krogers would make the better investment…

    • Dan
      Posted January 13, 2011 at 2:47 am | Permalink

      In Colorado Krogers operates as King Soopers.
      I have shopped at both but currently live 20 miles from a Safeway but more than 80 miles from the closest King Soopers.

      When I lived in metro Denver Safeway and King Soopers were often nearby, sometimes across the street. And King Soopers parking lot was always more crowded than Safeway, indicating it would be a better investment.

      Also Krogers has something like 400,000 employees and one of its smaller units is the Loaf and Jug convenience store chain, which has a unit in our small town of 1,600 in Colorado. I am impressed with the efficiency of this store, its employee’s attention to small details like putting out daily food specials on a timely basis and the steady traffic at its gas pumps.

      Despite my thought that most businesses and the U S. are too big to manage, Krogers seems on the surface to have the skills to operate a large scale enterrise.

      Downside of course, is that its growth potential is less than a I think privately owned Sunflower Market, a successor to the much beloved Wild Oats that succumbed to short term insider profit taking.

      It could be a core holding for the central part of a portfolio, and I was watching the stock $8 ago and now I guess should wait for a correction to buy.

  14. Chris - Denver CO
    Posted January 11, 2011 at 5:16 am | Permalink

    It doesn’t make sense to spend more at a grocery store just to save a 1-2 bucks on gasoline.

    It’s just like credit card points, they don’t give them out because they’re nice, they give them out because they get you to spend more than you would have and make more money in the end.

    Also now, Target is offering 5% off anything in their stores (groceries and everything else) by using their debit/credit cards. I chose debit and I’d take 5% off everything I buy rather than 10 cents off/gallon any day of the week. Plus Target’s quality on the food they carry is top-notch.

  15. Posted January 11, 2011 at 5:02 am | Permalink

    American grocery stores will suffer tremendously from volatility and higher commodity prices (food and energy prices going higher hurt grocery stores the most as their margins are the thinnest to begin with). Kroger and Safeway are already experiencing what Wall St analysts call “margin compression” where net profit margins decrease heavily as they cannot pass on cost increases to a US consumer on life support since they are the furthest up the value chain.

    If one sees inflation worsening in their macroeconomic picture, and I do based on raising of US debt ceiling, more Euro bailouts from other PIIG countries, continued recapitalizing of the large banks, potential municipal and state defaults, etc I would avoid stocks like these as long term investments until this macroeconomic situation is a lot more played out.

    The current inflation rate using Austrian School TMS figures is around 11% inflation per yr. John Williams of ShadowStats using older and more honest government formulas from decades ago says inflation is 6-8%. If you are not beating the inflation rate by getting a higher return per yr, you are not growing your net worth and you are actually losing money to the inflation tax.

    So, my own personal goal for 2011 is to get higher than 11% returns for all of my stocks on 2011.

  16. yixter
    Posted January 11, 2011 at 3:55 am | Permalink

    In our area there are wal-mart, costco, meijer, kroger, marsh, dominic grocery store chains and super discounters like aldi, dollar tree

    walmart is by far the most popular store judging by cars parked outside, costco is crowded at times but it has store hour while the others are 24/7, marsh/meijer/dominic/kroger are the next tier their parking lots are that crowded

    My grocery shopping is done as follows: walmart 50% costco 20% meijer 10% other 20%

  17. Gary - Atlanta
    Posted January 11, 2011 at 3:48 am | Permalink

    We don’t have Safeway in our area and use Kroger. Stores are clean, prices are reasonable and Kroger is not a superstore pushing Chinese exports. We also judge grocery stores by the meat department and Kroger beats the competitors by offering better quality. One concern I have about grocery stores in general is the uptrend in commodity prices which will hurt razor thin margins.

  18. Posted January 11, 2011 at 3:25 am | Permalink

    I too am from SoCal. I have never been in Vons(safeway I guess) but I have shopped at Ralphs(Krogers). Ralphs definitely looks nicer and more upscale than many grocery stores, but the prices are noticeably higher. I would imagine they do well in upscale locations(Newport Beach, Huntingon Beach etc) where convenience and atmosphere wins out over pricing. I would imagine that Ralphs would do poorly in lower middle class income areas.

  19. Barbara Ash
    Posted January 11, 2011 at 3:05 am | Permalink

    There is no Ralphs or Krogers near me, but there are a couple of Safeways. However, about 6 months ago Sprouts opened a store about 3 miles from me. I’ve been shopping at Sprouts since it opened, even though it is a longer drive because their prices are better on vegetables and they have a decent bulk section. Once in a while Safeway has an item that I want for less than Sprouts, but for convenience of shopping at one place, I usually just shop at Sprouts now.

