Superior supermarkets case study

Superior Supermarkets: Adding a Line of Private Brands 1

For Sam Harris, Jr. (Sammy), tomorrow's meeting with his father, Sam, Sr., promised nothing but unpleasantness. Actually, during the past year, most meetings of the management team of Superior Supermarkets had been unpleasant for Sam, Jr., as he and his father had openly disagreed about every store policy that had come up for discussion during the weekly business meetings attended by all store managers, the advertising specialist, the controller, and Sam Harris, Sr. In fact, Sammy wondered whether he should simply resign as manager of the east-end store now, rather than struggle with evaluating the data spread out before him on his desk. As usual, he had only limited information and very little time within which to make a recommendation, even though the decision to be made tomorrow on adding private brands to normal shelf stock was very important and had long-run competitive consequences.

Sam Harris, Sr., began his career in the food industry in 1947 with two grocery stores, which had been liquidated through involuntary bankruptcy procedures. Since that time, Superior Supermarkets has enjoyed phenomenal growth and prosperity. According to Sam Harris, Sr., the success of his supermarkets can be summed up in three concepts: convenience, service, and national brands. However, Superior Supermarkets has also been an outstanding member of a well-known national franchise for supermarkets since 1952. In addition, Sam, Sr., has been a prominent member of the community—contributing generously to local charitable organizations, serving on the board of a local bank, participating in many local activities and clubs, and donating free food to a local church-sponsored nursery school for disadvantaged children.

Superior Supermarkets is one of four major chains in Dixie Town. The competitive position of the four supermarket chains as of last year is shown in Exhibit 1.

In the past five years, competitive strategies and market shares for the four chain store groups have been somewhat stable. For instance, Colonial Food Stores has consistently featured a low-price theme in its weekly newspaper ads. The state chain, Big Bear Grocery Marts, stocks a distinct product mix with unusual items and brands that can often not be found anywhere else. Big Bear Grocery Marts also offer more convenience foods and prepared foods than the other chain stores. One of the Big Bear stores has a complete in-store bakery. Both Superior Supermarkets and Old South Super Savers have the best store locations in the area. Both regularly advertise more food specials than either of the other two chains. However, Old South Super Savers allocates a lot of advertising space to its private brands, whereas Superior Supermarkets normally features several well-known national brands as "loss leaders" in a single

This case was prepared by J.B. Wilkinson, Youngstown State University, and J. Barry Mason, The University of Alabama. The authors 1 wish to thank Harmon Looney, vice-president of Piggly Wiggly, Tuscaloosa, Alabama, for his advice on the financial data used in the case. Revised by Dr. Tim Christiansen 2014.

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ad. Moreover, Sam Harris, Sr., is an avid believer in the psychological aspects of loss leader selection, frequently selecting such items as sugar or soft drinks as loss leaders for the week.

Dixie Town is considered by the industry to be very competitive for its size with respect to food stores. The SMSA population for Dixie Town is 175,000; yet, in addition to the fourteen supermarkets affiliated with one of the four chain store groups, a warehouse grocery and a natural foods consumer cooperative are present. Sales revenue by supermarket or chain store groups is shown in Exhibit 2.