Licensees Leverage National Names

ELLIOT ZWIEBACH

SN recently interviewed a half-dozen operators of Save-A-Lot and IGA banners from throughout the country about their companies and about working with their licensors. Their profiles, appearing exclusively on supermarketnews.com, follow:

Dyer’s Comes Back to the IGA Fold

John Dyer

WAMEGO, Kan. — John Dyer is a born-again IGA operator.

He was forced to give up the IGA banner on his store here when Fleming folded and his new wholesaler was not an IGA distributor, but he gladly became a licensee again when his new wholesaler aligned itself with IGA.

Dyer is a fourth-generation IGA retailer who was buying from Fleming, an IGA-licensed distributor, until Fleming shut down its operations in 2003. When he switched to Affiliated Foods Midwest, Norfolk, Neb., which was not an IGA distributor at the time, Dyer had to give up his IGA license.

“We had a great deal of emotional attachment to IGA after being a licensee since 1932,” Dyer told SN, “and taking the name off the store was probably harder on us than the customers.

“But there was certainly a lot of disappointment among customers too because they were used to IGA’s quality products and they missed some of the IGA promotions.”

During the five years Dyer operated as a Shur-Fine store (the name of Affiliated’s private-label line), “IGA did nothing but improve,” he noted. “They made major changes in how they go to market, began offering more services and strengthened their marketing events, so when Affiliated Foods became an IGA wholesaler in 2006 and we became a licensee again, a lot had changed for the better.”

Dyer became a licensee for his store here in December 2008, “and our customers were very excited to see us go back. And we noticed that, though we were putting the IGA product in back of the Shur-Fine to sell through on what we had, customers were pulling the IGA product forward and buying that.”

Dyer is a partner in four other Kansas stores that converted to the IGA banner during the spring and summer, “and rather than running grand-opening ads, we’ve been running ‘homecoming’ ads because that’s what we’re doing — going back home to IGA.”

Houchens Expands With Two Licenses

BOWLING GREEN, Ky. — Houchens Industries here is probably the only company in the U.S. to operate both IGA- and Save-A-Lot-licensed stores.

It began licensing Save-A-Lots in 1990. Today it operates 230 locations, ranging from 9,000 to 13,000 square feet, stretching from Texas across Arkansas and Alabama; from Kentucky north to Ohio, Illinois and Indiana; from Georgia to Virginia on the Eastern Seaboard; and western New York — “a territory for Save-A-Lot that had not yet been overly developed when we got into it,” Jimmie Gipson, chairman and chief executive officer of Houchens, told SN.

What attracted Houchens to the format, he said, was Save-A-Lot’s approach to pricing, its self-distribution system and its private-label product lines. “Plus, it was economical to get into,” he added.

Though the states in which Houchens’ Save-A-Lot stores operate are mostly contiguous, the growth pattern was not, Gipson pointed out. “When we first began licensing the stores, most were in Kentucky, where the name was already recognizable,” he recalled.

“But as we expanded, it didn’t really matter if the store was in a contiguous area because it’s a key-in package where Save-A-Lot supplies the product, a recognizable name and a strong support company in Supervalu, so there wasn’t much we had to do other than provide the space.”

As it converted its own stores to licensed Save-A-Lot locations and as it acquired additional locations, “the stores performed better under the licensed format,” Gipson said.

For example, as the recession grew from early 2008 through the middle of this year, the Save-A-Lots experienced sales increases of 5% to 7%, he pointed out, “but since May those increases have stopped as people have returned to a mindset that things are not as bad as they were, though we’ve held on to some of the business we picked up.”

He said he’s not sure how the stores will perform as the economy recovers “because we’re approaching a situation we haven’t dealt with before. Between 2005 and 2007 the economy was moving forward based heavily on debt, so when the economy normalizes, it will be a different normal than in the past, and our challenge is to figure out how to budget going forward because it’s so hard to know how people will act.”

Houchens is converting 45 conventional stores to the Everyday IGA banner, including Houchens Markets in Kentucky, Buehler Foods in Indiana, Illinois and Kentucky and White’s Fresh Foods in Tennessee and Virginia, with 43 more conventional stores due to be converted over the next three years, Gipson said.

Houchens decided to make those changes, he explained, “because we were looking for an opportunity to develop a stronger private-label program than what the Houchens brand stood for, and the IGA brand certainly filled that requirement.”

Since the IGA name began appearing on the stores, sales have increased between 7% and 18%, “and we’ve been able to hold those increases,” Gipson said.

Houchens previously worked with IGA to develop a unique store concept called IGA Crossroads — a format that combines a convenience store with gas pumps with a small conventional supermarket that’s located along a country highway that people are likely to drive past on their way to or from work.

Houchens operates seven IGA Crossroads stores, which are priced like a conventional supermarket and designed for a $25 shop on each visit, Gipson explained.

“In my career, this is the only format that customers keep asking when do we plan to put one in their community,” he said.

Bob’s Windham IGA Differentiates Offering

WILLIMANTIC, Conn. — Bob Buonomano is a meat guy.

He’s been an IGA retailer for 25 years after working for First National Stores as a meat cutter and, later, meat supervisor, and meat remains a major focus at the 12,000-square-foot Bob’s Windham IGA here, accounting for 45% of sales.

“Our meat department offers what people can’t find at the chain stores,” he told SN. “We have five butchers, and everything we sell is fresh, with no additives. We cut all our meat fresh, and we make sure we educate our customers so they understand what that means.”

