Business Opportunities

MARK HAMSTRA

Food retailers may think they have today's consumers figured out, but those consumers aren't standing still.

Young shoppers are adopting new technologies and new values, and older ones are inundated with a never-ending array of new options for solving the daily question of what's for dinner.

To remain relevant to these fluid masses, supermarkets need to be flexible — it is no longer enough simply to distribute their weekly specials in the local newspaper. On the following pages, SN describes five initiatives that could help food retailers adapt their marketing to reach the consumers of today and tomorrow.

As anyone who's read a newspaper recently knows, the newspaper is a dying medium. Young consumers are increasingly relying on the Internet to obtain information, and that information can be accessed from a variety of electronic devices, including via digital music players like the iPod.

Some retailers, including Whole Foods Market, have begun tapping into this media channel by offering informational “podcasts” on their websites. For the current holiday season, for example, Whole Foods has posted podcasts relating to wine and cheese.

Young consumers also tend to be more concerned about the environment than their elders, researchers say, and marketing messages that tap into those concerns may present an opportunity for operators to make their brands resonate with the Gen Y demographic.

Retailers “can show consumers what they're doing for the environment in their own community,” said Carey Earle, chief idea farmer at branding firm Green Apple Marketing, Jamaica, Vt.

Whole Foods, Food Lion and Wal-Mart are among those operators that have employed this strategy.

Some supermarkets also have found success by taking their offerings to consumers, rather than waiting for consumers to come to them. As prepared foods have become an increasingly important part of retailers' offerings, companies like Bashas' and Stater Bros. have put their offerings in front of consumers at events like NASCAR races.

When it comes to home cooking, some consumers just don't have time — a fact that has spurred the rapid growth of the meal-assembly business. Now one supermarket operator, Langhorne, Pa.-based McCaffrey's Markets, is preparing to open a meal-prep business inside one of its stores.

“We think this will be a fun concept for our customers,” said Mark Eckhouse, vice president, McCaffrey's.

Another cooking trend that has captured the fickle attention of today's consumer is the TV cooking show — in fact, an entire cable channel is now dedicated to the culinary arts.

Some companies, including Wild Oats Markets, have been able to associate their brands with these broadcasts to get exposure among viewers who are highly likely to be supermarket shoppers.

INITIATIVE 1:

Test Podcasting to Reach Young Consumers

America's technology-oriented society continues to evolve. Just as cell phones and email have established themselves as standard forms of communication, a new technology is quickly taking hold, especially among younger consumers: podcasting.

Podcasting, the term for downloading audio and/or video files from a website to a portable media device like an iPod, has emerged as a fast-growing communications vehicle.

“The fact of the matter is,” said John Stanton, professor of food marketing at St. Joseph's University in Philadelphia, “we have to evaluate the technology in the media in terms of not what it is, but what it will be.”

Although most food retailers have recognized the need for a functional website, very few seem to have entered the realm of podcasting. Those that have tested the medium include Whole Foods Market, the innovative natural and organic retail giant.

The Austin, Texas-based retailer has eight audio podcasts featured on its website, which consist of short interviews with various specialists from the Whole Foods' team, all hosted by Paige Brady, national organic programs and special projects coordinator.

The latest Whole Foods' podcasts, posted for the holiday season, describe wine and cheese, popular topics around this time. One features an interview with one of Whole Foods' global wine buyers about Beaujolais Nouveau wine and cheese. The other features two interviews, one with another global wine buyer about Whole Foods' Top 10 wine list, and another with a cheese expert, who describes cheeses to pair with those wines.

Other Whole Foods' podcasts include discussions about how to select and cook a Thanksgiving turkey, the sustainability of Chilean sea bass, and the benefits of locally grown food.

“It's going to happen,” Stanton said, referring to podcasting becoming mainstream. “The question is, how should supermarkets keep tabs of when it's time to roll out the podcasts?”

