Miles of Aisles for Milk? Not Here

HARMAR TOWNSHIP, Pa. — Like cars and homes, grocery stores are beginning to shrink.

After years of building bigger stores — many larger than a football field and carrying 60,000 items — retailers are experimenting with radically smaller grocery stores that emphasize prepared meals, fresh produce and grab-and-go drinks.

The idea is to lure time-starved shoppers who want to pick up a few items or a fast meal without wandering long grocery aisles or paying restaurant prices.

Safeway has opened a smaller-format store in Southern California, and Jewel-Osco is building one in Chicago. Wal-Mart plans to open four “Marketside” stores in the Phoenix area this fall, and Whole Foods Market is considering opening smaller stores.

And here in the northern suburbs of Pittsburgh, the grocery chain Giant Eagle opened a Giant Eagle Express last year that is about one-sixth the size of its regular stores. It has gas pumps, wireless Internet and flat-screen televisions in a small cafe, a drive-through pharmacy and an expansive delicatessen that offers sushi, rotisserie chickens and ready-to-heat dinners. . . . more

Small-Store Grocery Concept Sets Massachusetts Opening

PLYMOUTH, Mass. — The Market, a 14,000-square-foot grocery store its developers say is a “state-of-the-art” store taking advantage of the trend toward smaller stores specializing in fresh foods and essential groceries, is set to open here next week, published reports said. The store was conceived by the developers of Pinehills, a planned community here, and Michael Szathmary, a founder of the Nature’s Heartland natural food stores that were bought out by Whole Foods Market in 2000. The grand opening is set for Sept. 17, the Boston Globe reported.

Source: SuperMarket News

Supermarket Chains Narrow Their Sights

ONE of the biggest brand names in food this summer doesn’t carry a trademark. It’s the word “local,” which has entered the language as a powerful symbol of high quality and goodness.

Supermarkets are beginning to catch on that stocking corn and tomatoes grown nearby is not enough for customers. Now they are competing with farm stands and farmers’ markets for a wider variety of fresh fruits and vegetables.

It’s been a boon for local farmers. Ten years ago local produce was devalued at the wholesale Hunts Point market, said Lyle Wells, whose family has been farming on Long Island since 1660. “Now you can’t get enough of the stuff.”

Last month Wal-Mart announced that it plans to spend $400 million this year on locally grown produce, making it the largest player in that market.

“When Wal-Mart makes a major effort to reach out to local food systems, it’s a major signal,” said Gus Schumacher Jr., a consultant to the nonprofit Kellogg Foundation and a former Massachusetts commissioner of food and agriculture, who has worked to introduce farmers to restaurateurs and retailers since the 1980s.

Some independently owned, small-to-medium-size chains have been selling extensive lines of local seasonal fruits and vegetables for years, lines they are now expanding.

For the largest supermarket chains, though, where for decades produce has meant truckloads transported primarily from the West Coast, it’s not always easy to switch to the farmer down the road.

But soaring transportation costs, not to mention the cachet customers attach to local food, have made it more attractive not just to supermarkets but to the agribusiness companies that supply them.

Growers like Dole and Nunes have contracted with farmers in the East to grow products like broccoli and leafy greens that they used to ship from the West Coast. Because of fuel costs, in some instances the cost of freight is more than the cost of the products.

“There is a huge shift,” said Brian Nicholson, an owner of Red Jacket Orchards in Geneva, N.Y., who has also become a distributor for local farmers. “Wholesalers and retailers no longer say, I can get it cheaper from out West.”

Some supermarket chains are allowing farmers’ markets to take over part of their parking lots on certain days; others have put a farmers’ market right inside the store.

But not all chains are there yet. “The whole commercial value of local is just now being appreciated by retail,” said Bill Bishop, chairman of Willard Bishop, retail marketing consultants in Barrington, Ill. “It’s a little bit behind the curve.”

Hannaford Brothers, with 165 stores in New York, Vermont, New Hampshire, Maine and Massachusetts, has always sold local produce, but in the last two years its customers have pushed it to offer more. “There’s been a 20 percent increase in sales” in the last year, said Michael Norton, a company spokesman. “Our research tells us consumers have about five or six reasons for wanting local: freshness and taste; keeping farmland in the community and having open spaces; a desire to be close to the food source and know where it comes from; support of local farmers and keeping money in the community. Embedded in all of this is concern about food safety. All this creates pretty powerful interest.”

Will Wedge, director of produce for the chain, said that in company surveys, “82 percent of all customers told us loud and clear, locally grown produce tastes better. We have over 200 farmers selling over 50 different commodities, primarily from June through September.”

