Save Mart is a regional supermarket chain based in the Central Valley of California. With over 200 stores, it is one of the largest grocery retailers in the state. Save Mart has a strong market position in many of the smaller towns and cities where it operates, which has led to allegations that it holds an unfair monopoly in some areas.
Save Mart’s Market Position
Save Mart is the leading grocery retailer in California’s Central Valley, with a market share of over 50% in many cities like Modesto, Turlock and Merced. It faces limited competition in these markets, as large national chains like Safeway, Kroger and Albertsons have only a handful of locations. Save Mart’s closest rival is FoodMaxx, owned by The Kroger Co., but it has less than half the market share of Save Mart in the Central Valley.
This dominant position is partly due to geography. The Central Valley is relatively remote and spread out, making it less attractive for large supermarket chains to expand into. Save Mart originated there in the 1950s and focused its growth in the region. It helped cement its status by acquiring several other regional chains over the past 30 years, including Albertsons stores.
Criticisms of Save Mart’s Market Power
Save Mart’s leading position has led some residents, politicians and consumer groups to accuse it of abusing its market power. Specific criticisms include:
- Higher prices – Prices at Save Mart stores are thought to be higher than competitors in places with more competition.
- Lack of choice – The limited competition allows Save Mart to reduce product choices and diversity.
- Supply agreements – Critics argue Save Mart uses its scale to command exclusive supply deals with vendors.
- “Predatory” competition – When competitors have tried to enter Save Mart strongholds, some allege Save Mart has responded aggressively by lowering prices temporarily.
A 2007 report by the Public Policy Institute of California argued that the Central Valley was one of the least competitive retail grocery markets in the state. It stated regions with “high levels of market concentration may experience higher prices as grocers exploit the reduced possibility that shoppers will take their business elsewhere.”
Save Mart’s Response
Save Mart states that its leading position simply reflects serving customers well in its core Central Valley markets for over 60 years. It argues that its expansion is limited by larger competitors as well as geographical factors. The company claims its prices are competitive with other major chains, citing independent surveys of grocery prices.
Save Mart says it provides benefits to the region by being a major employer and contributor to local communities. It notes that its stores range from 10,000 to 60,000 sq ft, allowing it to serve both large and small communities. The company says its supply agreements and low pricing strategies are typical practices for any grocery retailer.
Grocery Competition in the Central Valley
To better understand the competitive landscape, here is a breakdown of the grocery market share in 3 major Central Valley cities:
City | Save Mart Share | FoodMaxx Share | Other Chains |
---|---|---|---|
Modesto | 63% | 17% | Safeway (9%), Others (11%) |
Turlock | 55% | 33% | Albertsons (8%), Others (4%) |
Merced | 49% | 21% | Food 4 Less (14%), Others (16%) |
This data shows Save Mart has a very high market share in Modesto of 63%, facing limited competition. Turlock and Merced are slightly more competitive markets, but Save Mart still holds the leading position.
Assessing if Save Mart is a Monopoly
There is no definitive threshold for when a company’s market share constitutes an illegal monopoly. Courts have ruled that simply having a dominant market share alone is not sufficient for an antitrust violation. A monopoly also involves actively limiting competition through conduct like price fixing, exclusionary tactics or acquiring competitors.
In Save Mart’s case, critics argue some of its distribution and pricing tactics are exclusionary. However, others counter that it is acting reasonably given its market position and the realities of the grocery industry. Geographic factors also limit its competition.
Ultimately there is no clear consensus on whether Save Mart’s position should be considered an illegal monopoly. While critics may want more aggressive antitrust enforcement, proving predatory conduct in court is difficult. The mere fact that Save Mart is the dominant retailer in many Central Valley locations is unlikely on its own to prompt successful antitrust action.
Key Factors in Assessing Save Mart’s Market Power
- Very high market share in some cities – indicative of limited competition
- Allegations of distribution and pricing tactics that hurt competitors
- Geographic remoteness of the region limits competition
- No evidence of overt collusion or price fixing
- Scale efficiencies and cost savings from size may benefit consumers too
The Outlook for More Grocery Competition
Looking ahead, Save Mart could face more competition if conditions change in the Central Valley. Potential developments include:
- Continued population growth making it more attractive for large chains
- Expansion from regional chains like Raley’s into Central Valley
- Discounters like WinCo or Aldi entering the market
- Greater competition in e-commerce grocery delivery
However, the remoteness and spread out nature of the valley towns will likely continue to limit competition. Barring a major merger, Save Mart is expected to retain its dominant market position in its core Central Valley region in the near future.
Conclusion
Save Mart holds a very strong market position as the leading grocery retailer in California’s Central Valley. Accusations of monopoly power are understandable given its high market share in many towns, sometimes exceeding 60 percent. However, geographic isolation, limited competition and fair competitive practices contribute to this position.
Antitrust action would be difficult given legal precedents that dominance alone is not enough. Nevertheless, critics argue Save Mart sometimes uses questionable tactics to hinder competitors. Meanwhile, the company maintains its size brings efficiencies that can benefit consumers.
In the near term, Save Mart looks likely to retain its stronghold. But future changes like population growth and competitor expansion could slowly chip away at its dominance in parts of the Central Valley.