Stanton doesn't think every food retailer should jump into podcasting just yet, but should take preliminary steps and feel out their customer base. “More younger people shop at Whole Foods,” he said, which probably justifies the retailer's use of them at this time. “But eventually it will leak into other demographics.”

Stanton recommends that retailers start learning about the technology, and that they keep on top of what competitors are doing. “If you're not going to be an innovator, there is a marketing strategy of following closely,” he said. “Most retailers like to be first at being second.

“Supermarkets lament that they really aren't able to communicate with young consumers, but this is their media of choice,” he said.

Greg Galant, chief executive officer of RadioTail, a podcast advertising agency based in New York, estimates that podcast use has grown about 70% in the last six months. “It's a great way to connect with your consumers on so many levels, especially with video,” he said.

Although RadioTail doesn't have any supermarket clients at this time, Galant believes podcasts can offer them a great amount of potential targeting. “I would imagine you can reach the higher-end consumer who would be interested in specialty supermarkets, and also young people who haven't necessarily settled into their shopping patterns.

McDonald's, Oak Brook, Ill., started using video podcasts on its website last spring, according to Tara McLaren, senior manager of corporate communications. “Podcasts serve as a new avenue of communication for us [to promote] what we do and what we stand for,” she said. The fast-food retailer has podcasts about food quality, opportunity, Ronald McDonald House Charities and investor relations.

McDonald's also posts its podcasts to YouTube and Google Video.

“Our customers and employees obtain information in different ways,” she said. “Through the Internet, we are able to be where our customers and our employees are, whether on websites, through blogs and now podcasts.”
— MARIA TORTORETO

INITIATIVE 2:

Take It to the Streets

Instead of waiting for the consumers to come to them, some supermarkets are going out to the consumers.

“If you have unique products and services to offer, it's a way of letting out your best-kept secrets in the best way,” Alison Bendler, public relations manager for Bashas', Chandler, Ariz., told SN. “We think it's important to get out to locations where potential customers — who may never come into your stores — can see what you have available.”

For Bashas', that means participating in various events in the Arizona marketing area, including sponsoring the Women's Expo in Phoenix last year, “because it was an opportunity to put ourselves out in front of our target demographic,” Bendler explained.

At the expo, Bashas' operated separate booths for three of its formats to let people know what they could find at an upscale AJ's store, a Hispanic-oriented Food City or a conventional Bashas'.

“For example, there are people who may not be aware they can get espresso and lattes at AJ's, just as they can at Starbucks, or that we also sell sushi, so we offered samples of both products at the AJ's booth,” Bendler explained.

“People know Food City stores cater to Hispanics, but they may not know all the products we offer, such as tamales made fresh at the stores that can be heated up at home. And for Bashas' we sampled cakes from our scratch bakeries and had a live cake-decorating station to showcase what we can do,” she added.

Bashas' also participated in Certified Local, an outdoor event that showcases Arizona-owned businesses with active product sampling.

The company also sponsors an annual NASCAR race — the Bashas' 200 — during the spring at the Phoenix International Raceway, where it sets up a mini-store on the racetrack property with a full range of products, with ongoing barbecues outside the store, to serve the people who travel in their motor homes and spend a week at the track, “and we believe some of them end up as our customers when they go back home,” Bendler said.

The chain runs a similar track-side operation in the fall, when it does not sponsor a race, and its success with the venture has prompted it to increase the size of the facility from 6,500 square feet to 7,500 square feet, she added.

Stater Bros. Markets, Colton, Calif., is taking a similar approach at the California Motor Speedway, where, in addition to sponsoring the Stater 300 at NASCAR's annual Labor Day event there, the chain also sets up a convenience store in a tent right on the infield of the track, where 5,000-6,000 race fans park their motor homes for the three-race weekend event.

“There are a lot of food vendors outside the stadium,” said Jack Brown, chairman, president and chief executive officer, “but we bring about 2,000 products to the people, right where they're parked, so they can buy what they need, including beverages — but not beer because the track has an exclusive franchise — plus steaks and hamburgers for barbecuing, with all the fixings; 150 produce items that people use for sandwiches or fruit dishes; potato and macaroni salads from our prepared food sections; snacks, especially Slim Jims, plus water and ice, and we sell them all at the same prices as we do in our regular stores.