Wegmans Food Markets, a 71-store chain based in New York with locations in Pennsylvania, New Jersey, Maryland and Virginia, has been buying from local farmers for the last 20 years. Today it has 800 farmers and has also experienced a 20 percent increase in sales of local produce over the past year. “There’s a real emotional connection with local,” said Dave Corsi, vice president for produce.

Mr. Corsi said that in order to buy from local farms, the chain had to stop acting like a chain. “We don’t control these relationships centrally — the produce manager in each store does this directly,” he said. “We only guide the stores.”

The King Kullen Grocery Company, with 45 stores, all but one on Long Island, has become famous for its local produce, but it took a while. Tom Cullen, a vice president of the family-owned chain, said the company started to buy from local farms 12 years ago but it didn’t work out because neither the quality nor the supply was consistent. “It’s taken years to build trust with farmers,” he said.

Some of the early attempts by retailers have shown that local does not always mean better.

In New York last week there was no discernible difference between blueberries from New Jersey and those from California at Food Emporium, both priced the same. Jersey tomatoes at Whole Foods were barely more flavorful than those from away. Packaged plums and apricots at both stores were hard as rocks, and the corn was not really fresh.

Mr. Bishop said he wasn’t surprised. “Part of being new means not completely perfected. To a significant number of shoppers it seems logical that local has the connotation of being fresher and better tasting, but it isn’t necessarily so.”

Several companies and nonprofits are working to put farmers and supermarket executives together to iron out the kinks. A major focus of Karp Resources of Southold, N.Y., is how to re-regionalize the food system.

“Regional agriculture systems in the Northeast, mid-Atlantic and Southeast are really quite broken,” said Karen Karp, the president of the company. “Small farmers can sell direct, but there is no infrastructure for middle-sized farmers to get stuff into supermarkets.” There are no warehouses, limited trucking facilities and few distributors.

These growers are used to picking the zucchini and bringing it to a stall at a farmers’ market. In order to sell to grocery stores, they have to learn pricing, invoicing and ordering systems as well as post-harvest handling techniques that include chilling, sorting and grading for size and color.
Big retailers have even more work to do. Used to making just a few phone calls to large produce distributors, often thousands of miles away, they do not have the setup or the personnel to deal with individual farmers who deliver to the back door.

Some of them are reluctant to do so and small farmers either have to join a co-op or find a distributor who can deliver to the supermarket’s warehouse.

The chains also have to change their purchasing practices to make room for seasonal local produce instead of being locked into a year-round contract with one source in order to insure the lowest prices.

“It takes innovation and reallocation of resources,” said Mr. Nicholson of Red Jacket Orchards. “It takes passion, and patience to get good collaboration. They have to be willing to spend more money because it’s costlier buying from small growers.”

Ms. Karp said: “If retailers want to deal with these farmers they can no longer push all the risk about food safety and quality assurance back on the individual farmers, who can’t bear those costs.”

Joe Casa, owner of Harbor View Foods, on Long Island, knows the difficulties firsthand. Mr. Casa’s company helps growers and markets communicate, telling stores what is ripe in the fields and telling farmers what produce managers will buy. After he convinced some East End farmers to grow extra produce for the Great Atlantic & Pacific Tea Company, which owns Food Emporium, Pathmark and Waldbaum’s, the process stalled. “It’s hard to make things happen at A.&P., to get approval from top management,” Mr. Casa said. “I told them I had stuck my neck out to get farmers to grow extra stuff for them, but I couldn’t get an answer from them.”

The impasse was resolved when the Long Island Farm Bureau called Senator Charles E. Schumer and told him that a number of farmers might be stuck with unsold produce. He agreed to intervene and soon enough the senator and the chain held a press conference to announce that Long Island produce would be available in some of its stores.

Despite the difficulties, many in the food industry believe the demand for local food is here to stay. “It’s going to be a way of life,” said Matt Seeley, vice president for marketing of the Nunes Company, which sells Foxy brand vegetables. “I don’t think there is any turning back.”

Source: New York Times

Gas. Food. Savings.

With prices soaring, grocery chains compete for customer loyalty by offering incentives that ease costs at both the pump and the checkout counter

With the economy struggling and gas and food prices escalating, grocery stores are aggressively competing for price-conscious shoppers.

Several chains are offering a discount at the pump when customers buy groceries. Some stores also are trying to lure shoppers with deep price cuts on everything from ice cream to coffee.

And it's becoming increasingly common to see coupons offered only on store websites and discounts you can only find in a grocery flier in the newspaper or by mail.

These are the latest tactics grocery stores are using to compete for customer loyalty at a time when shoppers now are paying near record prices for food and fuel.

Gas prices are near all-time highs and food prices have skyrocketed 5.3 percent from a year ago, the fastest increase since 1990.

John Rand, a grocery store analyst with Cambridge-based Management Ventures Inc., said New England has lagged behind other parts of the nation in gas discounting programs.

