OF INDEPENDENT MEANS

GREG GATTUSO

CHAMPAIGN, Ill. -- This region of central Illinois has a population of 100,000 -- and a 230,000-square-foot Meijer's suspercenter.

There's also a 178,000-square-foot Kmart supercenter, four Supervalu County Market discount stores and two Schnuck Markets measuring 60,000 and 70,000 square feet.

One would think it impossible for an independent supermarket to do business in a climate as competitive as this, but that is far from the case.

A group of independent store operators from this and other parts of the northern Midwest told SN they expect sales to remain flat or increase in the second half of the year.

To achieve this, they are employing one or more of the following strategies:

Creating enticing perishables departments;

Promoting home-meal replacement programs;

Partnering with wholesalers to increase sales of private-label items and fine-tune product assortments;

Embracing modern technology, including electronic customer-loyalty programs; and

Emphasizing customer service.

Kirby Foods, based here, operates nine IGA stores in central Illinois -- including three in the heavily competitive Champaign-Urbana region -- fighting for consumer dollars against the above-mentioned formats.

Vic Buraglio, owner, said sales in the first half of the year were impacted by the opening of the second Schnuck store in January. But he expects his sales to rebound later this year after the "newness" of the Schnuck wears off.

"We'll come back some, but we probably won't be back up to 1996 levels," he said.

The company is relying heavily on its frequent-shopper program, which it launched in 1995. To date, about 70,000 "hometown variety cards" have been distributed. Every month, the top 30% of customers receive direct-mail promotions. Other times, the store markets to the middle third or "lost customer" groups.

Sales figures have proven the program's acceptance among customers, Buraglio said. And it is helping to increase profitability in private label and other areas.

"In looking at our loyalty-marketing card, we found that $1 of every $14 spent in the store was spent on private label, so we just tried to enhance that a little more," Buraglio said.

A recent four-month promotion featured a sweepstakes in which every time a customer bought a private-label product, his or her name was automatically entered in a drawing. Each month, one person per store won a gift certificate whose value was based on the increase of private-label sales that month. The value of the certificates ranged from $250 to $400.

A currently running promotion rewards top customers with a prepaid phone card in time for Mother's Day.

"I think the challenge is to continually give the card a value so that they do use it most of the time, whether it be a small order or a big order," Buraglio said.

"I think we've really seen some significant challenges," said Bob Bartels, outgoing FMI chairman and president of Martin's Super Markets, South Bend, Ind., "We basically have low-growth markets -- in some areas no-growth markets -- with more dogs growling over the same or fewer bones, as mass merchants and alternative channels come into play." "Independents face a unique challenge," Bartels said. "We have more-limited resources, more-limited staff. We have less room for error."

However, technology can be one key to staving off competition, Bartels said. His own stores are launching a baby club and a pet club to hang onto key shopper groups.

"We're at a crossroad where we really need to make the transition from being slaves to technology, to using the technology to do a better job to sell more product more efficiently," he explained. "I think that is a real challenge for independents. We have fewer resources internally, and we have to find a way to get the job done. It is possible."

Other operators said they are focusing on produce, private label and customer service to win increases in shopper dollars.

Steve Erickson, president of Erickson's Diversified, Hudson, Wis., predicts his sales will be stronger in the second half of 1997 as compared to the first half, because the company will place more emphasis on "what the customer needs," including fresh food and good service.

"We're positioning ourself more in the fresh-food arena because we don't feel that anybody can do it as well as we can," Erickson said. "Convenience stores or mass merchandisers can't sell fresh food. Neither can the supercenter format. Target, Kmart, Wal-Mart -- they don't know how to sell fresh food."

"I think we're getting into higher-service levels in our stores, like people were used to years and years ago," he told SN. "All of us in the supermarket business were getting away from that. I think we're going to handle each of our very good customers with kid gloves because they are so valuable to us."

The company's five stores in Wisconsin and 13 in Minnesota face competition from a slew of other independents, including chains like Hy-Vee Food Stores, West Des Moines, Iowa; convenience stores; and the ubiquitous supercenters which dot rural landscapes.

"Mass merchandisers take a lot of grocery tonnage, and convenience stores are trying to capture more grocery tonnage," Erickson said. "Anybody who sells anything to eat is competition. Everybody has got to eat. It's just a matter of what and where."

Ronald Graff, president of three-store Columbiana Foods, Boardman, Ohio, expects sales to stay flat for the balance of the year. And with better weather arriving for spring and summer, Graff expects consumers to eat out more. He said his stores will promote their meal solutions to recapture those food dollars.

"We're heavily advertising home-meal replacement, and cross merchandising in-store displays," he told SN. One of the more successful displays is a "Sloppy Joe" display, with ground round, cheese, tomatoes and cole slaw all merchandised in the same area. Another successful meal-solution display is a bacon, lettuce and tomato presentation, he said.

His stores are also emphasizing perishables and private-label items in an effort to be competitive with rivals including Food Lion, Sparkle Markets and a Super Kmart, located six miles from its Youngstown, Ohio, store. "We're really big on produce," he said. "We feel produce is a really big attraction because of all the health kicks out there. All the health foods are related to produce."

The company's automated front-end system, which it hosts with its wholesaler, Giant Eagle, helps identify opportunities for building its Giant Eagle private-label brand. Currently, Columbiana stocks 1,000 private-label items and expects private label to account for 15% to 20% of sales.

"Independents are very entrepreneurial and tend to be very close to their customers," explained Bartels of Martin's Super Markets. "Which gives the independent a little different perspective in that the top management of independent stores face customers and customer issues daily at the store level. I think that focus is the unique perspective."