Food price war possible

With the opening of the warehouse store Cost-U-Less affecting its sales last weekend, Foster’s Food Fair will do what is necessary to maintain its market share in the grocery business.

Cost-U-Less

Crowds packed Cost-U-Less for the preview last Wednesday and then kept coming for the grand opening sales right through the weekend and into this week.
Photo: Alan Markoff

‘We take Cost-U-Less very seriously,’ said Foster’s Food Fair Managing Director Woody Foster. ‘We’re pretty comfortable with our place in the market and feel we offer fair prices.

‘But we’ll be retaliating.’

Retaliating will mean lowering some prices at the Foster’s stores.

‘If it means a price war, that’s what we’ll do,’ said Mr. Foster.’ We’ll do our best not to allow [Cost-U-Less] to take away our customers.’

Cost-U-Less opened last Thursday to large crowds that continued through the weekend. Store manager Charlie Hyde called the opening days of the store incredible.

‘It was record-breaking for the company,’ he said of Cost-U-Less, which has 11 other stores in the Caribbean, Pacific and U.S.

Meanwhile, Foster’s Food Fair had a decrease in business last weekend.

‘It’s typical to have a decrease with something like [the Cost-U-Less opening],’ said Mr. Foster. ‘Everyone wants to go see what’s going on.

‘Sales were off, but they weren’t off to the extent we thought they were going to be.’

Cost-U-Less produced an eight-page grand opening sales booklet with 150 sales items that offered substantial discounts compared to other retailers on Grand Cayman. The sale prices were only good through today.

Mr. Foster’s said Cost-U-Less was selling some of its sales items at or below Foster’s cost. In response, both Foster’s Food Fair and Priced Right, the Foster’s warehouse-style store, will look to reduce prices where it can.

The reductions have already begun. During the Christmas season, Foster’s typically offers lower prices, especially on holiday favourites.

‘This year it’s even more so,’ said Mr. Foster.

Mr. Hyde at Cost-U-Less said the grand opening prices will be replaced by the stores regular low prices.

‘We had signs [on the sale items] that showed what the regular price would be,’ he said. ‘The only thing that would change that is the vendor cost or the freight cost, but we all have to deal with that.’

Cost-U-Less will also have a limited-time sale on 12-14 items at the end of every month, Mr. Hyde said.

‘And once a year, we’ll have something very similar to the grand opening sale for our anniversary,’ he said. ‘It’s actually a little bigger than what we did for the grand opening.’

If Foster’s or other retailers undercut prices, Cost-U-Less will not respond in kind, Mr. Hyde said.

‘For one, we don’t think they can sustain it because of the model they operate on,’ he said. ‘Secondly, if they undercut us, then we’ll be doing exactly what we said we’d be doing; lowering prices for the people in the Cayman Islands.’

Mr. Hyde said Cost-U-Less does not use loss-leaders – the practice of selling some products at less than cost in order to get customers to come in and buy other items – like other stores do.

‘Our model is based on efficiencies,’ he said, explaining that Cost-U-Less has its own distribution centre on island, plus two in the US, including one in Miami.

‘We hang our hat on being value leaders. We try to bring in great products at great value.’

The initial success of Cost-U-Less has created some problems for the company.

‘We’re so busy we can’t keep up with stocking,’ said Mr. Hyde. ‘We don’t want to do it while we’re open for safety reasons, so we’ve had to change our operation hours and go 24 hours,’ he said.

The volume of customers has also been a challenge for Cost-U-Less employees.

‘The staff has been holding up great,’ said Mr. Hyde. ‘My hat’s off to them. No one would have expected the reception we have had.’

Something else Cost-U-Less is doing differently than other retailers is posting the unit prices of their products. For instance, if something weighing one pound costs $1.60, Cost-U-Less will post the $0.16 per ounce unit cost below the total cost. The practice of unit pricing, which is a law in most US states, makes for easier comparison shopping

Mr. Foster said Foster’s might follow suit.

‘We did that years ago, but the software gave us problems and we couldn’t guarantee accuracy, so we stopped it,’ he said. ‘But I actually think it’s a good thing and it’s something we’ll look at again.’

Kirk Supermarket declined to comment on the effect Cost-U-Less had on its business or what response it might make as a result of the new entrant in the grocery business. Hurley’s Group expressed a desire to respond, but was unable to do so by press time.

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