Safeway and Fred Meyer to sell gas

Safeway and Fred Meyer are joining a growing number of supermarket chains that will peddle gasoline outside their front doors.

The chains plan to open gas stations at several of their stores in Washington and Oregon, joining a list of supermarket and wholesale chains, including Albertson's and Issaquah-based Costco, that sell gasoline under their brand names.

Selling gas is the latest marketing idea to hit the highly competitive supermarket industry, whose efforts to become a "one-stop" destination for consumers also include video stores and 24-hour pharmacies. Supermarkets own about 3 percent of the U.S. gas market, the National Association of Convenience Stores says.

The number of supermarket-operated gas stations has more than doubled in the past two years and is expected to reach 1,400 locations by 2001, according to the National Petroleum News.

Costco and Albertson's were two of the first chains to sell gasoline, said Michael Shea, an analyst with D.A. Davidson who tracks Safeway.

"It's worked; it's clearly showing up in these companies' same-store sales," Shea said. The sale of gasoline "adds traffic to those stores. It's been an effective strategy."

Costco, which has sold discounted gasoline since 1996, has pumps at about a hundred of its warehouses, including those in Issaquah, Southcenter, Aurora Village and Silverdale. Albertson's, the nation's second-largest grocery chain, followed suit a year later and recently opened its 100th Albertson's Express station. The company has five fuel centers in Washington - in Kingston, Richland and Spokane - and plans to add more.

Safeway and Fred Meyer would not discuss the price of their fuel, saying only that they would compete with national chains. While the fuel sales alone may not generate tons of cash, said Rob Boley, a spokesman for Fred Meyer, they certainly will attract more customers to the stores.

Safeway and Fred Meyer would not say whether they are considering gas stations in King County. A check of permit applications in Bellevue, Kent and King County, which handles planning for many smaller communities and rural areas, did not turn up any gas-station permits for Safeway or Fred Meyer.

Officials at Seattle's Department of Design, Construction and Land Use said their computer system did not have the capability to search for projects by name.

Safeway, based in California, just opened its first station in Alaska and will have one in place at its Aberdeen store by October, said Cherie Myers, the company's Washington spokeswoman. The company also plans to add gas pumps at at least 25 Pierce County locations, records show.

Safeway has sold gasoline before through national affiliates, said Myers, but the company is beginning to look at the Northwest market.

Safeway, analyst Shea said, "is a little late to the game, but they are going to be coming fast and furious."

Myers was more cautious.

"We're new at reviewing this," she said. "We're wetting our feet a tad."

Portland-based Fred Meyer is also late to the game. The company recently opened two gas stations in Alaska and plans several more in the West, Boley said.

Boley, who wouldn't say which of Washington's 54 Fred Meyer stores would sell gas, said the company was looking to open gas stations before it was bought by Kroger. The Cincinnati-based grocery chain, the nation's largest, runs 35 fuel centers and plans to open 40 more by the end of the fiscal year.

"We saw an opportunity to use the Fred Meyer brand name," said Boley. "We will be a low-price alternative to national-brand gas stations."

A report prepared for the National Association of Convenience Stores said warehouse chains, beginning with Costco, posed a real threat to gas stations and convenience stores.

"The story of these competitors is powerful," the report said. "The numbers prove that they surely have taken volume from traditional competitors."

Supermarkets, the association noted, can offer frequent-shopper promotions to consumers who shop at the fuel center and at the main store. Albertson's, for example, offers the Extra Saver Card, which allows customers to earn discounts at the supermarket by buying gas from the company.

Thomas Lee's phone message number is 206-464-2448. His e-mail address is: tomlee@seattletimes.com.