BANNER DAYS

ELLIOT ZWIEBACH

Wholesalers are waving their banners more aggressively.

Store banners licensed by wholesalers to their retail customers are enabling those retailers to boost sales by as much as 15% or more, wholesale executives told SN.

They also acknowledged that banner programs are providing them with a more secure wholesale sales base for long-term security.

Whether conventional, superstore, price-impact or limited-assortment formats, store-banner programs help independents compete on a more equal footing with chain operators, the executives said.

As a result, an increasing number of independents have been encouraged to adopt these programs.

As they fine-tune their various store concepts, wholesalers are finding new ways to use the banners:

Widening the assortment of store formats.

Tailoring formats to fit more specific niches, enabling multiple banners within the same marketing areas.

Providing sufficient flexibility for entrepreneurs to exercise their own independent instincts within a store-banner program.

"Because we're dealing with entrepreneurs, there has to be a tender balance with store formats -- an umbrella big enough and parameters wide enough to provide the advantages of sameness, but with enough latitude for the operator to exercise his independent personality," said Michael DeFabis, president and chief executive officer of Associated Wholesale Grocers, Kansas City, Kan.

He said that more than half of AWG's volume among customers with 10 or fewer stores comes from retailers who have chosen to adopt one of the wholesaler's banners, and with sales rising 15% to 20% at those stores, he said he expects the number of bannered customers to increase "at a brisk pace in the natural course of events as markets change and as independents grow."

John McCurry, vice president of independent store operations for Nash Finch Co., Minneapolis, said success breeds success.

"As operators contemplate new stores, remodels, expansions and changes in their interior decor, we encourage them to consider one of our formats," McCurry said. "And frankly, every time a store has adopted some of these changes, it's gotten a great sales increase -- at least 10% to 12% at some locations -- which makes it easier to sell the next group of independents on the idea. Because these retailers know each other and they look at each others' stores and talk to each other, and the banner idea sells itself."

For Certified Grocers of California -- a newcomer to the banner marketing approach \-\ interest in its Apple Markets concept has grown as retailers have seen actual operating results, according to Chuck Pilliter, senior vice president of the Los Angeles-based member-owned cooperative.

While three corporate-owned Apple stores have experienced sales increases of up to 25% -- primarily because they lost a lot of volume under their previous ownership, Pilliter pointed out -- four independently owned Apples in southern California have averaged sales increases of 15% to 18%, he said.

Roundy's, Pewaukee, Wis., has seen sales increase 8% to 15% when operators convert to its limited-assortment format, Mor for Less, Dave Busch, vice president of administration, told SN. While the LAS format is growing slowly, he said Roundy's sees ongoing square footage growth for its superwarehouse format, Pick 'n Save, and for a new conventional format called Village Market.

For Supervalu, Minneapolis, offering different formats "enables a retailer to look at various opportunities, knowing he's not confined to any one solution, and allowing him to consider a variety of options based on assortment," explained Mike Mulligan, vice president of wholesale sales and marketing.

"As a result, an independent can operate stores under his own name, or he can adopt one of the concepts we offer if he thinks that will work better for him -- and that kind of flexibility is very valuable for a retailer."

Following are overviews of each wholesaler's banner programs, based on conversations with SN:

Associated Wholesale Grocers has offered store-concept programs for years, DeFabis told SN, but the approach has changed in response to competition.

"There's a clearer definition of the kinds of stores available, based on the neighborhood being served," he explained. "It's a question of combining the right owner with the right store in the right location at the right time.

"What's different now is that we tailor the concepts so we can offer different formats in the same marketplace. There's a more clearly defined niche for each concept, so instead of offering only a single format, we now have several options we can give a retailer."

AWG's banner options include Price Chopper (46 stores) and Price Mart (9), a superwarehouse format; Country Marts (44), a superstore format; Apple Markets (54), a conventional neighborhood format that emphasizes perishables; Sun Fresh (10), a perishables-oriented combination store for metropolitan areas; Cash Saver (14), a conventional format with limited perishables for rural areas, and Thriftway (57), a conventional neighborhood format.

As far as most consumers are concerned, wholesale banners are no different than chains, DeFabis said, noting that AWG licenses 30 Price Chopper stores in the Kansas City marketplace to seven different owners. "But as far as the customer is concerned, it's a virtual chain, and it's irrelevant that there are different owners -- to everyone but the owners."

He said the goal of banner programs is to give independent operators all the advantages of a vertically integrated chain and none of the disadvantages.

However, he said he believes stores with their own banners can co-exist with chains and wholesale-sponsored banner stores.

"With a one- or two-of-a-kind store, it's very difficult to get people's attention," DeFabis said. "But those kinds of stores will always have a place in the marketplace because the owners are close to their customers."

Certified Grocers of California is a newcomer to licensed-banner programs.

"For years, Certified's membership included a number of regional independent chains that grew strong by developing their own banners," Pilliter told SN.

"But in the last 10 years, many of those operators were acquired by larger entities, and the newer, state-of-the-art independents that remained needed new formats and banners that would be recognized by consumers, who are looking for the kind of consistent shopping experiences they find at a chain in terms of store design, decor and promotional events. "With a common banner, you can implement that kind of approach and also attract trade dollars across a wider group of stores."

