BIG Y: AT A CROSSROADS

Christina Veiders

SPRINGFIELD, Mass. -- Big Y Foods here ventured into new turf last week with the grand opening of its 50th store, the newly built Walpole World Class Market, just 15 minutes outside of Boston. It's a bold move by the retailer, according to some industry observers. Big Y appears confident it can grow in the heart of Stop & Shop's and Shaw's Supermarkets' territory. Claire D'Amour-Daley, Big Y's vice president of corporate affairs and a member of the family-owned company, told the local media that "Walpole represents the next frontier," and that Big Y was looking at eventually operating 15 stores in the Boston area. She could not be reached for comment.

Until now Big Y has become a regional champion through slow, calculated growth, concentrating on areas in central and western Massachusetts and Connecticut where it holds onto a healthy market share. In these core markets, it has built its name and reputation for customer service and quality perishables.

In western Massachusetts, Big Y is a strong No. 2 player behind Stop & Shop, according to those that know the market, with an estimated market share in the 20% range.

According to a recent shoppers survey by International Demographics, Houston, Big Y scored No. 3 with the number of weekly grocery shoppers in its stores in the Hartford-New Haven, Conn., area, behind Stop & Shop, No. 1, and Shaw's, No. 2.

Industry observers were somewhat puzzled by Big Y's entry into eastern Massachusetts, where competition also includes Roche Bros., which runs an upscale format, Bread & Circus, Trader Joe's and Wal-Mart.

"Usually a retailer grows into an area. They don't jump in, and it's not like they are buying three or five stores in a market," said one observer. "People in Boston don't know Big Y, and Big Y is spending a tremendous amount of money in the Boston market to educate customers as to who they are."

Said another observer, "Walpole is a hotbed of competition, and all the big guys are right there. The fact they are going in there speaks to Big Y's level of confidence that they think they can compete with anyone at this point."

Big Y, with sales at around $1 billon in 2002, according to published media reports, wasn't always so big. Paul D'Amour, a Wonder Bread route salesman, purchased a 900-square-foot store at a Y intersection in Chicopee, Mass., in 1936. In comparison, today's Big Y World Class Markets are from 55,000 to 65,000 square feet.

Paul and his brother, Gerald D'Amour, grew the company slowly. In 1960, Big Y opened its fourth store, a 31,000-square-foot store in Northampton, Mass., considered at the time to be the largest supermarket in western Massachusetts. In 1966, the retailer arrived in Springfield, and doubled its store count with the acquisition of a seven-store operator. The company debuted the Big Y name in Connecticut in 1984. Two years later when it celebrated its 50th anniversary, Big Y was ranked No. 1 in western Massachusetts and No. 12 in the state with 21 stores, according to the company. In 1989, it established a foothold in Worcester, Mass.

Big Y introduced its World Class Market in 1993, and began converting most of its stores and newly built units to this concept of expanded product offerings and service. This year the company acquired four A&P stores that it will convert to the World Class format.

World Class Markets get high marks on quality and selection, depth of product selection, expanded nonfood departments and overall cleanliness. Big Y is just starting to roll out pharmacies in selected locations. The stores are bright and airy with wide aisles.

Said Grace Nome, president of the Connecticut Food Association, Farmington, Conn., "It's a unique store, and it captures the customers' imagination. They have a mixture of high quality and a good selection."

Last weekend during the CFA's annual convention in Newport, R.I., the association honored Donald D'Amour, Big Y's chairman and chief executive officer, as 2003 person of the year for his service to the food industry and the communities that Big Y serves.

In terms of community service, the chain is especially focused on education and educational funding projects. During last week's Walpole grand opening, Big Y gave a $500 donation to each of the town's nine schools. It offers an annual scholarship program. This program awards over 225 scholarships each year, totaling more than $175,000. It has established a free homework assistance phone service available to students in kindergarten through high school, and it instituted Upromise, a way for loyalty card shoppers to save for college education.

Big Y is a high/low operator. It is known for its buy one, get one or two free. It also operates a unique loyalty card program where customers can be instantly rewarded at the checkout with coins that are redeemable for products or airline miles.

Said one observer, "They've succeeded in conveying that Big Y is loyal to the neighborhood and consumers and, therefore, there is a payback in being loyal to Big Y." According Nome, Big Y plans to continue to grow in Connecticut.

For now, all eyes are on Walpole. "Big Y is known in Connecticut and in Springfield. They've built a franchise there. But in Boston, they aren't as well known. Will they be able to go against the big competitors that are very well established and have high store density [in that market]?" asked one observer.

Another big challenge will be Big Y's ability to maintain its promotional pricing strategy against Stop & Shop that offers triple coupons and Shaw's that is breaking out with more aggressive price promotions, said another observer. Can it protect its profits from shoppers that cherry-pick Big Y's promotional items, and then shop the competitors?

That is the immediate challenge for Big Y going forward. However, Donald D'Amour told the local media that Big Y has "inherent advantages" in its growth strategy. It will apply the same formula in Walpole that it has used to make it a strong regional player in its existing markets.

Big Y

Market Position: No. 2 or No. 3

Main Competitors: Stop & Shop, Shaw's Supermarkets

Distinguishing Features: World Class Market format, offering quality, selection and service, executed by a well-managed company

Biggest Challenge: expansion in Boston metro area