NATIONAL'S TEST OF THUMANN'S BRAND GETTING GREAT GRADES

ROBERT VOSBURGH

ST. LOUIS -- In a bold experiment, Midwest chain National Markets is betting it can fatten up sales by branding one of its delis with the name of a single major East Coast supplier, and stuffing the department like a well-dressed sandwich with the purveyor's product lines.

Now six weeks into the test, the retailer reports hero-sized positive results from its Thumann's The Very Deli Best department. Sales at the rejuvenated deli are up by an impressive 55%, while revenues storewide have grown by 25% since the conversion, according to Jim Gibson, chief executive officer and chairman of the 18-store independent based here.

"The bump in sales was beyond anything we initially thought it would be coming out of the box," he told SN. "And this is only one store."

National's exclusive, three-year branding agreement with the Carlstadt, N.J.-based supplier grants access to the complete Thumann's inventory, going beyond deli provisions to include bulk items like holiday hams and ground beef, signage and case merchandisers and old-fashioned mobile hot dog carts.

Until now, Thumann's has been a minor player in the St. Louis market, its presence limited to a small number of freestanding delis. Ray Trasso, national sales manager for the supplier, noted that National's program is a first for his company.

"It's not a franchise. There are no minimums [for] purchases, or target numbers that we need to hit," he said. Instead, the focus is on developing a flexible partnership that lets "the consumer dictate what the flow is going to be in the store."

The test store, in the affluent St. Louis suburb of Chesterfield, was chosen because the majority of its customers were educated and familiar with the East Coast, where the Thumann's name is well established.

Most local store employees, on the other hand, were not acquainted with Thumann's before the project began. During the changeover, they learned about the company's history, its products and various merchandising techniques that work for the brand.

According to Trasso, special emphasis was placed on brand knowledge so employees could answer the inevitable customer questions, "What happened here? What am I eating, and what am I paying more dollars for?"

Gibson said that the former department was a "me-too" deli, selling commercial meats and cheeses that were similar in nature to his competitors'. "We [all] had the same products, the sandwiches were made the same way; everybody used the same bologna and ham and pastrami," he said.

But now, under the new program, all but a few of the most popular non-Thumann's items are being phased out, and are replaced with items that National expects will lend its deli distinction. "You get a 2-inch or a 3-inch presentation on good Jewish rye with a kosher pickle, and the dark mustard and the ham sliced real, real thin," Gibson explained.

Very little of the deli's physical layout was reconfigured, although the visual image has been unified and strengthened under the brand. Cases are reset with Thumann's signature case tape and shelf liners, numerous danglers depicting the Thumann's logo are suspended from the ceiling and the company's black-and-red color scheme is evident throughout.

Customers waiting on line are invited to watch a pair of video monitors atop the deli case, which play Thumann's "infomercials" in continuous 90-minute loops. An aggressive sampling program focuses customers' attention on the taste of the products.

"It gels and meshes real nice," said Trasso of the many ways the deli is connecting with shoppers.

National Markets begins merchandising the Thumann's name even before customers enter the store. A special lighted Thumann's sign has been added to the store's marquee.

Also, in pleasant weather one of the two branded hot dog carts is parked out front, outfitted with an umbrella and side panels featuring the black and red Thumann's logo. The two carts sell some 100 hot dogs a week.

It costs National more to source Thumann's compared with its former purveyors. In the past, the deli operation enjoyed margins of 50% or greater; now it is down to "the high 30s and low 40s." However, Gibson noted the lower margins are more than offset by the huge increase in sales volume.

The store's gourmet sandwiches -- made with store-baked breads -- have also been the subject of more frequent rings at an average price point of $2.39. Better portion control under the Thumann's program has allowed management to minimize price increases on most sandwiches.

In making the deli a destination, National has also created a gateway to the rest of the store. It moved an open freezer case adjacent to the deli counter for Thumann's brand bulk items like sausages and hams. The purveyor's kosher pickles and deli-style mustard are also merchandised.

"People are coming from other ZIP codes to patronize our deli," said Gibson. "Once they see what we're offering, it becomes an impulse to visit other areas of the store."

This is the second department that the company has redesigned to differentiate it from competitors. Soon after Gibson acquired the chain in 1995, he ordered a top-to-bottom makeover of the produce department. The result, Gibson's Farmers Market, with its open stalls and wide variety, has become a chain signature, he said.

Branding the rest of the stores' delis under the Thumann's banner has been put on a fast track, according to Gibson. Two more stores are due to have their delis retrofitted by the end of this month.