Certified began testing Apple Markets, a conventional format; and Total Value, a limited-assortment store, in mid-1996.

Certified has seven Apples in operation -- three corporate stores in northern California and four southern California stores that are operated by three different owners -- with 13 more stores scheduled to open in southern California by the end of 1997 and 20 more anticipated in 1998, Pilliter said.

Converting a store to Apple involves adding bakeries, service meat and meals to go; upgrading perishables; and initiating a complete remodeling and remerchandising program, he said.

To give the southern California Apples a stronger identity, Certified launched a frequent-shopper program, called Apple Valued Customer, at two stores in mid-June, with the others expected to join the program by mid-July, Pilliter said.

"The Apple stores have done better than planned, and they've generated more interest than we anticipated," he noted. "The success of the first few stores has sparked enough interest among other members to enable us to move from zero toward our goal of 20 stores within the first year, and we anticipate doubling that number in the second year to achieve significant synergies."

Development of the Total Value format at two Certified-supplied stores is coming along more slowly than Apple, he acknowledged. "Preliminary indications are that a limited-assortment format is more attractive in a rural area rather than an inner-city location, because ethnic shoppers in the inner city are more interested in fresh perishables," Pilliter explained.

Certified is "trying to California-ize" the limited-assortment format, he said, by testing some fresh products, including 24 feet of produce and 12 feet of service meat. He said the company will make a decision on the future of the LAS format by the end of the year. Pilliter said Certified is looking at a price-impact format and a perishables-oriented combination-store format, "but we have our hands full right now rolling out the Apples, and any decisions on moving into new formats are at least a year away."

Nash Finch Co. offers four licensed banners, although McCurry said he does not think of those stores as virtual chains.

"While a banner program may give you an image in the marketplace, it does not result in cookie-cutter stores because you're still dealing with the individual entrepreneurial spirit," McCurry told SN.

"What banner programs do, however, is provide enough room for the independent to adapt the banner to his own way of doing business."

Nash Finch's banners are Food Price (77 stores), an upscale conventional format; Our Family Foods (4), a conventional format; Economart (12), a warehouse format; and Econofoods (20 licensed stores, 22 corporate-owned stores), a super-warehouse format. It also licenses 340 IGA stores.

The proliferation of banners will not mean the end of nonbannered independents, McCurry said. "In many smaller towns in rural America, an individual's name on the store is extremely important, and that is not going to disappear in the near term.

"Despite the variety of formats, banners, color schemes and decor that we offer, the independent supermarket is still run by an entrepreneur who's there at store level and knows his customers and his marketplace, which is what gives him a competitive edge and makes him great."

Supervalu is less concerned with banners or formats than with determining the right assortment for each operator, Mulligan told SN.

When Supervalu considers banner stores, it prefers to think in terms of modular assortment packages rather than formats, Mulligan added.

"We see formats as being very modular -- the boxes may not be different, but what's plugged into those boxes is -- whether it's a decor package, or communications and marketing, or private label or a package that focuses on fresh," he explained.

"For the past few years, we've developed more of a food court presentation for our Supervalu stores. But that module can also be added to any of the other concepts we offer if that's important to a retailer's positioning in the market."

Supervalu's banners are Supervalu (900 units), a conventional format; Cub Food Stores (62 franchised, 55 corporate-owned stores) and County Market (100), both discount superstore formats; and Sav-a-Lot (476 licensed, 135 corporate-owned stores), a limited-assortment format, plus 700 IGA stores.

Mulligan acknowledged that banner programs create virtual chains, "although virtual chains, like category management, are defined differently by everyone you talk to," he said. "What we try to accomplish with our store concepts is to provide the same advantages on the buying and promotion side and the same efficiencies in store design, decor and marketing, while leaving room for the independent to stay close to his marketplace and respond to his customers.

"So while we may afford opportunities for a virtual chain, we don't want to fool with the absolute independence of our retail customers. There will always be room for the independent to exercise his creativity."

Roundy's has established Pick 'n Save, a superwarehouse format, as a virtual chain in Wisconsin over the past 14 years, but more recently it has begun to branch out with Mor for Less, a limited-assortment format; and Village Market, a conventional format, Busch said. There are 55 licensed Pick 'n Saves, and 10 corporate-owned stores; 16 Mor for Less stores, and a single Village Market.

According to Busch, the cooperative has been licensing the Mor for Less concept for five years, "but growth has been slow because it requires a very specific type of demographic -- an economically depressed, more rural area -- to succeed."

Roundy's introduced its conventional Village Market format two years ago in the Milwaukee area, "and we've been refining the concept since then by testing ideas we want it to represent and evaluating how it fits into the marketplace with our other formats," Busch explained.

He said the wholesaler has determined that Village Market will work best in less populous areas, where it doesn't have to compete with the strong price approach of Pick 'n Save, "and there are several retail operators looking at that format now," Busch pointed out.

Pick 'n Save remains Roundy's primary retail growth vehicle, Busch said, controlling half of the market share in Milwaukee "due to aggressive advertising and our Advantage frequent-shopper card," he said.

Although the number of Pick 'n Save units isn't growing rapidly, the total retail selling square footage is, as operators replace older units with newer, larger stores, Busch said.