May 11, 2015

Rapid Growth of Kosher Supermarkets a Good Omen for Shoppers… But is it for the Supermarkets?

Chicago IL - The new Mariano’s kosher superstore in Skokie was hardly open a fortnight when it already set in motion a price war. Reports in Kosher Today about the planned opening of new kosher supermarkets in Lakewood and Baltimore evoked much comment from industry sources but many wondered whether it would set off a new price war which in the end may actually create havoc for the bottom line of many of the stores. One source told KosherToday: “margins are already too small to realize healthy profits and now this would only further hurt the bottom line.” In Chicago, soon after Mariano opened, Jewel-Osco, its major competitor, put rib eye steak on sale for $5.99 a pound, only to be followed by Marianos with a $5.88 a pound sale. Other items were also put on sale as well, setting off what one source called “Chicago’s kosher war.” The trend towards opening these large kosher stores will most definitely impact prices and some believe that it will ultimately force a change in the kosher landscape. “I wouldn’t be surprised that after an explosion of these stores there is ultimately a consolidation in a few years. I am not sure people realize just how much money it takes just to run the infrastructure and inventory in these big supermarkets,” said a kosher manufacturer.

Most of the kosher sources interviewed for this article agreed that on paper there “should be enough business to go around.” What they were referring to was the demographics that clearly point to an Orthodox community that continues to grow, particularly in markets like Monsey and Lakewood. Despite the demographics, many wondered if the customer base would be divided in an equitable manner between the stores.

In the short term, the big winner will be the customer, the sources said, pointing to the increased use of FSI’s and flyers to promote discount items. One victim of this latest trend may turn out to be customer loyalty as shoppers gain many choices on everything from the location of the store to amenities. The stores say that they have seen a decline in the “one stop shopper” who not only divides their loyalty between stores but augments the basket with specials from stores like Target, Wal-Mart and Costco as well as the large supermarket chains.