Tuesday, July 22, 2003

Wal-Mart Supercenters face California resistance

MICHAEL LIEDTKE, AP Business Writer

MARTINEZ, Calif. (AP) -- Wal-Mart is poised to introduce California to its version of paradise -- "Supercenters" stuffed with discount groceries alongside the usual potpourri of bargains.

But the nation's largest company is meeting resistance in a state where rising concerns about reducing traffic and preserving open space clash with Wal-Mart's desire to build gargantuan shopping centers nearly twice the size of its typical store.

Contra Costa County, a fast-growing San Francisco suburb of nearly 1 million people, already has banned the Supercenter concept -- a precedent Wal-Mart is seeking to overturn at the ballot box.
In Los Angeles, California's largest city, officials are discussing an ordinance that would block or discourage Wal-Mart from opening Supercenters there.

The opposition hasn't blanketed the entire state. Wal-Mart's first Supercenter in California is expected to open next year in the booming southern desert city of La Quinta, followed by others in the Central Valley -- Bakersfield, Hanford, Chico and Redding.

Still, the pockets of resistance underscore the challenges facing Wal-Mart as it pursues plans to open 40 California Supercenters during the next four years. Bentonville, Ark.-based Wal-Mart Stores Inc. already operates 134 of its traditional stores in California, including three in Contra Costa.

California represents the last frontier for Wal-Mart's Supercenters -- stores that contain full-service grocery departments. To accommodate all the food, the Supercenters span an average of 187,000 square feet compared to an average of 97,000 square feet for the typical Wal-Mart discount store.
Since Wal-Mart first introduced Supercenters in 1998, the concept has turned into its crown jewel. The company runs 1,258 Supercenters in 43 states, up from 441 Supercenters in 28 states five years ago.

Supercenters "have been extremely successful for them," said Kurt Barnard, an Upper Montclair, N.J. retail analyst who has been following Wal-Mart for 40 years. "I would expect Wal-Mart to make sure (the Supercenters) get built in California and then make them indispensable for millions of consumers. They are a very determined company."

While Wal-Mart hails the Supercenters as the ultimate in shopping convenience, opponents attack them as monstrosities that attract too much traffic, create too many low-wage jobs and destroy neighboring businesses.

The criticism has dogged Wal-Mart for years, and stirred community opposition in several other states, including Oregon, Arizona and Nevada.

But the critics may find an even more receptive audience in California, where congested roads and sprawling developments have emerged as a major irritant.

"We don't want our communities to become one giant freeway tied together by strip malls," said Amaha Kassa, co-executive director of the East Bay Alliance for a Sustainable Economy, an Oakland community group opposed to Wal-Mart's expansion.

The Supercenters also face fierce opposition from a longtime Wal-Mart foe -- the United Food and Commercial Workers, which has more than 200,000 members in California. The UFCW and other labor leaders fear nonunion Supercenters will pressure traditional supermarkets to lower wages or fire well-paid workers to remain competitive.

Wal-Mart regards much of the criticism about its Supercenters as "ludicrous," said spokeswoman Amy Hill.

But Wal-Mart is taking Contra Costa's snub seriously, even though the company has no plans to open a Supercenter in the unincorporated areas affected by the ban.

"This is a direct threat to our business. It's a matter of principle for us," Hill said.

The company spent about $100,000 collecting 40,735 voter signatures to qualify for a referendum seeking to overturn the Contra Costa ban. Just under 26,500 of those signatures need to be validated by the county clerk to force a special election on the issue.

Wal-Mart is prepared to spend even more in the campaign leading up to Contra Costa's still-unscheduled election, Hill said. The company's pockets are deep, having generated an $8 billion profit last year on sales of $245 billion.

Supercenters are important to Wal-Mart because shoppers typically visit supermarkets more frequently than general merchandise stores.

By luring customers to its store more often to buy groceries, Wal-Mart gets more opportunities to sell other products that generate higher profit margins.

But more frequent trips to the stores mean more traffic problems for the Supercenter's neighbors, said Contra Costa Supervisor John Gioia.

Because most groceries aren't taxed, Gioia believes the Supercenter won't generate enough revenue to pay for the additional burdens on the county roads.

With that in mind, Gioia wrote the Contra Costa ban against stores that cover more than 90,000 square feet and devote more than 5 percent of the space to nontaxable items, such as groceries. All of Wal-Mart's cover at least 90,000 square feet, with the largest spanning 261,000 square-feet.

The Contra Costa ban exempts big membership warehouses, such as Costco and Wal-Mart's own Sam's Club, that sell groceries. Gioia believes that exemption makes sense because shoppers at the membership warehouse buy in bulk so they don't have to make as many trips.

Wal-Mart views the Contra Costa ban as government interference in consumers' freedom of choice. It's an argument that resonates with Marlise Evans, a regular shopper at a traditional Wal-Mart store in Martinez, Contra Costa's county seat.
"It would be nice to have it all right here in one place," Evans said while buying her son an ice cream bar from a vending machine outside the Wal-Mart. "It would be cheaper, and it would be more convenient."

Consumers in general seem to like the idea of getting their groceries from Wal-Mart.

The sale of grocery, candy and tobacco items accounted for about $37.7 billion, or 24 percent, of the sales made in Wal-Mart's Supercenters and discount stores last year, up from $11.7 billion, or 14 percent, of the same segment's sales in fiscal 1998.

Wal-Mart's ballot-box defense of its Supercenters has proven effective in other communities.

The company spent $140,000 last year to defeat a measure that would have banned a Supercenter in Calexico, a California border town of 27,000 people. The Southern California city of Inglewood and Nevada's Clark County repealed Supercenter bans after Wal-Mart qualified voter referendums to take the issue to the ballot.

But Contra Costa has no plans to back off, Gioia said.

"It's a quality of life issue," Gioia said. "All we are doing is putting legitimate and reasonable limitations on the kinds of stores that we want in our community."

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