One of the store’s TV ads — which turns out to be a butcher’s nightmare — involves a mother showing her children a dinosaur skeleton at a museum, adjacent to a butcher, and explaining how each one became extinct.

The store offers conventional pricing except in the meat department, which features everyday low prices, Buonomano said.

The meat department, plus the IGA promotional events and the private-label line, have enabled Buonomano to outlast other independents in his area and continue to compete against Stop & Shop, Big Y, Shaw’s, BJ’s, Wal-Mart and Aldi, all of whom operate within four miles of his store, he said.

The store is part of a five-store ad group with two IGA stores in New York and two in Massachusetts. “Two of the guys have strong grocery knowledge, one knows produce and my expertise is in meat, and without their knowledge, I’d be in trouble,” Buonomano said. “But when you can work together and share knowledge with each other, which is what IGA is all about, you’re stronger for it.”

Saver Group Stays True to Its Name

CAMPBELLSVILLE, Ky. — For Larry Noe, being a Save-A-Lot operator is a way of helping consumers.

“As I’ve said many times, you won’t go wrong doing the right thing, and helping people save money on their groceries is the right thing,” Noe told SN.

The Save-A-Lot format makes “doing the right thing” possible, he added, “and it has meant a great deal to me to help so many people who either need to save money or want to save money on their grocery bill.”

Since acquiring eight stores in North Carolina in late September, Saver Group operates 37 stores, including 18 stores in Kentucky, 11 in North Carolina, six in Ohio and two in Virginia. Of the original 29, about a third have been upgraded or relocated since 2003.

Being part of Save-A-Lot helps him keep on top of the stores’ physical operations, Noe said. “This is an area we at Saver Group like to think puts us on the cutting edge. And relocating stores into modern facilities has been a great investment for us.”

He said reinvesting back into the business with improved facilities and energy-efficient equipment “has given us very good returns on our investment, and I would recommend Save-A-Lot to anyone who is an entrepreneur and is not afraid of hard work.”

Unlike some Save-A-Lot operators, Noe’s group employs supervisors for operations, meat and produce, “which helps us meet our numbers for distribution and gross profit,” he explained. “Having those supervisors has been very positive for us, and we believe it enhances our business.”

Kirby Co. Converts to IGA

SHELTON, Wash. — The Red Apple has become a red oval for David Kirby.

The IGA stores Kirby and his partner, David Coulter, operate in the Pacific Northwest were originally part of the Red Apple group sponsored by Associated Grocers, Seattle. When AG merged with Unified in 2008 and Unified subsequently became an IGA wholesaler, the partners decided to test the IGA program at their smallest location — a 6,000-square-foot store in Cathlamet, Wash., about 80 miles north of Portland, Ore.

“We switched that store to Unified in March 2008 because we wanted to see how Unified worked,” Kirby explained. “We liked what we saw, and when Unified become an IGA distributor, our store in Cathlamet was the first store in the Northwest to get the IGA banner.

“We worked very carefully to market the new brand name to make it work,” he added, “and we succeeded, with sales rising about 10% very quickly and holding that increase through the first year.”

One of the major issues the partners faced was converting customers of the Western Family private-label line to the IGA line, Kirby said.

“Western Family has a great following in this area, and there was some skepticism by consumers that the IGA brand could be as good. But since we’ve made some changes, we’ve had positive feedback,” he noted.

To encourage trials, the company stresses IGA brands in its advertising and offers in-store demos, “but we still carry both labels, though we’re skewing more toward IGA as quickly as we can. The difficulty is, Unified carries only about 100 IGA labels right now, so we’re not able to convert all items yet.

“But wherever we can, if we can pull the IGA line from the warehouse, then we convert that section. We just completed converting the paper goods section and the canned vegetable aisle completely to IGA.”

The company converted three of its other four stores — in Goldendale and Toledo, Wash., and St. Helens, Ore., which had operated as Red Apples, to the Fresh Market IGA banner earlier this year.

The company’s other store, located here, is very close to Unified’s Seattle distribution center, and since Unified plans to distribute the IGA lines in the Pacific Northwest through its Portland, Ore., facility, “we felt it was better to keep the Shelton store operating under the Red Apple banner and draw from the Seattle warehouse, and we have no plans to convert that store to IGA,” Kirby said.

Freemans Keep Save-A-Lots in the Family

GAYLORD, Mich. — The third generation of Freeman family grocers was determined to keep the family business going.

So when some family members decided in 1999 to sell their 26 conventional grocery stores and three Save-A-Lots in northern Michigan, brothers Tim, Tom and Paul Freeman decided to buy the discount stores.

“We had a really strong desire to continue in the grocery business, so we purchased the three Save-A-Lots,” Tim Freeman told SN.

In the ensuing 10 years the brothers have grown the business into a 12-store chain, with two more Save-A-Lots scheduled to open in the spring, he said.

Making the switch from conventional operations to Save-A-Lot was “a very easy adjustment,” he pointed out.

Meeting Save-A Lot’s store standards has not been difficult either, Freeman added, “because we operate our stores with pretty high standards. There have been some decor upgrades over the years, and Save-A-Lot is always looking at making adjustments to the format, but nothing is jammed down your throat because you are a licensee.

“They work with us as a partner to make sure we have a good understanding of why they’re making whatever changes they make to the program.”