  20. John Lubberdink
    Posted January 11, 2011 at 2:51 am | Permalink

    Safeway for a several of reasons. North of the U.S. where I reside there are no Kroger stores, Safeway has the market share. The stores are clean, modern, with helpful personel. They offer air miles that happen to be a bonus but not the reason for shopping. They offer a wide variety of products(local and international), a great vegetable selection, well priced specials and great store hours. Great food for thought Jason. Keep up the great articles and observations.

  21. Pat Gibb
    Posted January 11, 2011 at 2:28 am | Permalink

    I live a bit closer to Safeway than a Fry’s Marketplace (owned by Kroger). No question about it, Fry’s/Kroger wins out every time.

    Safeway lost my business with some deceptive advertising and ridiculous pricing “tricks”. When I spoke with the store manager to try and resolve an issue she had no interest in customer service. Rather, I was told to contact the headquarters via internet email. I found their customer service website to be confusing and ineffective, but did go to the time and effort of letting them know my dissatisfaction. I never even received a reply.

    On the other hand, Fry’s/Kroger employees have always been friendly and helpful. The company rewards loyal customers with additional special coupons and offers via email. That is the reason for the club card. They can track your purchases and evaluate not only how much you spend but also what items will interest you.

    We also buy all of our gasoline through their club program. They have very competitive pump prices and we get an additional discount of 10 cent/gal. Our I-wireless cell phones get 20 minutes of airtime for every $100 we spend at a Kroger store. Their pharmacy has a $4 generic prescription plan and they will match price any competitor prescription price.

    You may think I have some bias but that is not the case. Rather, I admit to being a compulsive deal finder. And Fry’s/Kroger has figured out how to offer so many loyalty benefits that it really saves me money to do the majority of my shopping at their store.

    Take a look at to see all of the different stores and services that they own. You might be surprised to find that the store you shop at is actually owned by Kroger.

  22. Garrett
    Posted January 11, 2011 at 2:23 am | Permalink

    I live south of Houston, and while we have Krogers, we have no Safeways around here. We have the Target superstores, (interesting selection, but usually overpriced), Wal-Mart superstores, (better prices, but pretty ho-hum selection), and a few other grocery stores such as Randalls and HEB.

    I’m a penny pincher and compare prices everywhere I go, everytime I shop. I shop at Kroger, because they usually have the best prices on the items I most frequently buy.

    The thing that sells me the most on Krogers is this: on the price labels attatched to the shelves, they list a quick breakdown of the price per ounce/lb, etc you are paying for the item. That makes it very easy to pick out the cheapest items, no matter what their packaging or size.

    They also have very good and very cheap “value” brands that are comparitive to label brands.

    And guess what Chris from Denver, they sell hamburger meat in exactly 1, 2, and 3 lb tube packaging!

    Kroger’s newer stores in the are very large with all the exotic food stuffs you’ll find at a more expensive grocery store, but with the usual lower prices.

  23. Chris
    Posted January 11, 2011 at 2:20 am | Permalink

    We do not have Safeway or Kroger here in South Carolina, maybe not in the Charlotte area either. I go to Walmart for specific things that are cheaper – Breyer’s Ice Cream, Truvia and a few other things. I shop mainly at Bi-Lo because their produce and meats are good quality AND because my purchases earn credit at the BP gas stations. Yesterday I bought gas at a $.30 per gallon discount. That matters to me. Born in Michigan, we had Kroger grocery stores which were always well stocked, clean and had the good produce and meat. Have not been in a Safeway but even the name makes me think Walmart or Sav-A-Lot. Funny how a name can turn you off to a place.

  24. Anthony James Warner
    Posted January 11, 2011 at 2:12 am | Permalink

    Hello,

    I live in the north and so out of the two, I have only visited Kroger. I have seen inconsistency in the quality of that store from location to location, and I enjoy quality, so I don’t shop there. I shop at a food co-op—local, organic sort of stuff. I believe it to be a trend in a younger generation to be moving into that realm of healthy, natural foods. For that reason, I saw Whole Foods (WFMI) as a potential long term position. Their financials don’t look great, and it may be a train that has already pulled out of station, but still, I am interested in a more intuitive analysis of WFMI, which, if possible, Jason, I would please like to hear. I think it would be a good comparison in this poll anyways—the things that make Kroger and Safeway a good buy, and the things that make WF a bad one.

    Regards,
    Anthony

  25. Mike Hammel
    Posted January 11, 2011 at 1:34 am | Permalink

    Safeway, in Southern California, is called Vons and Kroger, in Southern California, is called Ralphs.

