ANCHORAGE, Ala. -- Mark R. Williams, president and chief executive officer of Carr Gottstein Foods Co. here, knows that a way to a shopper's heart is through the stomach.
So while the retail newcomers to Alaska, including mass merchandisers and specialty retailers, may have gobbled up his general merchandise profits, Williams' company is concentrating on perishables -- specifically, prepared foods and bakery products.
"Anybody can sell a can of Del Monte beans, because you can't differentiate yourselves unless you price it differently. You can add value in perishables departments that nobody else can," said Williams in an interview with SN.
"We've taken the box and we keep massaging the inside by adding departments like sushi bars or whatever it is that differentiates us from everybody else," Williams said. "We think the installation of new, nontraditional supermarket departments is going to keep our stores moving on that integrated edge."
Although the chain has long been known for an extensive showing of prepared foods and vast produce departments, it was also once a big dealer in nonfood.
That ended when competitors opened some 1.5 million square feet of retail space within the last year, compared with Carr Gottstein's existing 900,000 square feet.
Williams told SN he realized differentiation was the key to regaining lost market share. He went on the offensive, targeting consumers where they eat.
The strategy is taking shape at one of Carr Gottstein's units under remodeling, a 35-year-old store in the Anchorage area. Plans call for a new central kitchen and bakery to be added on to the building.
As things stand now, individual stores prepare most of their own food-service offerings. The central facility, however, will make goods for at least the chain's Anchorage-area stores, resulting in considerable savings in labor when it is opened in the first or second quarter next year, Williams said.
"The central kitchen is going to do a lot of the background prep work," he explained. "We're chopping a thousand pounds of fresh carrots every day in every single store. We can take that work into a central facility and buy a piece of equipment that does a thousand pounds an hour."
The store, one of the chain's highest volume units, will also be retrofitted with an Orient Express restaurant, an expanded produce department and a bank, each of which are popular in other locations.
Carr Gottstein also is installing a new bagel program in a store in the Anchorage market. Customers will be able to shop for freshly made bagels and watch as the store's staff makes them.
The product's healthy image meshes nicely with the state's young, fitness-oriented residents, Williams said.
"If you want them fresh, you've got to make them in Alaska. Fresh bagels will be something that will differentiate us from our other competitors," he said.
In the initial stages of the program, the bagels will be stored in bins behind a service counter. Later on, Williams will consider packaging them by the half-dozen in a plastic sleeve.
Depending on factors such as the number of turns and the product's freshness, the chain will determine how to roll out the program from its initial unit to other stores -- whether to source them from a single store or install bagel-making equipment in all stores, for instance.
Williams said the company will be using a new production technology to replace the traditional bagel boiling process, but he would not elaborate.
Obviously, Carr Gottstein is not afraid of breaking new ground in food service. But Williams admitted the company has made some errors in judgment, such as its Taco Express restaurants, which were installed about two years ago and then taken out after a year.
"We were not able to attract a unique customer for the Taco Express. We cannibalized other food-service departments by putting it in," he recalled. "Everybody tries stuff that doesn't work. If you're not trying stuff that doesn't work, you're not trying hard enough."
Carr Gottstein's commitment to its various fresh food programs is what usually makes those programs so successful, he said.
"People think they do sushi because they put eight containers of sushi out. You've got to make a commitment to the department, like we do, if you're going to convince people you know what you're doing. You can't kind of halfway do it."
When Carr Gottstein decides to get involved in a project, it pulls out all the stops, he added. In floral, for instance, the company flies in Dutch flower arrangers to train its department employees, as well as interested consumers.
"Because of the way you present your floral people and the floral department, you make a commitment to people," he explained. "We have convinced the population that we've got quality floral. We do weddings and all of that."
The chain sharpened its emphasis on perishables, particularly after mass merchandisers and specialty retailers began invading its markets about a year ago.
The company has seen 12 competitive store openings in less than a year. Toys "R" Us, Wal-Mart, Sam's Club, Sports Authority and Kmart moved in. Fred Meyer built three new stores and added food to two existing Alaskan units.
Up until this year, some 25% of Carr Gottstein's business could be attributed to nonfood. But in the latest competitive climate, the company has reconfigured its general merchandise departments and simultaneously expanded the perishables offerings in about half its locations.
The company cut out some 40% of its toy offerings and completely eliminated its audio departments. At the same time, it expanded its video rental departments, greeting cards and cosmetics in some locations.
The chain's large-format Carrs Quality Centers are central to its fresh food strategy, characterized by their plentiful food-service offerings. The Juneau store, opened in March, is a good example. The unit boasts a sushi bar, a bakery, a Le Cafe in-store restaurant, a salad bar, seafood and meat departments and a produce department, as well as organic produce and all-natural grocery items. The store also has a pharmacy, floral and video departments, a Bank of America branch and the Oaken Keg liquor store.
"We expanded on our opportunities -- what we see as weaknesses in our competitors' setups," Williams explained. "We built Juneau to make sure the competitive presence didn't take away the market share we'd enjoyed before."
It is a challenge to operate in a place where the median age is 29 and a fully developed infrastructure is lacking, Williams said. Alaska's vastness makes it even tougher. The distance from the Aleutian Islands to Juneau is about the same as the distance from Long Beach, Calif., to Raleigh, N.C.
"I think anybody looking at the marketplace would say there are a lot of places I could go and be more successful than I can up here," Williams said.
Two of Carr Gottstein's saving graces, on the other hand, have been its familiarity with the Alaskan consumer and its efficient distribution operation -- both of which give the chain distinct advantages over the operators from the lower 48 who have moved up into the market.
National chains make their first mistake when they set their Alaskan stores the same way they set their stores in southern California or metropolitan New York, he said.
"The in-stock positions [between us and our competitors] are very different. We run over 98%. They can't even get close to that," he claimed. "How many times will you go somewhere where you can't get everything on your list?"
Their second mistake is trying to operate in such a remote state without a local distribution center. Chains that are shipping out of the Pacific Northwest could wait anywhere from five to nine days for a load. For companies like Wal-Mart and Kmart that are both shipping from California, it takes even longer.
"If the weather changes, and, as you know, you've always got the wrong stuff at the time that happens, you can't wait a week to get it in. That's not responsive. I order at six in the morning and get [a shipment] that night at six o'clock," he said.
He acknowledged, though, that it has taken the company a long time to be able to accomplish such a feat.
Williams said he is especially proud of the quality and variety of the produce the chain is able to consistently carry in its remote operating area, yet another factor he says puts Carr Gottstein ahead of the pack.
"I'd put our produce up against anybody's in California, and they're growing the stuff right down in southern California. We fly a lot of stuff in from Israel or Holland or Australia. We have strawberries when nobody else does," he said.
He said he hopes other supermarket operators will realize that the best way to steal share back from competitors is to do just as Carr Gottstein has done -- emphasize fresh foods.
With people eating out more and more these days, it is even easier for supermarkets to be successful. A whole new world of opportunities is open to them.
"People are becoming more convenience-oriented," he said. "I think supermarkets that don't have an expertise in food service are losing share, because if they don't have a good roasted chicken, consumers are going to go to Boston Market or KFC."
He urged grocery retailers to capitalize on the shift to convenience foods. "In some sense, some of the supermarket industry refuses to recognize it. They'd like to change it," he said. "When supermarkets develop that expertise [in food-service departments], they'll develop bigger draws in terms of their customer bases."
