Randalls battles for its place as rivals try to cart off...

In its heyday, Randalls was locally owned and one of Houston's top grocery chains, among the first in Texas to offer expansive gourmet and prepared food sections, floral departments and even loyalty cards.

That was decades ago, and such innovations today are pretty standard.

Randalls is part of a California-based chain, and its numbers in Houston continue to dwindle, down 40 percent since 2005. Two more stores closed in 2013, and the grocer recently announced it would shutter its Westchase Shopping Center location, bringing the count to 30.

Meanwhile, its competitors - many of which were not around when Randalls was a market leader in the mid-1980s - continue to expand.

That leaves Randalls stuck in the middle: a mainstream supermarket outnumbered by heavyweights and under siege from an influx of smaller, newer specialty grocers. Analysts say the stores are having a hard time differentiating their brand and competing on price.

Randalls also faces tough competition with Kroger, which has 105 Houston-area stores, and H-E-B, with 85.

"Being in a market is challenging when you don't have a store count competitive with the market leaders," said Scott Mushkin, an analyst at Wolfe Research Securities. It puts a chain at a disadvantage with advertising and maintaining brand relevance, he added.

Competition in Houston is intense, Mushkin said.

He said Wal-Mart Stores has had its struggles but does a good job with its SuperCenters, particularly in Houston. H-E-B combines great merchandising with hard-to-beat prices and service, he added, and Kroger is close to that same standard.

Kroger also benefits from being the largest traditional supermarket chain in the U.S., with significant buying power and a strong private label program, said Mark Hamstra, retail and financial editor of trade publication Supermarket News.

Wal-Mart, which began selling groceries in 1988, is one of many grocers to have entered the Houston market since the days Randalls was a leader, said David Livingston, a grocery analyst at DJL Research. The list includes not just H-E-B but also Costco, Whole Foods Market, Super Target and, more recently, Trader Joe's, Aldi, Fresh Market and Sprouts.

Moves to scale back

There has been speculation that Pleasanton, Calif.-based Safeway, which has owned Randalls since 1999, might close its Randalls stores or significantly scale back.

One reason is that Safeway's new CEO, Robert Edwards, has been aggressively downsizing, selling off more than 200 Canadian stores this year and recently announcing that the company will divest itself of 72 Dominick's in Chicago.

Last year the Wall Street hedge fund Jana Partners invested $300 million in Safeway. In September Jana Partners called on the company to eliminate its "subscale and lower margin geographies," and a few weeks later Safeway announced it was selling Dominick's, the Chicago Tribune reported.

More Information Changing market Houston-area store counts for some major grocers: Grocer 2003 2008 2012 2013 Kroger 96 101 99 105 H-E-B 52 47 81 85 Wal-Mart 22 50 55 57 Randalls 46 36 33 31 Target 6 10 35 35 Fiesta Mart 34 33 33 34 Source: Houston Chronicle surveys, Wulfe & Co.

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Safeway spokeswoman Connie Yates recently told the Chronicle that Randalls was committed to the Houston market, while confirming that it would close the Westchase store.

"Safeway does not comment on rumors in the marketplace, nor does it comment on the performance of individual stores or divisions," she said.

The company declined to make a Safeway executive available for an interview.

The competition

Randalls faces pressure from all sides. While it once had the reputation for going the extra mile in quality and offering higher-end gourmet items, it now goes head to head with gourmet and/or natural foods grocers like H-E-B's Central Market and Whole Foods Market.

At the same time, it sees value-oriented mainstream rivals H-E-B and Kroger growing in number.

Other chains have had trouble in Houston. AppleTree and Albertsons did not last long here, while Rice Epicurean bowed out after a long run, Livingston said.

Texas-based H-E-B has something of a hometown advantage, and Kroger has deep roots in Houston, Livingston said, while Wal-Mart sets the standard for low pricing.

Mushkin noted that Randalls competitors such as H-E-B and Fiesta are particularly adept at appealing to Houston's growing Hispanic population through their merchandising, bilingual marketing, locations and, in the case of H-E-B, Hispanic-themed concepts such as Mi Tienda.

"H-E-B and Fiesta aren't American companies trying to appeal to Hispanic consumers - they are grocery companies serving the needs of shoppers who happen to be Hispanic," said Terrie Ellerbee, associate editor of the Shelby Report, a grocery industry trade publication.

"Fiesta Mart's founder had lived in several countries in Latin America and H-E-B operates stores in Mexico and is very familiar with other Latino cultures," she said.

Safeway also has 14 Randalls in Austin and 63 Tom Thumb stores in the Dallas/Fort Worth area.

Sees positives

Some analysts are more optimistic about Randalls. Burt Flickinger III, managing director of Strategic Resource Group, a retail and consumer goods consulting firm, is among those who see opportunity.

Safeway has been effectively launching new initiatives, he said, including Just For U, an online and mobile coupon application offering personalized deals to customers based on their shopping history accessed from their loyalty cards.

Just For U launched companywide more than a year ago and has been well received by Randalls customers, spokeswoman Yates said.

With its influx of capital from the selling off the Canadian stores and Dominick's, Safeway could invest more in the Houston market, including the Hispanic customer, Flickinger said.

Safeway does well in California, having the advantage of being well-entrenched and having a high market share, Mushkin said.

The middle consumer

Randalls has ties to the Randalls Super Value store dating back to the 1950s.

The company, considered a pioneer, was led by the late Robert Onstead and, afterward, his son Randall Onstead.

"Randalls was among the first retailers to offer an exciting and service-oriented shopping experience - it raised the bar," Ellerbee said. "But today's shoppers expect that kind of quality in every traditional supermarket, and without a strong point of differentiation, it is very difficult to serve the middle consumer."

After Safeway took over Randalls in 1999, it heard complaints from customers when it discontinued some products, including Boar's Head meats and cheeses.

A few years later, Lisa Cartwright, an analyst at Smith Barney Citigroup, told the Chronicle that Safeway had gotten the message and was listening more to the needs of customers in its various markets nationwide.

Pressure to expand

Beginning in 2004, Safeway began revamping its stores with a "lifestyle format" which included more organics, prepared foods, wine and sushi and olive bars and new lighting, flooring and fixtures.

All but three Randalls stores have gotten the makeover, Yates said.

Houston's competitive grocery environment makes it challenging for all players, partly because they feel a pressure to expand, said Charles Cerankosky, an analyst at Northcoast Research.

"Houston has such a healthy economy that it attracts everyone," he said, "and sometimes chains will expand their capacity faster than the population growth."