Crowning Achievement

JON SPRINGER

PITTSBURGH — For Giant Eagle, which a year ago quietly launched a discount concept known as Valu King, the timing couldn't have been better. But there's something to be said for the format too.

Valu King, built behind low costs, private-label goods and pallets of brands on deal, has grown to three locations in Ohio, with at least three more on the drawing board, officials said. The first two turned a profit immediately upon opening, according to Jeff Galmarini, a Giant Eagle vice president who helped create the concept. The third, which opened last month in Norwalk, had the same projections as the first two.

“It's a shame that the economy has been so bad but on the bright side it seemed that it was perfect timing to introduce something that customers needed,” Galmarini told SN in an exclusive interview. “That's probably played a role in the success.

“But when people ask me what happens when the economy turns around to what we all want it to be, I tell them it will only make Valu King stronger, because people won't let this happen to them again. People want to find a way to change their lifestyles and save money, not waste it. That's why they're shopping at Valu King.”

Galmarini, a 35-year Giant Eagle veteran whose previous roles at the company included helping to develop its Giant Eagle Express format, said Valu King went from concept to reality quickly in 2008. It grew from the realization that the growth of private-label goods presented an opportunity to create a store format specifically devoted to the offering.

The first location, a 28,000-square-foot former Tops store in Eastlake, opened last December after four months of planning. A second store that opened in July in Ravenna was also a former Tops store left vacant when that chain pulled out of the Cleveland market in 2006. The Norwalk store is a former Giant Eagle location.

Low real estate and occupancy costs are one part of Valu King's success. A low-labor model that doesn't sacrifice service is another, Galmarini said.

“If you can't keep the labor costs down you can't run this concept. And we're finding new ways to do that,” he said.

For example, Valu King offers free bags and bagging for shoppers, accomplished with minimal labor thanks to a carousel-style front-end system. Workers are trained to handle a variety of different tasks in the store, eliminating the need for multiple specialists. All clerks can work a register or stock bananas. Displays of cut cases and pallet drops reduce time required to stock shelves, as do a limited selection of about 7,000 items per store and a relatively small footprint.

An exception to the generalist employees is in the meat department, where a butcher is employed to cut meat only, Galmarini said.

“If you look at a labor model that depends on cutting meat in the store, people say, ‘How can you do that and be efficient from a labor perspective?’ It's because the clerks are all trained in every area of the store; they can do every function except cut meat,” he said. “We found that to be extremely efficient. Most stores have meat cutters doing things like stocking frozen food and putting meat out in the case and a lot of things that are not their speciality.”

Success of the meat department at Valu King is “one of the benefits that snuck up on us,” Galmarini said. The department contributes more than 30% of sales at the stores, he said.

The majority of items at Valu King are private-label goods under Topco's Valu Time and Food Club labels, with some products under the Full Circle and World Classics labels, Galmarini said. The selection is bolstered by some branded items such as Coca-Cola, as well as items on special buy known as Royal Deals, which are merchandised on pallets and specially priced until they are gone.

The store also has a selection of $1 items including housewares and hardware. Galmarini said he has looked at product lines including clothing, but hasn't tinkered too much with the selection yet, which he describes as “80/20” — the top 20% of supermarket items providing 80% of sales.

“The premise of the store was the idea that we can do a really good job with our own brands,” he explained. “The acceptance has shifted to a level we thought we could capitalize on it by doing an own-brand store that's really a full-service value store.”

According to Galmarini, Valu King has resonated with shoppers in its stores' immediate neighborhoods, and also to bargain shoppers who might have previously been primary customers of Marc's — a local discounter — and Wal-Mart Supercenters.

“I think we've clearly hit them, and there's been some competitive response to our pricing that tells me we've hit them,” he said.

For Giant Eagle — which while the chain ramps up has acted more like an investor than a parent — the hope is that Valu King provides another option in a growing array of store formats.

“Four years ago, we were focused on the Giant Eagle supermarket format only. Now we have everything from Market District stores being all about the food enthusiast, to the Giant Eagle banner being the heart and soul of the business. The GetGo convenience store is filling a new void in the company and GEX [Giant Eagle Express] is a great concept that I worked on for a while that services the fill-in need,” he said. “What we're really excited about now is the value opportunity, competing with the players like Wal-Mart and Aldi. We're giving people all of the prices they can get at those stores and more variety and much, much better quality.”

Valu King's ultimate position within the Giant Eagle portfolio should be better determined after another few store openings, Galmarini said.

“Six months ago, we were still learning,” he said. “Right now, I think we have a model that has some scale to it. My guess is that once we get the next three open, I think we'll be able to make some adjustments that can serve over the longer term.

“Right now, it's not about making major changes — we don't want to screw around too much with what's been successful — but we do have ideas, and we'll be testing some new departments to see what the customer acceptance is. And we'll be doing it in a way that saves customers money.

“If it adds labor and doesn't generate acceptance from customers, then we're not going to do it,” he continued. “But we're not going sit on our laurels and consider it a perfect model. The plan is to tweak this in the next six months and make sure its easily replicable and financially viable, and then build lots of them.”

Giant Eagle ranks among Top 75 retailers. See details at supermarketnews.com