Superior supermarkets Case Synopsis A quarterly review by Hall Consolidated is scheduled to discuss performance in District III.

District III includes fifteen Superior Supermarkets located in Centralia, Missouri. The district manager for these stores, Randall Johnson, has requested that these three locations implement an everyday low pricing strategy since these stores are the highest priced supermarkets in the Centralia market. His is concerned that because of increasing consumer price consciousness, they may lose market share. Centralia stores sales have been below budget for the last quarter of 2002 and this first quarter of 2003. Still, operating margins are near plan due to sales of slightly higher gross margin items and a reduction in operating expenses. They have also had a higher customer count for this first quarter (Kerin & Peterson, 1998/2010, pp. 484-495). Market Conditions in Centralia, Missouri had food and beverage sales of $62.3 million in 2002, which was a 4.6 percent increase over the previous year. Superior and three other major competitors, Harrisons, Grand American, and Missouri Mart account for eightyfive percent of food sales in Centralia. 41.6 percent of Centralias population is between the ages of twenty-five and fifty-four. 30.6 percent of household income is between $15,000 and $34,999 and 39.6 percent is between $35,000, and $74,999. In 2002, Superior held an estimated twenty-three percent of the food sales market, Missouri Mart had twenty-seven percent, Harrisons had twenty-two percent, and Grand American had thirteen percent. However, these competitors draw customers from larger geographic areas than Superior (Kerin & Peterson, 1998/2010, pp. 484-495). Competition Superior executives consider Missouri Mart to be their primary competition since thirtytwo percent of Superiors customers shop there regularly. Missouri Marts customers are... Case Recap In early April 2003, James Ellis, the President of Superior Supermarkets, met with company executives to discuss the ability to adopt an everyday low price (EDLP) strategy for Superior Supermarkets in Centralia and Missouri. Superior Supermarkets is a division of Hall Consolidated, a privately owned wholesale and retail food distributor. Hall distributes food and related products to some 150 company-owned supermarket units and about 1,100 independent grocery stores in the U.S. through 12 wholesale distribution centers. Halls sales in 2002 were $2.3 billion. Superior is the smallest of the three supermarket chains owned by Hall, with sales of $192.2 million in 2002. Superior serves small towns in the South Central U.S., and is number one or two by market share in each of its trade markets. Sales of the three Centralia stores were $14,326,700 in 2002. Their gross profit margin was 28.8%, while the median for the U.S. grocery industry was 26.4%. Randall Johnson, the District Manager for the Centralia stores, has recommended that they implement everyday low pricing (ELP). The reasoning behind his desire to implement the ELP strategy is that Superiors prices are higher than the competition at a time of growing price consciousness, and that the price differential could cause them to

lose market share. Superior President James Ellis suggests that their recent consumer research should be studied to assist in the pricing decision. If the research suggests that an ELP strategy should be used, it would then be applied to all three of the Centralia stores. One company official suggests that the pricing strategy should be part of a broader store positioning strategy, and it should be supported with advertising. It is known Superior is does have the highest prices in the area. To the extent that price knowledge exists, it is thought to be category dependent. This adds a dimension to the ELP implementation decision, specifically whether ELP should be applied..