IGA Pushes for Expansion, Higher Store Standards

ELLIOT ZWIEBACH

CHICAGO — IGA here hopes to expand its U.S. membership over the next few years by redefining its brand image and boosting its store standards, Mark Batenic, president and chief executive officer of IGA USA, told SN.

IGA expects to add its banner to close to 100 new stores this year from customers of the 14 wholesalers that operate IGA-licensed distribution centers, but the number could increase if the alliance is able to license additional wholesalers — a goal Batenic said he is pursuing.

“For the most part, any cooperative or voluntary wholesaler that supplies independently owned and operated supermarkets that are community-based and community-focused is of interest to us,” Batenic said.

“Without question, there are marketing forces at work that are pushing an increased level of collaboration among wholesalers, and that works to the benefit of their independent customers. That combined scale creates advantages for both vendors and consumers and makes it possible for our retailers to do a better job serving customers.”

IGA, which is scheduled to hold its Global Summit next week in Miami, has about 1,150 stores in the U.S. While Batenic declined to pinpoint domestic sales, industry sources put the 2006 total at an estimated $9 billion.

Combined with Canadian sales of approximately $3 billion (at 483 stores) and overseas sales of approximately $10 billion (at some 3,000 stores in 40 countries), IGA's total sales for 2006 came in at about $19 billion — roughly even with 2005 and reflecting a pickup in international sales that made up for a slight drop-off in domestic sales, sources said.

IGA expects to close 55 U.S. stores this year, while adding enough new customers to end 2007 up a net 96 stores, based on estimates from its licensed distribution centers, Batenic said, “and that's a growth rate we'd be happy to duplicate every year.”

LOOKING WEST

As IGA looks for new growth opportunities, Batenic said he sees “a lot of room” to add stores in the Southwest, where the 2003 demise of Fleming Cos. resulted in the loss of large numbers of IGA stores in Texas, New Mexico, Arizona and California — “areas where we haven't been able to replace stores as quickly as we would have liked,” he pointed out.

One coup for IGA was the decision by DeLano Partners to convert 11 former Ralphs stores in the San Francisco Bay Area to the IGA brand earlier this year, giving the alliance a beachhead in Northern California.

The only state in which IGA has no stores is Hawaii, Batenic noted.

The efforts to redefine the IGA brand and raise store standards preceded his arrival, Batenic pointed out, but he said he is looking forward to reaping the results of both undertakings.

“The IGA logo represents the best independent retail organization in the world,” he declared, “and what we're trying to do through research is to enhance the value of that logo and bring new meaning to it.”

The research is being conducted by the IGA Coca-Cola Institute, which began talking with shoppers at IGA stores in mid-2006 “to help define the IGA brand for current and future retailers,” Batenic said.

“The goal is to position IGA to be the choice of independent retailers who want to appeal to consumers with a positive alternative to other shopping experiences. My dream would be that what we develop will make an increasing number of independents want to affiliate with IGA because of the broad consumer recognition and respect IGA stores have.

“We've already got some terrific information on why people shop at IGA and what makes them come back, and we will use that data to shape a message we can use to make IGA the strongest brand out there for independent grocers.”

According to the research, consumers see IGA stores as convenient and easy to shop, with friendly employees, and as an anchor for their communities, Batenic said.

He said he expects the research to continue through the rest of this year, during which time he anticipates IGA will craft a message that defines itself more fully as a brand. That message will be developed by a consortium of IGA personnel, retailers, distributors and Red Oval manufacturer partners, he said.

Along with developing a new brand image, IGA hopes to reposition its stores with higher operating standards that focus on the in-store customer experience, Batenic said.

NEW INSPECTION PROCESS

IGA went through a process in the late 1990s of developing more stringent standards for its retailers, using a grading system that rated stores based on store size, cleanliness, friendliness and store safety. That rating system was dormant during 2006 while IGA developed a new ratings approach that uses thousands of specially trained inspectors who act as customers of the stores they assess.

Those customers will conduct four unannounced store assessments a year, each timed to one of IGA's four annual marketing events. After one of the visits they will identify themselves to the owner and conduct observations of areas not visible to consumers related to food handling and safety.

“The process, all based on consumer expectations, involves a combination of new, generally higher store standards with a reinforcement of the established standards,” Batenic said.

The program also requires IGA owners to show evidence of community involvement, proof of inspections by local health authorities and proof of participation in IGA Coca-Cola Institute training classes, and it offers a Web-based program for customers to provide their stores with feedback.

According to Batenic, “We've already tested the program at more than 300 stores and have had very positive results, with retailers agreeing with the findings concerning areas they have to work on.”

Batenic, 58, spent the past four and a half years getting hands-on retail experience as executive vice president and chief operating officer at Clemens Markets, Kulpsville, Pa. However, he spent the previous 29 years as a wholesaler, working with IGA stores in various capacities at Fleming.

“A.O. Fleming, who founded the wholesaler, was one of the original signers of the agreement that brought IGA to the Midwest,” Batenic said, “so Fleming was always very involved with its IGA members, and during my time there IGA represented the wholesaler's largest customer segment — approximately 850 stores at one time.”

The bankruptcy that dissolved Fleming in 2003 was hard on IGA , which lost 300 of the 850 Fleming-sponsored IGA stores. That dropped IGA's membership in the U.S. from approximately 1,600 stores down to 1,300.

GROWTH OVERSEAS

While the domestic total has continued to decline — albeit slowly — in the intervening years, IGA's growth as a worldwide organization has flourished, prompting the alliance to decide to separate oversight of U.S. stores from overseas stores, Batenic said.

“Tom [Haggai, who remains IGA's non-executive chairman and CEO with responsibilities for international operations], has done a terrific job for the last 20 years, managing IGA when it was at its zenith and then putting it back on top after the Fleming situation — at the same time he was exposing most of the world to the IGA system,” Batenic said.

“Tom has taken the IGA experience and helped people in other countries use it for the benefit of their own consumers.

“But the board felt it was time to have one executive concentrate on the U.S. portion of the business, which would enable Tom to continue to spread the word across the rest of the world.”

Following Batenic's hiring late last year, Haggai has shifted his base of operations full-time to High Point, N.C., where he lives and where he's maintained an office. However, Haggai is always available for advice and counsel, Batenic said.

“We talk regularly and bounce ideas off each other, and I want to continue to draw on Tom's advice and knowledge as we continue to grow IGA.

“At the end of the day, we're still one IGA to consumers around the world, although there are now two leaders, and it's up to us to collaborate and make sure our message gets out there.”

Asked what special edge he brings to the job, Batenic cited his operating experience at Clemens. But he also has passion similar to Haggai's for IGA.

“I've worked with and for independent retailers my whole career, so I have an understanding of and an empathy for them in terms of what they think and how they feel,” he explained.

He said he was interested in the IGA job “because it seemed like a perfect fit for the experience and talents I could bring to the independent sector.

“I've always thought there was a great market out there for independents, because not everyone wants to shop with a big mega-retailer.

“The community-based, community-focused supermarket is still the cornerstone of most American towns. People gravitate to merchants in a community who have been there for years because they have a lot of confidence in them.

“So I have a deep passion to support and encourage independent businesspeople.”