Regional Chains Use Local Orientation to Their Advantage

CHRISTINA VEIDERS

WHITE SULPHUR SPRINGS, W.Va. — Two thriving regional chains — Weis Markets and K-VA-T Food Stores — say they built competitive advantages on their localized positions.

In a presentation delivered at the Grocery Manufacturers Association/Food Products Association Executive Conference last month, Steve Smith, president and chief executive officer of K-VA-T, Abingdon, Va., told attendees that “living and playing where we do business gives us a huge advantage. Our thumbs are on the pulse of what's going on in the community and region, and we can change based on that.”

Both retailers are growing due to their flexibility and their willingness to invest in new marketing and technology that make them better competitors, the retailers said.

The 156-store Weis Markets, which celebrates 95 years in business this year, has built programs around its freshness and quality philosophy to distinguish it from others. “Our goal is to offer the best combination of quality and value, and back it up with customer service,” said Norman Rich, president and CEO of the Sunbury, Pa., chain. Besides Weis' core Pennsylvania market, it operates stores in Maryland, New Jersey, New York and West Virginia. The publicly traded company did $2.2 billion in sales last year.

Over a year ago, Weis Markets introduced a new campaign, “Weis — Where Freshness Matters,” which signifies that Weis is committed to providing its customers with the highest level of fresh foods in town, said Rich. At the same time it broke its new campaign, the retailer introduced Steakhouse Angus beef, an exclusive program that contributed to a 23% increase in meat sales last year. “We inspect every shipment that comes through the distribution center, and it is a lot more consistent than the ‘Choice’ program we had before,” Rich commented.

‘BRANDED COMFORT FOOD’

Another program Weis is developing is “Weis2Go,” a hot-meals offering designed to encourage shoppers to stay home for dinner. Rich called it “branded comfort food.” Featured in store signs and in ads, the “Deal of the Day” is a new entree each day, such as a roasted 4.5-pound Wonder Chicken ($7.88) or a large, fresh-baked cheese pizza ($4.88). Weis recently added scratch-baked lasagna ($3.88) to the program.

Produce is considered a key differentiator for Weis. Rich said the chain is probably the largest buyer of Pennsylvania agriculture, which reinforces its strength as a localized business. To supplement the short Pennsylvania growing season, Weis has shifted produce supply from Chile to California. As a testament to how serious Weis is about its high produce quality standards, Rich said the company rejected $246,000 worth of produce shipped to its docks in the month of May.

Weis delivers value through a multifaceted marketing initiative. Examples include Fresh Rewards, a periodic promotion that gives shoppers savings based on their volume purchases over a specified period of time. This has prevented channel erosion and has kept loyal customers coming back, said Rich.

One Check Rebate is a program that sends one check worth up to $50 to participants based on their rebates recorded during a specified period. Ten-for-$10 deals are often tied to fresh foods, and Buy Four, Get One Free Clubs often feature items from the retailer's three-tier private-label line.

Weis has stepped up its event marketing and community involvement causes. Rich described a number of examples of how the retailer is reaching out to its local communities through various fund-raising and promotional events. It is the official grocery food sponsor for Pocono Raceway, which draws 750,000 people over the 20-week auto racing season.

Like Weis Markets, K-VA-T, a privately owned, family-run company that generated $1.5 billion in sales last year, considers itself deeply embedded in its local markets. The company holds the No. 1 market position in all markets it serves in Kentucky, Tennessee and Virginia, said Smith.

In 1984, the company, which operates 95 stores, mostly under the Food City banner, began an Employee Stock Ownership Plan in which employees now own about 16% of the company. Smith attributes the company's success to the ESOP and the fact that those who own a stake in the company work harder to provide better customer service.

Smith outlined how K-VA-T has invested heavily in technology to keep its operations and its employees on top of quickly changing market conditions and in control of the business.

“I call it a high-tech, high-touch approach, which enables us to understand who our customers are and what they want, but also to empower our employees with information.”

THE ‘BRAINS’ OF K-VA-T

K-VA-T has developed a sophisticated data warehouse, and its loyalty marketing program has data on more than 1 million customers. The data warehouse is considered the “brains” of the company.

“It gives us information on customer spending and profitability,” Smith explained. “We not only know what customers are spending, but know how profitable they are. We identify and analyze relationships between products, customers, events and promotions. We validate some of the decisions we make. We also determine our most profitable niche and store layout. We optimize category performance, and we score product performance and category change.”

Stores use a scorecard to rate category performance on a weekly, quarterly and yearly basis and compare their performance to company averages. Through these scorecards, managers really know what is going on in their stores, Smith said.

K-VA-T color-codes its coupon offers to three types of customers: green for a new customer, red for a lost customer and yellow for a declining customer, said Smith. This way, store managers and cashiers know which type of customer was sent the coupon. The retailer also has developed various loyalty clubs — wine, baby, pets and kids — to better communicate with customers.

When it comes to community involvement, K-VA-T recognizes with cash rewards those employees who have done exemplary work and volunteerism in their communities.

K-VA-T has a long-running relationship with Tennessee's Bristol Motor Speedway involving the sponsorship of two NASCAR events — the Food City 500 and the Food City 250. The company ties its racing program to hunger relief with its Race Against Hunger.

“Some of the things we do in our community really distinguish us from competitors. It's one of the advantages of being local. It's one of the advantages of understanding and living where you work,” said Smith.