At its peak in 1930, The Great Atlantic & Pacific Tea Co., then the largest food chain in the world, operated 15,709 stores in 34 states. But times have changed, for A&P and for the rest of the food-retailing industry. The onetime leader is a shadow of its former self, having slimmed down to just 1,088 stores in only 25 states. The new top banana, Safeway Stores Inc., operates only 2,012 stores in 28 states and the District of Columbia.

The Maine-to-California supermarket chains did well when food retailing was essentially a distribution business and customers picked a store primarily for its prices and convenient location. But the national chain operators, which pioneered in creating efficient operating and distribution systems for their stores, are at a disadvantage in today's more complicated and sophisticated retail food market. Their good management is no less important today than in earlier times, says food-retailing consultant Bill Bishop, but it is no longer sufficient. "What separates the extraordinary merchant from the average merchant today," Bishop adds, "is that the first has a very clear view of who his customer is and what he or she wants. The really outstanding retailers today are strongly market driven."

The food business, in other words, has been experiencing the kind of segmentation found in such businesses as apparel retailing. It is a trend that favors the independents and smaller chains that can pick a niche and concentrate on it -- like George W. Jenkins's Publix Super Markets Inc.

Ever since the 78-year-old founder opened the first Publix in 1930, Jenkins's customers have been middle- and upper-income Floridians. Today, Publix and competitor Winn-Dixie Stores Inc., by Jenkins's estimate, each have about 25% of the Florida market. But Jenkins stays well clear of the lower-income neighborhoods where Winn-Dixie stores flourish. "Somebody has got to service those people," he says, "and Winn-Dixie does a better job than we do."

Allen Bildner, chairman and chief executive officer of Kings Super Markets, which has 15 stores in New Jersey, also goes after the high-income shopper -- "people who are willing to trade some price for quality and service," as he puts it. To be sure he stays in touch with his market, he has put together seven consumer advisory boards, with 15 to 24 members each, that convene quarterly. "We're astounded," he says, "by the fact that people are willing to meet after dinner and share their thoughts with us."

Bildner's 31-year-old son, Jim, has become provisioner to Boston's well-heeled Yuppie population with small neighborhood markets dispensing the latest in flavored mayonnaises, brie, and prepared gourmet entrees, along with groceries. His tiny (4,300 square feet) J. Bildner & Sons market in trendy Back Bay will, he claims, produce $4 million in sales this year, its first full year of operation. "We're doing more than selling food," says Bildner junior. "We're serving a lifestyle phenomenon. Ten percent of our volume comes in phone orders. We know people well enough to substitute for them, and they know us well enough to let us. . . . Anybody can put in miles of shelves and freezers and compete on price. I'm going to concentrate on satisfying the upper-end buyer."

Pathmark supermarkets, a hugely successful division of Supermarkets General Corp., operates 137 stores in New Jersey and neighboring states and generates probably the highest weekly sales per square foot in the industry, $15.33, at least twice the industry average. What is unusual about Pathmark isn't its customer base -- there is noting upscale about its shoppers -- but the lengths to which it goes to keep tabs on what its customers want.

"By prohibition," says Supermarkets General vice-president Robert Wunderle, "we do not have meetings in headquarters on Thursdays. By edict, vice-presidents are in stores on Thursdays -- not just our own stores, but competitors', too. And that includes the fish stores, butcher shops, and bodegas that are competing with us." If there is a product in a local ethnic market that is selling, Pathmark wants it in its local store, too. But only if it is selling. "If you see a unique item on the competition's shelf but it is dusty, then that guy has made a mistake," Wunderle says.

"We spend lots of time," he adds, "visiting companies across the country, looking at new formats, new techniques. We're constantly asking ourselves what trends we see. But our forte is that we're not afraid to fail. To implement new ideas, we first get some store manager to buy in. We'll say, here's this idea. Anybody interested in trying it? Even if 9 out of 10 say no, we'll take the 1 and let him try. He becomes our test market. With the luxury of 137 stores times the number of departments in each store, that's how many test markets we have. At any given time there are probably three or four dozen experiments going on within the company."