    Both stores, from my infrequent visits, are clean, well stocked and, this is the key, not well patronized. This goes for any of their locations that my wife or I have shopped at. Compared to other grocery chains in the S.C. market, their prices are higher at almost all levels. We shop there only as a fill- in because both are located very close to our house. Quite frankly, I do not understand how they are able to stay in business.

    • Haris
      Posted January 11, 2011 at 1:58 am | Permalink

      I have no experience with Safeway, but I really like shopping at Kroger. They have a good organic selection and their deals of the week/month are many times unbeatable even by Walmart. I also shop at Walmart for things that are consistently cheaper there and for things that Kroger doesn’t stock. However, Kroger is always my first choice. My other option is Food lion which I am not fond of and I rarely visit (about once every two years).

  26. Nathan Spear
    Posted January 11, 2011 at 12:48 am | Permalink

    In Portland, OR we don’t have Kroegers. I have a Safeway 2 blocks away and chose to shop at Trader Joe’s and New Seasons instead. The only things I ever buy at Safeway are beer and whipped cream for my espresso. I guess if I was a cigarette smoker and lottery player I may get my Camels and Megabucks tickets at Safeway too. The Safeway in my neighborhood has a strange clientele, similar to the couple Walmarts I’ve been to.

    What I find strange is that I can always buy my whipped cream here for buy 1, get 1 free. Ice cream is another product I’ll buy there because the prices vary so much. When I see the Safeway CLub card savings price I ask myself, why don’t they just sell it for this price. Why are they ripping off their customers who don’t carry a club card. This has always seemed like bad business to me. I only shop at my neighborhood Safeway for a bargain – whipped cream and ice cream, and if friends are over, beer.

    Safeway produce is terrible which is why I shop at New Seasons. Trader Joe’s gets the bulk of our business, with the 4 or 5 stores scattered around the city, with it’s pricing and selection. They really do well getting unique products at a good price.

    The employees at New Seasons and Trader Joe’s are very warm, friendly and helpful. Safeway on the contrary seems to have employees with a union mentality.

    I couldn’t compare Safeway and Kroegers, but did want to weigh in with my thoughts on Safeway. I’m not a fan.

  27. KC Chuck
    Posted January 11, 2011 at 12:01 am | Permalink

    Dillons/Kroger pulled out of KC a couple of years ago and I’m not even sure where a Safeway is. We were very loyal to Dillons/Kroger when they were here but they were very close by and convenient and I agree that in all most if not all cases convenience i.e close wins the shopper.

  28. Chris - Denver CO
    Posted January 10, 2011 at 11:59 pm | Permalink

    I’d like to add to the discussion that I do all my grocery shopping at Target or Wal-mart because I got tired of the gimmicks and grocery stores:

    1. “Buy 10 of an item and get a special price” They try and get people to spend more than they otherwise would have.

    2. I’m tired of the “club card”. I’d rather one price w/o the gimmicks and illusion of savings.

    3. “illusion of savings” gimmick – at the end of the checkout they say you saved $XX.XX amount, but this is compared to MSRP. In reality, I’m paying more at a grocery store than at Target/Walmart and I never pay MSRP for anything!

    4. “ground beef” – This especially makes me upset. They always package their ground beef at 1.25-1.35 lbs/package. They want me to spend 25-35% more on the ground beef when I only want 1 lb.

    In the end they try and pad their bottom line by a few % here and a few % there, but end the end they ended up losing 100% of my business. I vote with my dollars and I took my business elsewhere where I don’t have to use a club card, I don’t have to earn points for gas, I don’t have to by X items to get the price, and I don’t have to put up w/ them trying to sell me 25% more meat.
    -Chris

  29. Don
    Posted January 10, 2011 at 11:32 pm | Permalink

    I was literally raised in the grocery business. My families small stores that had lasted 30 years closed 5 years after the first Dillions Super Market in town was built close to us which was 1953. Dillions was a growing family chain based in the small town of Hutchinson Kansas about 60 miles from us.

    Dillions is now merged with Kroger, and one of the Dillon family is now Kroger’s CEO. Today we shop at a nearby Dillons. In my city, both Safeway and Kroger both failed to survive against Dillions and Independent Grocer Alliance, or IGA stores. IGA is now virtually gone too, and Dillions dominates strongly over scattered smaller store groups. Their big competitor locally now is the Wal-mart super store groceries, and they are doing well in that respect.