“The first time we did it, in 2005, we did OK but people told us they wished they had known we would be there because many had already stocked up before they came, so when we did it again last fall we doubled our volume.”

Stater has a store two miles from the track, which enables it to keep the tent store fully stocked throughout the weekend, Brown said.

Brown said he believes a portion of the race fans are already Stater customers, although as many as 75% come from parts of Southern California where the chain has no presence. “So our No. 1 priority is exposing our corporate name, products and services to customers we don't serve or who live in areas we're moving into so they will become more familiar with us. And we've heard comments from some people there who tell us they intend to try the Stater store in their neighborhood when they get back home.”
— ELLIOT ZWIEBACH

INITIATIVE 3:

Send a Message to Earth

Whole Foods Market has shown the food retailing industry not only the potential of the natural/organics trend, but also the value of fusing it into a lifestyle brand.

And while there may only be one Whole Foods, there's plenty of its genius to go around.

One key to Whole Foods' message, observers say, is the implication that natural foods are not only healthier for the individual but for the environment at large. This, observers say, taps into a sense among consumers they are doing themselves — and their planet — a favor by shopping there.

“People associate Whole Foods with taking a stand on the environment, and they are one of the brands that even mundane, mainstream supermarkets are watching because they are forming where the paths are going to go,” Carey Earle, chief idea farmer of the branding firm Green Apple Marketing, Jamaica, Vt., told SN. “What you're seeing now is some of the mainstream supermarkets making an effort to add environmentally friendly products and co-op aisles, and green brands like Seventh Generation.

“They don't have to be a complete Whole Foods, but they can still have elements of it,” Earle added. “They can show consumers what they're doing for the environment in their own community.”

Several mainstream food retailers in recent months appeared to have made strides in establishing an environmental strategy as a part of their overall brand message. These include:

Supermarkets that consider incorporating a message of environmentalism into their brands should proceed with caution, however, said Laura Ries of Atlanta-based branding consultant Ries & Ries.

“The environment is a hot button at the moment,” Ries told SN. “People want to be better citizens. But to put that in your brand you have to be sincere. Doing something small and trivial is not going to have much of an impact on consumers, and might even make you look silly.”

Consumers tend to respond to environmental messages because they take personal satisfaction from aligning themselves with altruistic causes, and they get similar satisfaction from consuming brands aligned with them, Earle said. Recent events like the war in Iraq, spikes in fuel costs and buzz around Al Gore's “Inconvenient Truth” film have brought these feelings into deeper relief, she added.

“The environmentalist has gone from the image of tree-hugger to a thing that people want to do something about. They're asking ‘What can I do?’” she said. “This carries over into them buying Seventh Generation recycled paper towels and feeling a little better about their impact.”
— JON SPRINGER

INITIATIVE 4:

Offer In-Store Meal Prep

Supermarket companies offer the ingredients for home cooking, they offer fully and partially prepared meals, and many even offer cooking classes — in fact, they do everything but allow customers to actually assemble their own meals inside the store.

That is about to change, however. Next month, McCaffrey's Markets, a four-store chain based in Langhorne, Pa., is planning to marry the supermarket format with the fast-growing meal assembly retail concept inside its Yardley, Pa., store.

“I think the concept will go well with the supermarket,” said Mark Eckhouse, vice president, McCaffrey's, which is known for its upscale positioning and strong catering and prepared food business. “We will be making suggested side dishes, and suggested wine lists.”

McCaffrey's is expanding the store by about 1,000 square feet to include the meal prep concept, which will be called Studio Gourmet. It will be run by two partners who had previously operated their own-meal assembly operation.

“We think this will be a fun concept for our customers,” Eckhouse said.

