BATON ROUGE, La. -- Co-branding takes on a new dimension in a three-way deal between wholesaler-distributor Associated Grocers here, its retailer-members and a popular local cafeteria chain.
In a move that gives life to the adage, "If you can't beat them, join them," Associated Grocers entered an agreement with Piccadilly Cafeterias here earlier this year on behalf of its 230 retailer-members in Louisiana, Mississippi and Texas, that grants its retailers the exclusive right to link up with the cafeteria chain.
The first manifestation of that partnership, a Piccadilly Express operation inside a supermarket, opened May 21. The store is a Hi Nabor on Jones Creek Road here, where the in-store cafeteria -- and the concept of co-branding with a well-known food-service operator -- is proving a success, according to the executives involved.
"We're looking at the reality of what's happening in the marketplace today," said J.H. "Jay" Campbell Jr., Associated Grocers' president and chief executive officer.
"Consumers are looking for meal solutions, and for something they can rely on. And this agreement gives our retailers a golden opportunity to offer a known commodity inside their stores," Campbell said.
A large sign outside the store announces Piccadilly's presence inside, as does a line every week in Hi Nabor's ad circular.
The project is Piccadilly's first partnership with a supermarket. The company has freestanding cafeterias from coast to coast across the southern United States.
Campbell told SN the project was spurred by his company's interest in Home Meal Replacement, which along with virtually everyone else's in the industry, has heated up over the past year. But branding, in this case, is a major key to the successful partnering venture, he emphasized.
"If we had just opened 'Joe's Sandwich Shop,' it wouldn't have the impact Piccadilly does," Campbell said. He added that the cafeteria chain, with a strong presence here, has been dear to the hearts of Southerners for years.
"They're known for providing quality cooked food day in and day out. How many supermarkets can you say that about?"
Sam Crifasi, owner of the three-unit Hi Nabor here, said he is also convinced the name, the quality and the consistency that Piccadilly offers his operation is a distinct edge in a very competitive market.
"People around here know them for quality and consistency. Piccadilly just does a great job," Crifasi said.
"I'm the first to say they do hot food better than we did. In one of their cafeterias, they're so busy after church on a Sunday you have to stand in line 30 minutes to get your food. That's how popular they are."
The new Piccadilly Express in Crifasi's 50,000-square-foot store is a trimmed-down version of the popular, freestanding Piccadilly Cafeteria format. It supplants a limited hot-food program that Hi Nabor had previously operated on its own in the store, which is Crifasi's largest.
Checks at Piccadilly Express are running between $5 and $6, which compares favorably to the prices for the lunches in Hi Nabor's former program, which went for $3.99.
Some customers have complained about the price difference, but Crifasi said that, by and large, they seem to appreciate the added value of having Piccadilly in their Hi Nabor store.
"Our customers love having Piccadilly right here, and it has absolutely increased our traffic," the retailer said. The Piccadilly Express is pulling 3,000 new people a week into the store, Crifasi said, and he estimated that up to 20% of that 3,000 a week are becoming regular Hi Nabor shoppers.
What's more, Crafisi said he expects that percentage to increase. And the new Hi Nabor customers increasingly extending their visits. "At first, they were just picking up maybe bread and milk on their way out. Now they're buying more."
Crifasi said total checkout tallies have slowly, but steadily, increased to 10% since the installation of Piccadilly Express.
The agreement Associated Grocers struck with Piccadilly prevents the 130-unit cafeteria chain from going into such a partnership arrangement with nonmember supermarkets in AG's market area.
Crifasi said such an exclusivity agreement is particularly meaningful in Hi Nabor's territory, where independent retailers are up against stiff competition from the likes of Wal-Mart, Kmart, Albertson's and Super Fresh.
"We have an Albertson's next door and a Wal-Mart Supercenter about a mile down the road. Piccadilly gives us an advantage; it's something the others don't have. And now I even see Albertson's employees coming in here to eat," Crifasi said.
While Crifasi's Hi Nabor unit is the first of Associated Grocer's members to get a Piccadilly Express, a second facility is set to open this month in inside The Natchez Market, an AG member based in Natchez, Miss. Another 20 Piccadilly Express installations are projected in the next 18 months, said Campbell at Associated Grocers.
"The level of interest [from retailers] has been very good," Campbell said. "But the final decision is Piccadilly's, as to whether or not they want to enter a particular market."
He said that for Associated Grocers, the deal made with Piccadilly offers increased customer traffic in its members' stores. "Anything we can do that helps our member stores to be more competitive and makes their customers' shopping experience more pleasant, helps us," he said.
He added that co-branding ventures such as this one also improve the image of the independent grocer in particular, Campbell said.
"I think there has always been a perception problem when it comes to the independent," he explained, with consumers often thinking that small independents won't be able to compete adequately with the large supermarket chains and mass discounters. "But that is untrue, and co-branding can help lift that perception."
The agreements between independent retailers and Piccadilly are lease arrangements based on a percentage of sales.
"It's a win-win situation for everybody. The store participates in the growth of Piccadilly's operation and at the same time its overhead is covered by the base rent," Campbell at Associated Grocers said.
Associated Grocers began to look more deeply into HMR options for its members after the Food Marketing Institute's MealSolutions conference in Phoenix last year.
Campbell said he and other AG representatives who attended that conference were particularly fired up by Ira Blumenthal's comments there. Blumenthal, president of Co-Opportunities, Atlanta, a consulting and marketing firm that works primarily with manufacturers and the food-service industry, had presented the keynote address at the conference.
"Ira threw out so many ideas, so many options, that he forced us to take the changes in the market a little more seriously and caused us to focus more attention on helping our stores provide meal solutions for their customers," Campbell said.
The Hi Nabor unit here provided an ideal launch pad for the joint venture, said Warriner Siddle, director of development for Piccadilly.
"Hi Nabor is a good, well-run store and it's in a desirable location -- a large residential section with enough commercial traffic to support lunch. It's one of the fastest-growing areas of Baton Rouge," Siddle said. "It's also a good spot for a pilot store because it's near our home office."
The merchandising focus of Piccadilly Express is hot food to go, but Siddle said he had not expected that so many people would want to eat in-store; while he had estimated only 5% would eat-in, at least 15% are doing so. Currently, the Hi Nabor Piccadilly Express provides seating for 24 people, but that's soon to be doubled.
"From the first day on, I've been surprised at the number of people who buy their lunch and then sit down to eat it. I guess they want to relax away from their work," Siddle said.
The Piccadilly Express in Hi Nabor offers nine entrees and nine side dishes daily. The products are made from scratch on site and served hot. Salads are also offered daily from an 8-foot service counter. A hot meal with two side dishes, a salad, rolls, and dessert, is about $6.
Homestyle cooking is featured, with a mainstay menu of such items as beef stew, meat loaf and chicken pot pie. A traditional-style special of the day is offered on the same day each week. Sam Crifasi said his personal favorite is Monday's special: Piccadilly's liver and onions. "I've been having that almost every Monday for about the last 25 years," he said.
Piccadilly Express also offers a limited number of items prepacked and chilled in a self-service case.
The chilled, to-go category is made up mainly of soups, chowders and crawfish etouffee in quart containers. Siddle said the chilled menu will be expanded. The chilled items, as well as a vacuum-packed crawfish pie, are made on-site just as the hot food is, he added.