    Key difference between Dillons and the others and still true today in our market is the level of professionalism. The customer experience is more personal and friendly, the stores tend to be cleaner and consistently better stocked. Management back then as well as now was building a better team atmosphere and keeping happier employees than Safeway or the earlier Kroger either one. Prices weren’t their edge then, and it’s not now. They have just performed better, and that has worked. They are still doing that, but now as a Kroger division. I don’t know how stores operating under the Kroger flag are operating, but I suspect with a Dillion heritage at the helm of the company, the Dillions philosophy is the Kroger guide too.

    I’ve not looked at their stocks to research, but in anything I research I look hard at management skill and philosophy. I like theirs. In my own companies, we are the highest priced as well as the best in quality and the best in service. As a result, we are able to make a substantially higher profit margin than the competitors. Simply, we compete on quality rather than price. There’s a market for everything and cheaper will always sell, however anyone can compete with price lead. But that doesn’t provide any loyalty in the business you get, and it’s directly adversary to your bottom line. Lose the delicate balance and you are in the red, as Safeway has been many times in the past . Quality in terms of your team performance is much harder to build, but gains loyalty in the customer base and allows you to maintain a slightly higher price . Even if customers leave to save money, they are spoiled and soon come back to regain the benefits of service.

    Safeway was once the largest market chain here; Kroger second, before Dillions came. It was Dillions that beat out our family stores, not Safeway or Kroger. This is old history, and I am not familiar with how Safeway operates today. However I would be finding out before I bet on them in the long-term against Kroger/Dillion management.

    • J.K. Kelley
      Posted January 11, 2011 at 4:05 am | Permalink

      Talk about Dillon’s in Hutch brings back memories, Don–before we moved to Colorado (not far from Jason Country), I spent early years in Hutch and remember them well.

      Out here in the Northwest, we have Fred Meyer as the local incarnation of Kroger. They were kind of an early and less dramatic version of the Wal-Mart concept. That Kroger has had the sense not to absorb the Freddie’s brand shows that they are smarter than many national corporations (B of A, Macy’s) who bought up Northwest brands and then removed the fig leaf of a familiar name. People who loved Seafirst hate B of A; people who loved Bon Marche recoil at the New Yorkness of Macy’s.

      Looking at Fred Meyer, I don’t really see the apples to apples comparison with Safeway because Safeway is just about all groceries, whereas at least half of Freddies’ floor space has clothing, toys, furniture, electronics, even home and garden. How true that is of Kroger overall, I don’t know. Out here Fred more resembles a less trailery Wal-Mart than a Safeway. But for groceries, here’s what’s interesting: while I prefer our very nearby regional grocery chain (Yoke’s), if given her druthers, my wife would drive the extra three miles to Freddie’s every time. It makes me wonder if there isn’t a trend whereby Kroger is doing something very successful to appeal to women, because I really don’t understand why she likes it so much.

  30. Robert Warth
    Posted January 10, 2011 at 11:25 pm | Permalink

    They both seem fairly equal in the risk so why not buy split the money and buy shares of both.

  31. Posted January 10, 2011 at 11:09 pm | Permalink

    We have neither Safeway or Kroger stores in my area. But a family member on the west coast has established Kroger as being leading in his mind if that means anything. I can only compare the 2 stores to Publix, Winn Dixie and the recently failed Albertsons stores around me. Publix is at the top of the list because of its cleanliness and outstanding lighting aided by bright color schemes that enhance the lighting ambiance. Prices are generally in line or higher with other stores. I have sensed that a store with these qualities will out last all others over a period of time. Albertsons and Winn Dixie fail in this category and Albertsons closed its stores in Florida because it could not compete. Winn-Dixie has an edge over Publix in the meat department. Their quality of meats surpasses Publix according to popular opinion. If Winn Dixie were to align its appearance along the lines of Publix I believe they could defeat Publix in due time. If Kroger or Safeway most closely reflect Publix I would bank on that one.

  32. Michael Nettrour
    Posted January 10, 2011 at 10:50 pm | Permalink

    I favor Krogers. I must admit a bit sentimental. I worked for them 10th and 11th grade as a bagger and later a stockboy. They had a great training program, treated us fairly and paid a better than minimum wage salary. Solid company, loyal to employees and customers. I have been in both Safeway and Kroger stores. Safeway was big in the west when I was growing up. In Krogers I always felt I was in a old time family grocery store. Safeway was slicker, better marketing, but the prices were higher. Looking at the financial data Kroger seems a do be in a better cash and market position than Safeway. I believe in buying what I know, or what someone I trust knows. I will put a buy order in for Kroger at 20.75.

  33. Bill Lovins
    Posted January 10, 2011 at 10:26 pm | Permalink

    We have a King Soopers and Safeway near our home. We seldom go to Safeway because their prices are generally higher. Safeway is not as clean and seems poorly managed. The produce is inferior and the employees do not seem happy.

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