Grocer's shares suffer as rivals go to market.

• Author: Speizer, Irwin
• Position: Money Matters - Ingles Markets Inc.

There's no such thing as a free lunch at Ingles Markets Inc. anymore -- certainly none as big as its annual Food Show was. The Black Mountain-based grocery chain has discontinued the giveaway, which last year drew almost 10,000 people. It's one of many marketing cuts Ingles (Nasdaq: IMKTA) has made as it struggles with declining earnings that helped push its stock price to a 52-week low of $9.31 in May.

More and more, Ingles is facing deep-pocket competitors it once didn't have to worry about. Started 40 years ago, the chain grew up in rural North Carolina markets that most major grocers ignored. It now operates 203 stores in six Southeastern states -- North Carolina, South Carolina, Georgia, Tennessee, Virginia and Alabama.

As suburbia swallowed farmland and brought more customers, the major chains followed, including Wal-Mart with big grocery sections and prices that chill the hearts of grocery-chain execs. That's what has happened in Georgia, home to 40% of Ingles stores. Kroger is king in Georgia, but coming on strong is Wal-Mart at No. 3.

In the three months that ended in April, while most chains' share of the Georgia grocery market shrank or held steady from the same period in 2002, Wal-Mart's grew 5.9%, according to The Shelby Report, a grocery journal. It made similar gains in Ingles' other markets. Ingles'...