Joan Tardy and Anne Tieleman, who will run the Studio Gourmet site, had previously operated Menu Meals as part of a cooking school run by Tardy's husband, locally renowned chef Jean Pierre Tardy.

“We always wondered why the supermarkets weren't doing this,” Joan Tardy told SN. “It always seemed like the perfect fit.”

The meal preparation business has seen enormous growth during the last few years, as franchises like Super Suppers, Dinner by Design, Dream Dinners and others have rolled out more than 1,000 outlets across the country generating nearly $300 million in annual sales. The operations serve as prep kitchens to help customers assemble up to two weeks' worth of heat-and-eat meals serving four to six people.

The meals McCaffrey's will offer in Studio Gourmet will be somewhat higher end than those typically created by the meal prep franchises, according to Tardy, and will use recipes from her husband. She said the program will be a bit pricier than typical meal prep franchises.

Customers will be able to choose from three packages, including five meals for a little more than $100, eight meals for an estimated $160, and 12 meals for about $250.

Menu Meals was able to fill two to three sessions per day, with more than 20 people per session, Tardy said.

Tieleman, a food technologist, said she thinks Studio Gourmet is bringing together the right talent that may help separate it from the franchise operations.

“There are just so many synergies [with supermarkets],” she said. “You can go get your bread in the supermarket, for example, and it will just save these women so much time.”

Stacey Kaye, an independent marketing consultant specializing in the meal assembly concept, said the pairing is a natural.

“A handful of supermarket companies have contacted me,” she said. “I think we'll see more of it before too long.”
— M.H.

INITIATIVE 5:

Tie In With Cooking Shows

Supermarkets and television cooking shows appear to be a perfect marriage.

Such ventures can gain positive exposure for food retailers, sometimes on a national basis. They can be a boost for the brand image, especially if they include an endorsement from a superstar chef.

So why isn't a Food Network personality like Rachael Ray popping into chains like Pathmark on her shows more often?

One answer is that fame can be fleeting, sometimes too fleeting. “I had to make a leap of faith,” said Rich Savner, a spokesman for the 141-unit Pathmark Stores, Carteret, N.J., that Pathmark's logo would be captured when Ray and her film crew showed up recently to film at a store.

The process of building recognition through such television exposure is unlike traditional advertising, noted Sonja Tuitele, spokeswoman for Wild Oats Markets, Boulder, Colo., which has built a solid reputation with TV producers to film in its stores.

“You don't know how much exposure you will get,” she said. “Your product [or brand] may show up in one segment and not another. That is why you need an agreement that says ‘OK, we are guaranteed exposure for a particular show.’”

Wild Oats, its products and store staff have been seen on several episodes of the hit culinary competition series “Top Chef” on the Bravo network this season. The agreement is simply to supply food for the production, and gift cards for chefs to shop the stores.

Tuitele said it might otherwise cost $50,000 a year for an agency to get products placed in films for split-second exposure.

The goal is to “build our brand through these shows that attract a customer base that is consistent with people who would shop at Wild Oats, Tuitele said. “If chefs using our ingredients make beautiful, great tasting food, it's a strong endorsement for the quality of ingredients you can buy at Wild Oats.”

In addition, Wild Oats actively pitches local television stations for Wild Oats chefs to make guest appearances and do cooking segments. For Thanksgiving, the chain secured spots in 11 markets that produced 26 guest appearances, most of which were not paid for.

Rob Johnson, a spokesman for Bashas', Chandler, Ariz., said the chain has invested in a local lifestyle TV show, “Your Life A to Z,” to showcase Bashas' in-store perishables experts. The company's ready-meal chef Celia Sablone has been featured, as has Bashas' vice chairman Johnny Basha, who grilled gourmet hamburgers for a Fourth of July show. Johnson said the cost is a bargain compared to the cost of TV ads. Bashas is now averaging one or two appearances a week.

“We are trying to convey to people that the expertise they see demonstrated on TV will be continued in our stores,” he said. “It's fun to put the brand out there where people can see and understand what we are doing.”
— CHRISTINA VEIDERS