TAMPA, Fla. -- Partnering with branded-concept suppliers can give retailers a jump start in the meals arena, significantly increase foot traffic, and rack up impressive sales and profits.
That's what two supermarket executives told attendees at the Food Marketing Institute's MealSolutions '98 show and conference here, October 4 to 6.
The two officials -- Tom Roesener, vice president, operations, Clemens Markets, Kulpsville, Pa., and Todd Hazard, director of operations, Norkus Food Town, Neptune City, N.J. -- were panelists in one of several educational seminars at the FMI event. They shared the podium with two of their supplier partners: Rocco Fiorentino, vice president, business development, Manhattan Bagel Co., Eatontown, N.J., and Kevin Barton, marketing manager, Advanced Fresh Concepts (AFC) sushi, Compton, Calif.
Hazard said that Norkus Food Town's linkup with Manhattan Bagel gave the two-unit, family-owned company an easy start in the meals business. But that's not all; the profits are attractive, too, he said.
"We lost some sales in bakery, but gained a profitable department," according to Hazard. "Even though the payroll is high because it's a union department, it's the largest gross profit center in the store. It runs over 60%."
He said the reason Food Town sought partnerships with Manhattan Bagel and AFC was to speed up the process of giving customers what they want, build sales and increase morning traffic.
"We're a small company, but we're in a very competitive market," Hazard noted. "Our strategy was to deliver convenience, quality and variety, but we didn't have the time, resources or capital to invest to create specialty concepts like these.
Clemens' Roesener said his company's goal in partnering was to give itself a competitive edge with recognized brands.
"We're in the three highest-income counties in Pennsylvania, and we found through market studies that the consumers there want top quality and variety," Roesener said. "We hired an outside agency to evaluate the market, and that has helped us position the right partners in our units."
Roesener explained that Clemens Markets, after building a central commissary to help it cope with the accelerating meals trend, saw a need to get going faster -- and looked to branded concepts for a push. It worked.
"Five years ago, we built our 17,000-square-foot commissary because we saw where the meals business was going," he said. "Then, about two years ago, we started with Manhattan Bagel and Bucks County Coffee at our Quakertown store. The brand equity they bring is great. Our customer count is up 13.12%, and store sales are up 7.1%.
"The brands bring foot traffic up. The average customer is coming into the store three or four times a week now, instead of two times a week," he added. Sales at the Manhattan Bagel unit in that store are hitting between $6,000 and $7,000 a week, "and that's compared to about the $2,100 we were doing in bagels previously.
"We've captured customers who were previously stopping at their local convenience store for bagels and coffee."
The 16-unit, family-owned chain now has Manhattan Bagel operations in four stores, with three more under construction. And Bucks County Coffee bars are operating in seven of the chain's stores. In addition, Clemens has added sushi bars operated by AFC and its own proprietary brand pizza, L.A. Pizza.
Manhattan Bagel has strong brand recognition in the three-county area the Clemens units are in. So does Bucks County Coffee, Roesener pointed out. "Bucks County Coffee has brand recognition in the Philadelphia area [where Clemens units are located] that's equal to Starbucks on the West Coast," he claimed.
"We at Clemens feel that these brands bring equity to our market, and they help us make a complete meals-solutions plan," Roesener said. And the Manhattan Bagel units, which serve to send a quality message to the consumer, have helped increase sales at Clemens' in-store bakeries.
The company will add a locally known brand of upscale bread and rolls in selected stores later this fall.
"The branded concepts have definitely put us ahead on the meals curve," Roesener said. Clemens also has a large selection of prepackaged, chilled meals components -- fresh from its central commissary -- in all its stores.
Manhattan Bagel offers a variety of ways that retailers can partner with it. The most common are licensing and franchising agreements. Where space is limited in the retail store, Manhattan Bagel will supply branded, self-service display cases that are supplied by local franchisees, Fiorentino pointed out.
"In fact, the flexibility we offer is the key to our nontraditional [site] strategy," Fiorentino said.
At this juncture, Clemens Markets is in a licensing agreement with an outside franchisee to operate Manhattan Bagels in its stores, but will probably tackle running the next one itself, Roesener said.
Advanced Fresh Concepts enters into straight licensing agreements with its retailer partners, AFC's Barton said. Basically, the retailer is the landlord and AFC pays rent, which is typically a percentage of sales.
"The major benefit is the profitability it offers the retailer," Barton said. "There's a guaranteed profit, but also, the sushi bar creates animation, an upscale image, and could make the store a destination."
Both Norkus Food Town and Clemens Markets have agreements with AFC. The retailers offer a refrigerated, self-service case with a work area behind it, and AFC supplies the labor and sushi materials.
Hazard said Norkus Food Town's AFC sushi bar generates 1% of total store sales, "and we're able to obtain 20% of those sales."
In addition to the value and brand loyalty these partnerships bring to the retailers' stores, the arrangements have been an educational experience, Roesener and Hazard noted.
"We've learned from them that we have to operate [food-service] programs as stand-alone businesses," Roesener said.
He emphasized that the addition of brands is just a part of Clemens' plan to give customers what they want. "We've hired an executive chef, a food-service manager and a food-service merchandiser in the last two years," he said, pointing out that the company is committed to the meals business.
"We've learned to keep our eye on the customer. We've done numerous focus groups to see what we can add, and we're always looking for the right partners."
Manhattan Bagel and AFC both are continuing to see growth of their businesses within supermarkets, Fiorentino and Barton said. Retailers who have partnered with Manhattan Bagel include D&W Food Centers, Grand Rapids, Mich.; H.E. Butt Grocery Co., San Antonio; Kroger Co., Cincinnati; and Weis Markets, Sunbury, Pa. Manhattan Bagel also operates 310 stand-alone stores.
AFC was launched specifically to offer sushi bars in supermarkets, Barton said. The company now has units inside more than 400 individual stores across the country, including select units of Ukrop's, Richmond, Va., and Wegmans Food Markets, Rochester, N.Y.