Choice Is Instigator, Not Victim

Worried about a possible supermarket monopoly in their neighborhoods, members of the Sherman Oaks and Studio City homeowner associations recently asked state Atty. Gen. Dan Lungren to intervene in the planned merger of Hughes Family Market with Ralphs Grocery Co. Their concern was that, post merger, Ralphs would have too large a share of the local market and free rein to raise prices. The homeowners asked the state attorney general to require Ralphs to sell one of its stores in their neighborhood and they have prevailed; Ralphs has agreed to do so. In fact, the company will sell 19 stores in Southern California.

Concerns like this might make sense if we lived in a small town, but in the San Fernando Valley today, shoppers have more choice than ever. In fact, it is the growing range of shopping options that has led to the current consolidation in the sector in which chain supermarkets--Ralphs, Vons, Albertsons, Lucky and Hughes--compete.

Over the last 10 years, we have seen a substantial shift in grocery shopping patterns away from supermarkets and toward discount warehouse purchases at stores such as Costco and Petco. Valley residents also have access to a wide array of specialty stores such as Gelson's, Whole Foods and Trader Joe's.

One could even include restaurants such as Boston Market and other takeout venues as an additional option for consumers preparing their evening meal. My own shopping includes regular stops at Costco and Ralphs, less frequent stops at Petco, Albertsons, Trader Joe's and Whole Foods, and an occasional Friday night call to Ameci's for prepared pizza.

What this means is that purchasing patterns in the grocery industry have changed. Just as mom-and-pop stores gave way to supermarkets, supermarkets now face competition from a variety of other food sellers and food preparers. The consolidation in the supermarket industry is a response to changing patterns of purchasing, the effect of more choice in this industry rather than a harbinger of a world with few options.

The idea that Ralphs would have free rein to raise prices in an area like the Valley makes no sense. In addition to competition from other supermarkets, discount warehouses and specialty groceries, Ralphs faces competition from Target, Kmart and Sav-On Drugs in the sale of personal products, paper goods, over-the-counter drugs, stationery items, snack food and sodas. Stores such as Sav-On and Costco compete with the supermarkets for liquor sales. Clearly, with this level of competition any attempt to charge higher prices would be met with substantial loss of market share over time.