Upscale grocer entering market

Darnestown store is first in Maryland for Harris Teeter

Tuesday, Nov. 22, 2005

by Andrew P. Moisan

Staff Writer

A recently closed Food Lion Inc. grocery in Darnestown has been leased by Harris Teeter Inc. and will be the first store owned by the North Carolina-based food retailer to open in the state.

Harris Teeter, which is publicly traded, declined to say when the deal had been made because it is ‘‘too early in the process to share additional store information,” but did confirm the store is slated to open next year, Jennifer Panetta, a spokeswoman, said in an e-mail.

A spokesman for Food Lion, also a publicly traded company based in North Carolina, said the impetus for closing the store, at 14101 Darnestown Road for about a decade, had been in the making for some time.

‘‘The store just had not been as profitable as it needed to be for the last few years,” Jeff Lowrance, the spokesman, said.

It is Harris Teeter’s latest effort to expand from the Southeast—where its 138 stores operate in six U.S. states—to suburban Washington, D.C., where stiff competition from Giant Food and other chains thwarted similar efforts by the company four years ago.

Harris Teeter already has six stores in Alexandria, Va., and says it is eyeing other properties in the Washington region, even as analysts say it faces a similarly competitive market as it did four years ago.

It will also mean changes for shoppers used to the Darnestown Food Lion, as Harris Teeter offers ‘‘higher-quality” and thus higher-priced products than what Food Lion and Giant shoppers may be used to, according to Mitchell Corwin, a stock analyst with Morningstar Inc., a Chicago-based investment research firm.

‘‘Basically they are trying to offer higher-quality products and service but trying to remain competitive on price,” Corwin, who covers the Ruddick Corp., of which Harris Teeter is a subsidiary, said in an e-mail.

‘‘In other words,” he said, ‘‘have a good value proposition so a consumer will say, ‘I may pay slightly more at Harris Teeter but it’s worth the extra few bucks because of what I am getting.’”

Food Lion is a far larger company than Harris Teeter, with more than 1,220 stores in 11 U.S. states and 30 to 35 new stores slated to open this year.

It operates stores in the six states that Harris Teeter does, plus Maryland, Delaware, Pennsylvania, West Virginia and Kentucky, and employs 73,000 workers to Harris Teeter’s 14,000.

While he hadn’t heard of the deal involving the Food Lion in Darnestown, Harris Teeter’s efforts don’t surprise Tom Saquella, president of the Maryland Retailers Association.

‘‘They very much want to get into the Maryland market now,” Saquella said. ‘‘They stayed out for years because Giant was so dominant. Now that some of Giant’s dominance is slipping, they’re taking a second look at Maryland.”

Harris Teeter’s Panetta said the new store on Darnestown Road is part of an ongoing effort to support a growing consumer base, and that the company is ‘‘actively seeking” other locations in the region. She declined to elaborate.‘‘Site selection and projected store openings are a strategic and proprietary part of doing business,” Panetta said.

So how do experts think the company will fair the second time around?

Corwin says they have a good shot, but will have to work for it.

‘‘I think the company is confident in its new stores and they are quite attractive, but they operate in a brutally competitive environment,” he said. ‘‘Traditional competitors aren’t standing still and they also have to deal with growing niche operators such as Whole Foods and Trader Joe’s.”

Whole Foods and Trader Joe’s each have several Montgomery County stores.