"Flanking in a Price War" discusses some of the strategies utilized by retail grocery chains, wholesalers, and co-operatives within the Quebec Grocery Industry. Pricing strategies are the main focus of this article. It outlines both successful and non-successful pricing tactics. In addition, it emphasizes the importance of considering all pricing options, through price experiments, before deciding upon a pricing strategy.
It tells of the decline of an industry leader, Steinberg Inc. Steinberg Inc. dominated the Quebec grocery retail industry from 1950 to 1980 while using a discount pricing strategy. Use of that pricing strategy enabled Steinberg to gain more of the market share, forcing some of the smaller independent grocers to close. It also weakened the market position of some of its tougher competition, especially six small fully integrated chains.
Steinberg Inc.'s success quickly gained the attention of some of its toughest competitors. Two retail co-operatives merged and two major wholesaler-sponsored groups (Provigo and IGA) aggressively took over franchised convenience stores. 81 Dominion stores, which was Steinberg's main competition, were acquired by Provigo. It was those acquisitions that helped Provigo become Quebec's largest chain. All four of the major companies were using a price promotion strategy.
The grocery industry was experiencing rapid fundamental and competitive changes. As a result, all the firms were forced to chose new competitive strategies. Their chosen strategies would prove to be critical to their future success. Steinberg initiated a price war with major price cuts, rebates on all receipts, and heavy promotion. Provigo and Metro-Richelieu quickly responded in kind. IGA, however, decided to have academic p ...