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Superior Supermarkets

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Superior Supermarkets Everyday Low Pricing
In: Business and Management
Superior Supermarkets Everyday Low Pricing
Superior Supermarkets (SS) 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. Superior is the smallest of the three supermarket chains owned by Hall, with sales of $192.2 million in 2002. Sales of three Centralia stores were $14,326,700 in 2002. Randall Johnson, the District Manager for the Centralia stores, has recommended that they implement everyday low pricing (ELP) since Superior’s 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.
Problem Statement
Superior Supermarkets (SS) must decide whether o not to pursue an everyday low pricing (ELP) strategy at its three Centralia MO locations.
Analysis
Three viable alternatives have been found. Alternative #1 is to do nothing. Do not adopt ELP and keep the current promotional budget. If market share continues to decline, at the growth rate of -0.53% or greater, this alternative would be deemed unsuccessful. Conversely, if market share remains stagnant or improves, this strategy would prove to be prudent.
Alternative #2 is to implement a ‘limited ELP’ model. By marginally increasing the amount of loss leaders, the model could attract price-conscious customers at the margin. Under this model, the advertising budget could either remain the same or slightly increase. This alternative would be considered successful if SS contribution margins remain unchanged and/or sales revenue increases.
Alternative # 3 is to implement an ELP model and increase the advertising budget...

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