He also noted that many grocery store chains are moving toward a pricing model that shuns big-sale discounts in favor of lower everyday prices.

The message the stores are trying to send to consumers, Rand said, is that they can count on their overall shopping trip being less expensive than it had been.

"It's a good message to be putting out in this economic time," he said. The Boston area is "not a low-price market, but it is a more competitive market now."

As a result, some chains, such as Shaw's, Stop & Shop, and Price Chopper, are trying to entice customers by offering discounts at gas stations based on how much a shopper purchases at the grocery store.

The discounts can add up, typically accumulating at 10 cents a gallon for every $50 spent.
Shaw's, which started its program offering discounts on fuel purchased at Irving Oil stations in New Hampshire, has since expanded to Massachusetts stores in Worcester County and in suburbs north and south of Boston.

Stop & Shop, with some 70 stores with their own gas stations in New England, is offering discounts on its own brand of gas. And smaller Price Chopper, which has several Central Massachusetts locations, is partnered with Sunoco.

"Food and fuel go hand in hand," Shaw's spokeswoman Judy Chong said. "They have to buy food and they have to buy gas. If they can save doing both, they're compelled by it."

Shopper Kim Schoen of Worcester agrees. The mother of four said she found her grocery bill is always bigger at Shaw's and Stop & Shop, so she became a regular at Price Chopper.

Then she got hooked. She said that after several trips for groceries, she recently took her minivan with an empty tank and filled it after getting a $2.20 a gallon discount.

"I didn't go there because of the gas," she said. "The gas just became a factor to make me stay." But the gas discount isn't the only way stores are trying to convince customers that it's better to come inside their stores.

Stop & Shop said it has or will cut prices on items in 70 percent of the categories in its stores - moving away from a pricing model that favored higher prices and the enticement of big markdowns for sales.

In May, Stop & Shop dropped prices on 40 types of ice cream cones and toppings.
Other price cuts include frozen food, cereal, and coffee, the company said. And the company is extending some of its seasonal price cuts.

For example, the chain is putting Gatorade products on sale for the entire summer - compared with the more traditional week-long sale.

In the already competitive world of grocery stores, creating a feeling that you're offering a better deal than your rival is huge, said Jim Dwyer, chief business development officer for Ahold USA, which owns Stop & Shop.

"That's become even more important as the economy has softened a little bit," he said. "There's no question that's in response to the way things have been going."

Another change showing up at some Stop & Shop stores is a handheld price scanner that shoppers can pick up at the front of the store.

They can use the scanner to check prices, scan an item from the shelf into a grocery bag, and, with a running tally, pay based on what they've scanned - avoiding checkout lines.

Over the last few months, Dwyer said the scanners have been slowly rolled out across the chain and are now available at 92 of the 350 or so Stop & Shop stores.

About 60 scanners are typically available at each store. Dwyer said consumers have quickly embraced the program, particularly the heaviest shoppers.

In addition to helping shoppers stay within their grocery budget, Dwyer said the scanners are "a very fast way to get through a store."

Hannaford, which has been promoting itself as a low-price supermarket, took a tack similar to Stop & Shop, dropping prices on 1,500 items following the "everyday low price" model made famous by Wal-Mart.

Spokesman Michael Norton said the company avoids gimmicks (although it did give away a car in the spring in a promotion) and doesn't even offer a discount card - something that is common to most chains.

He noted that incentives being offered by other merchants to customers who used their economic stimulus checks for groceries was an example of something Hannaford would not do.
Hannaford, Norton said, has tried to show shoppers its prices are competitive.

For instance, it has a $10 meal promotion that offers recipes for four that always come in under that magic number, including shrimp scampi, or grilled pork sirloin with vegetables.

"They want a good value and they want to get in and out quickly," he said. "Nobody knows how long this environment is going to persist," Norton said.

Even so, not every grocery shopper is swayed by store pricing and marketing gimmicks.
Lorena Dias of Arlington has another reason for shopping at her local Stop & Shop. "It's convenient," she said.

Source: Boston Globe

Private Label, Loyalty Programs Boost Kroger

A reliance on value products and promotions have led to record earnings at The Kroger Co., executives said at the company’s first quarter conference call. The expansion of private-label products and promotions to help cash-strapped customers led to net earnings of $386 million, compared with $336.6 million last year. Total sales increased 11.5% to $23.1 million. Identical-supermarket sales increased 9.2% with fuel and 5.8% without fuel.

“Kroger’s performance during the quarter demonstrates the resiliency of our ‘customer first’ strategy,“ said David B. Dillon, chairman and CEO. “Our latest customer research indicates the two biggest concerns on shoppers’ minds today are high gas prices and food costs. These two factors are driving some of the behavior changes we are seeing lately, such as shoppers combining trips and actively pursuing gas discount offers.”

