(Dec. 9) NOGALES, Ariz. — A few years ago, when Rick Smith was vice president of corporate produce for retail giant Pleasanton, Calif.-based Safeway Inc., and that conglomerate was buying up various regional retailers, Smith was certain his chain’s economies of scale would put the smaller remaining regional chains out of business.

How his opinion has changed.

Now as director of produce and floral for Modesto, Calif.-based Save Mart Supermarkets — just such a “small chain,” as he calls it — Smith sees profitability levels that may make Safeway managers a bit envious.

“We at Save Mart can make a connection in the community that others can’t,” Smith said Dec. 1 at a workshop, “Channel Blurring: How Competing Retail Outlets Affect You,” presented during the Nogales Produce Convention, sponsored by the Fresh Produce Association of the Americas.

For one, target marketing is easier for a smaller retailer, he said. And procurement can be more real-time, meaning a retailer can take advantage of spot buys to pass on savings to consumers, thus building stronger loyalty.

The 81-store chain, founded in 1952, has a No. 1 market share in eight communities it serves, he said, racking up $2.5 billion in revenues after factoring in the 44 Food Maxx stores the firm also owns.

Save Mart plans to add at least five stores next year, perhaps more, he said.

“Our owner is keen on acquisitions, and with a potential sale of Albertson’s locations, you never know,” he said.

A localized approach, such as the one employed by Save Mart, is one way to stave off the most feared retail competitor around, Bentonville, Ark.-based Wal-Mart, said another presenter, Veronica Kraushaar, president of Vanguard Marketing Strategies Ltd., Scottsdale.

Wal-Mart, she said, has contributed to a retail scene that is typified by three Cs: consolidation, cost-cutting and channel competition.

By pricing its groceries at about 10% above cost, Wal-Mart will be stiff competition for any retail player, she said.

Still, Smith favors the maneuverability afforded by his firm’s greatly reduced scale.

“Sometimes, when my profits are real high, my boss comes in and says, ‘Rick, let’s tone it down a bit.’ We want to hang on to our customers.”