THRIFTY SETS PACE IN FRESH FORMATS

DAVID KOSUB

VICTORIA, British Columbia -- "Significant erosion of center store sales to the big-box formats" is changing battle lines in the Canadian supermarket industry, said Grant Burke, vice president of consumer goods for Thrifty Foods in British Columbia.

He said lower prices and the convenience of one-stop shopping are just too enticing for customers to ignore. The challenge facing both conventional stores and fresh format stores like his is to differentiate themselves from the discount stores and supercenters by stressing quality.

And fresh, he adds, "is really where you've got to focus to differentiate yourself."

Thrifty Foods' fresh approach, said Burke, has been to build destination departments within categories and departments. Take cheese, for example. By creating circular islands within the deli area and staffing them with people who are expert in cheese, Thrifty has been able to deliver a degree of service that discounters and supercenters by their nature cannot offer. And that can make a world of difference to a customer who doesn't know which type of cheese to serve with a cabernet, for example.

"Fresh-box formats are trying to differentiate themselves by providing the service and the freshness that the other guys in the big classical super store format can't really provide. And that's where the growth of the business is."

The proof? How about 50% growth in sales over five years to annual sales of $450 million Canadian. Thrifty Foods' success demonstrates, noted Burke, that the fresh box can supplant the conventional supermarket as the place people want to shop and make a serious bid to draw consumers away from the discount and super stores.

Thrifty Foods' growth is also underwriting an aggressive capital plan to expand beyond its current chain of 17 fresh stores on Vancouver Island and transplant its offering across the Strait of Juan de Fuca to Vancouver and other cities within B.C.'s Lower Mainland.

And the move to fresh formats generally may not stop there, said Burke, who envisions an overall evolution in the Canadian industry to the fresh-box format.

One indicator of the importance the fresh format is enjoying in Canada could be the zeal with which "conventional" supermarkets like Safeway Canada are building fresh components into their formats. It's always difficult to balance customer expectations, said Dave Ryzebol, vice president of public affairs, but Canada Safeway's introduction of its Signature Salads and a newfound commitment to healthy lifestyle choices make it competitive with the fresh formats.

"When it comes to fresh and fresh produce, we have some of the best contacts in North America right to the farm level," Ryzebol said. "We're making sure that we're getting exceptionally good quality produce, better than our competitors."

That's an important message for Safeway customers. With 16.3% growth and more than $4 billion Canadian in sales last year, Canada Safeway's challenge is to ensure its 215 stores, mainly in western Canada, remain relevant in a market increasingly drawn to the fresh formats.