The company has spent more than a year expanding its private label product line, and also has expanded its generic drug program to include 90-day supplies for just $10. Shoppers also can receive up to $120 in free groceries when buying Kroger gift cards, and discounts on gasoline as shopper rewards. Kroger is on track to open, expand or relocate 70 to 80 stores, and complete between 175 and 200 store remodels during fiscal 2008. Kroger operates 2,474 supermarkets and multi-department stores in 31 states under two dozen local banners, including Kroger, Ralphs, Fred Meyer, Food 4 Less, Fry’s, King Soopers, Smith’s, Dillons, QFC and City Market, as well as 778 convenience stores and 392 fine jewelry stores.

Source: GlobeSt.com

Supermarkets Could Pick Up $2 Billion From Stimulus Spending

NEW YORK — Goldman Sachs here estimated that supermarkets could pick up 7% of the stimulus checks the government will issue next month, or close to $2 billion during the second and third quarters.

"Although $2 billion is only about 0.3% of overall supermarket consumption, it could bolster comps at a time when food inflation is dampening demand," according to a Goldman Sachs research report entitled Independent Insights, which asked 2,500 U.S. consumers how they plan to spend their rebates. The report said the amount spent at supermarkets could be higher than the $2 billion projected if cost pressures on essentials like food and gas drive a higher proportion of spending into non-discretionary outlets," or if the percentage of tax check dollars spent is greater than expected."

Goldman said it believes Kroger will be a big beneficiary of the spending because the amount of tax checks will be greater in the Southeast and Midwest, which are Kroger strongholds, and because Kroger is offering a 10% bonus if shoppers cash the checks at its stores and put the money into a Kroger gift card, a program Supervalu is also offering.

Source: SuperMarket News

Stop & Shop to Open Maine In-Store Bank Branches

QUINCY, Mass. — The Stop & Shop Supermarket Co. here, part of Ahold USA, said yesterday it has made an agreement with People’s United Bank, Bridgeport, Conn., for in-store bank branches in its stores in Maine.

Stop & Shop now has one store in Kennebunk, which opened last year, and the bank branch will open in June. People’s recently acquired Chittendon Corp. in Maine, which operates three banks: Maine Bank & Trust, Merrill Bank and Ocean Bank. The Kennebunk branch will be an Ocean Bank.

“Today, 75 of our 162 Connecticut branches are located in Super Stop & Shop stores, providing our customers with superior convenience and helping us deliver an unparalleled customer experience,” said Robert R. D’Amore, senior executive vice president, Retail and Small Business Banking, People’s United Bank.

“Jointly, People’s United, one of our first in-store partners, and Stop & Shop have identified the synergies of convenience and volume that exist for our customers who may shop and bank in the same trip,” said John Hernon, vice president of leasing and asset management for Stop & Shop. The retailer hasn’t announced plans for future Maine stores.

Source: SuperMarket News

SuperMarket News Top 75 North American Food Retailers

Boosted by acquisitions, new-store development, inflation and same-store sales growth, 2008’s SN Top 75 posted $830.19 billion in sales, up about 4.26% over the year-ago total of $796.29 billion.

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Here's a list of the top 25. See the original article for the entire list.

1. Wal-Mart Stores
2. Kroger Co
3. Costco Wholesale Corp
4. Supervalu
5. Safeway
6. Loblaw Cos
7. Publix Super Markets
8. Ahold USA
9. C&S Wholesale Grocers
10. Delhaize America
11. 7-Eleven
12. Sobeys
13. Meijer
14. H.E. Butt Grocery Co.
15. Metro
16. Wakefern Food Corp
17. A&P
18. Dollar General Corp
19. BJ's Wholesale Club
20. Winn-Dixie Stores
21. Giant Eagle
22. Whole Foods Market
23. Trader Joe's Market
24. Albertsons LLC
25. Aldi

Korean Chain Plans Eight New U.S. Stores

LYNDHURST, N.J. — H Mart, a South Korean-owned chain of high-end Asian supermarkets here, is pursuing an aggressive expansion plan this year, with eight stores scheduled to open across the United States. The chain, which currently operates 24 U.S. stores, plans to open single units this year in New York, California, Virginia, Texas, Nevada and Massachusetts, and two units in Georgia. “We want to open more stores in areas where there are a lot of Asian people or people who love Asian food,” Jimmy King, marketing manager, told SN. H Mart stores range from 15,000 to 90,000 square feet, with most locations in the 50,000-square-foot range, King said. Depending on size, stores carry between 20,000 and 40,000 SKUs, he added. See Page 1 of the April 14 print edition of SN for more.

HMart is planning to open it's first New England store shortly in Burlington, MA.