QFC NUDGES OUT PRODUCTS FROM LOCAL VENDORS

BARBARA MURRAY

SEATTLE -- The QFC chain, based in Bellevue, Wash., has eliminated or drastically cut back on local vendors' products, reportedly telling one that the chain wants to deal only with national brands that pay slotting fees.

Snoqualmie Gourmet Ice Cream, Caffe Appassionato whole-bean coffee, salad dressings from high-end eatery Szmania's and Vitamilk Dairy no longer have the presence they did before the 84-store chain was acquired by Fred Meyer Inc. of Portland, Ore., and then by Cincinnati-based Kroger in 1999.

Barry Bettinger, vice president of Snoqualmie Gourmet Ice Cream, in Lynnwood near here, told SN: "I think QFC has lost a lot of local support not only because of that, [but also because] they told us they only want to deal with national brands."

This occurs even as major retailers are bringing in more specialty items. The Fancy Food Shows run by the National Association for the Specialty Food Trade, New York, have been growing, with many exhibitors selling to supermarkets. At the same time, there is growth in high-end private label, which may replace the coffee vendor that was cut back.

"It varies even within the large chain. A lot have regional decision-making," said Todd Hultquist, spokesman for the Food Marketing Institute, Washington. "It's such a segmented marketplace these days. What works well in one chain store in one part of the country does not work well in another store in another part of the country."

Snoqualmie super-premium ice cream started off in Larry's Markets here, then added other local independents, such as the Thriftway group.

"It's part of our core corporate strategy to reflect the community as much as possible, with the business in mind." Tina Roberts, director of sales and marketing for Larry's, told SN. "The products have to be actionable toward our customers: Our customers have to want them. That is how a lot of the local products come into our stores; our customers introduce them.

"It's really unfortunate for companies that are bigger than Larry's that they have gotten so mired down in 'shareholder value.' Our shareholders are the people who shop us for groceries," Roberts said.

Bettinger said that after being promised that his ice cream would start in QFC in May or June of last year, it finally got in in October -- missing the prime ice cream-selling season. By April 2002, it was dropped by mutual agreement since it wasn't selling well, he said.

But the reason it was not selling well was poor positioning, that "almost as soon as we got in, they cut our space in half," according to Bettinger, who added that in Larry's Markets, where he has much more space, his brand outsells Haggen-Dazs, which is priced 15 to 20 cents higher.

"It does outsell Haggen-Dazs," Roberts said, but she described a three- or four-year process of partnership with the vendor, suggesting that he add flavors and do demos to grow the brand.

"We use some of our resources as a launch pad for our vendors, so it becomes a partnership. We take it very personally. Our customers expect to see Barry Bettinger, they know him by name, they have a personal relationship with him. It's very much a one-to-one. And our customers expect us to source products that have a really high quality. Many smaller, artisan niche companies are making something because it is better."

Paul Kapioski, president of the West Seattle Thriftway, told SN that customers come in looking for the ice cream, and naturally buy more groceries once they are in the store. Some have become regular customers, he said.

No one from QFC or parent company Kroger returned SN's phone calls.

"I did ask [the buyer] for better space, to give us a try. We were doomed to fail in that space. But she said, 'No, people are paying tens of thousands of dollars for that space. Don't mention it again,"' Bettinger said. Snoqualmie Gourmet Ice Cream was in all of the QFC stores, but a national vendor, Dreyer's Grand Ice Cream, Oakland, Calif., was managing the case.

Bettinger added that the QFC buyer, who has since been promoted, didn't ask him to pay a slot fee, but there were other fees, he said. "You have to pay to go on sale, you have to pay to demo -- so many fees we never had to deal with with the independents."