Safeway’s Restaurant Will Test Limits for Supermarkets

A couple of months ago I wrote a column for this space entitled: “Reality Check: Supermarkets Are Not Restaurants.” The point was that supermarkets need to run their food-service businesses differently than restaurants, because the two types of operations rely on very different business models.

Supermarkets have tried for years to emulate the marketing and merchandising styles of restaurants, often without success. But in recent years successful in-store, café-style food-service efforts by operators such as Whole Foods and Wegmans indicated a renewed push in this direction. A few independent supermarkets have even stuck their toes in the upscale restaurant business with units located near stores.

Still, the news about Safeway opening a freestanding restaurant in Redwood City, Calif., last month, raised eyebrows. A Page 1 story about this unusual venture was published in SN on June 25.

Safeway’s eatery, called The Citrine New World Bistro, is a 5,000-square-foot, 125-seat establishment that at first blush doesn’t seem extraordinary. Its menu favors a better-for-you food approach that splits into five regional flavor profiles. The company is mostly mum about the project but considers it a way to test new food concepts. There is only one Citrine unit, so it hardly makes a dent as a competitor.

Yet a closer look at this fast-casual concept reveals more interesting details. First, Citrine isn’t located near a Safeway store. It’s menu appears to be a marketing vehicle for Safeway’s core store-label items, such as O Organics chicken, Rancher’s Reserve tender beef, and Primo Taglio meats and cheeses. The retailer has reached deep into the ranks of restaurant experts in assembling the Citrine team, people with experience at companies ranging from McDonald’s to Wolfgang Puck. Citrine was designed by WD Partners to support the launch of multiple units, and already the retailer was advertising for managers to run additional locations, even though no one has confirmed expansion plans.

Some observers are saying a restaurant venture has limited revenue upside for a giant supermarket company because it would never represent a major percentage of sales. This initiative raises other questions. Will consumers want to dine out on the same brands and foods they eat at home? Will learnings from restaurants really translate to the retail space? Do consumers really seek a better-for-you foods direction or just give lip service to that?

The risks to Safeway increase if Citrine morphs from a testing lab to a bona fide expansion business. Despite uncertainties, Safeway is making a smart move here. The potential for learning about consumer tastes and raising the profile of store brands is strong. Restaurants tend to be ahead of retailers in adopting new food trends, so this venture would be a way to close that gap.

The existence of Citrine is proof to consumers that they are getting a restaurant experience at home with Safeway’s brands. Moreover, it’s another rung on the ladder of choices that Safeway offers: food ingredients, value-added products, prepared meals and restaurant dining.

That brings us back to the original point, that supermarkets are not restaurants. That’s still true. However, Safeway is trying to show that a supermarket company can successfully operate a restaurant if it embraces that economic model and culture.