CHAINS CAN LEARN MUCH FROM CHEESE MAKERS: ACS

STEPHEN DOWDELL

HYDE PARK, N.Y. -- U.S. supermarket chains and specialty cheese makers apparently have a lot to learn about each other before they can work together to take the business beyond the niche of gourmet food stores.

Leading representatives of each group came together to trade knowledge and experience at the American Cheese Society's annual conference, held on the campus of the Culinary Institute of America here earlier this month.

But despite the fact that many chains have been spending the last several years building specialty cheese programs -- in some cases with hundreds of items -- their executives tend to know little about the suppliers or their products and have insufficient time to learn.

Conversely, the U.S. specialty industry -- mostly consisting of relatively small cheese makers, including the "farmstead" farmer-processors that are the roots of the ACS -- keep struggling to crack the nut of supermarket distribution.

"I have been a cheese buyer for 10 years," said Phil Sloan, a buyer at Stop & Shop Cos., Quincy, Mass., a speaker on a panel of retailers. "But I don't know you. How come?"

Sloan shared a speaker's dais with colleagues representing another supermarket chain, Tops Markets, Buffalo, N.Y., as well as from the gourmet food store operators Sutton Place Gourmet, Rockville, Md., Murray's Cheese Shop, New York, and Deluca's Market, Boston.

The panelists described and showed slides of their respective cheese procurement and merchandising approaches to an audience of cheese makers, distributors and other retailers. But while the panel's expertise seemed to favor the gourmet side of the business, the interest, questions and frustrations voiced from the audience were directed more often at the mainstream supermarket side.

The exchange revealed a dilemma in which cheese suppliers are pondering how to squeeze past the barriers of expensive and complicated entry into a market where, clearly, opportunity exists; and supermarket cheese buyers are hoping those suppliers can indeed find a way in -- but may not be quite sure how to help.

"This is the first time I have been to a Cheese Society event, and I am not privy to those things that go on," Sloan remarked, obviously impressed by the knowledge about the specialty products and the business he was gaining at the conference.

He said the chain, as of the end of September, will be operating 194 stores, 150 of them superstores with cheese shops. But that was apparently no boast. "I consider us progressive, but I can see we have a long way to go," he said. "I drool in specialty shops, and say to myself, 'How much of this can I do?' Unfortunately, not much."

The quandary Sloan detailed, for Stop & Stop and presumably many chains in a similar situation, was one of being desirous of the category, but too big to do it justice.

With specialty cheese sales at only 0.5% to 1% of total sales, the business just is "not a high priority" for the chain. "But I know it is an area where we can differentiate ourselves," he added.

Sloan recounted the odd circumstances under which specialty cheeses may find their way into the chain's cases. "One day, the wife of the chairman of the board sent a note to the dairy buyer, asking why she could not find any Havarti cheese in the stores. That's how supermarkets do it, sometimes."

Other than by getting the chairman's wife interested in a product, however, the entry to that case is hard to find, at best. "Supermarkets can be a pain in the ass to do business with," he said. "Specialty cheese producers can be pains, too."

Sloan said Stop & Shop faces the challenge of translating a category that typically benefits from a narrow casting, across a broad spectrum "spread from Cape Cod to New York. We have very diverse stores, from upscale to blue-collar, with different cheese requirements."

One practical issue is how to integrate new gourmet cheeses into the distribution system. The chain has the ability to order 275 cheeses and will typically merchandise 130 to 150 varieties in its superstores. Ninety of those items move through the chain's warehouse system, while the balance must be transshipped via cross-docking.

"Control is difficult," Sloan admitted. "We rely on distributors." As demand in the category grew stronger, what went through the warehouse began to be held up to a higher criteria, he said. "We started having a store-door deliverer act as a consolidator, so we did not have to use our central facility." The tough break for specialty cheese is who it bumps up against at the store door. "DSD is the least desirable option. Unfortunately, you are competing with Frito-Lay at the back door."

The system continues to evolve; but, supermarkets being what they are, the category's idiosyncrasies of supply keep challenging its growth in his stores. "It is not all right if you don't have that product that day," he said.

Another problem, from Sloan's perspective, is the interface between chain buyers and specialty cheese marketers at the sales call level -- if such a call can even get through.

"I know it is difficult to get a buyer's time," he acknowledged. "The problem I face is how we do these things. Small manufacturers don't often think enough about their own business. I am not a product expert. I am an expert at how to get your products through our stores to our customers."

What suppliers need, and apparently many don't have, are "turnkey" packages of three, four or five products that a buyer can easily understand and perceive how it would fit into his business or not.

"We need you to help us educate. How can they sell themselves? You need to be able to answer that."

Cheese makers in the audience responded by seeking answers as well, to such questions as how they can get past the monetary barriers of slotting fees and marketing dollars to get their products in.

"It is expensive to do business with supermarkets," he replied. "The top 40 items represent a huge amount of the sales we have. If you want it, you have to bring something to the party.

"I like to think of it in relative terms. It can be a six-figure expense to slot your product in. On the other hand, it can cost nothing.

"As buyers, we try to get everything we can from manufacturers. But it does not have to be hard dollars. We think of it in terms of having the right products in the right stores at the right time."