SPARTAN GETS CENTERED

MARYELLEN LO BOSCO

GRAND RAPIDS, Mich. -- A strong focus on Center Store is one key strategy that Spartan is using to ensure its profitability and competitiveness into the next century.

"We are very bullish on Center Store," said Kevin Schlosser, vice president of sales and marketing for Spartan Stores, the 8th-largest wholesaler in the United States, here. Spartan supplies about 400 independent supermarkets and 44 corporate stores out of two distribution centers in Detroit and Grand Rapids.

One of Spartan's biggest challenges is to "get our retailers to think, act and strategize like a chain," said Schlosser. "The perimeter is very important," he continued. "It's the point of difference between us and the alternatives. But we have to be aggressive and hungry, and draw the line in the sand in Center Store."

Schlosser went on to say that convenience stores and other classes of trade are offering grocery products and are "playing in categories we considered ours, and that they now consider theirs." Many of these products are impulse items like snacks, soup, detergent and cereal -- products that can be found in every home in the United States.

It's Spartan's job to grab back some of those dollars and make sure to remain healthy in the top 10 categories driving significant dollar sales, including cereal, detergent, beverages, pet food and paper products, Schlosser said.

One new program being used to accomplish this goal is "pallet pro," which is built on Center Store sales.

With pallet pro, Spartan ships large quantities of merchandise that it has negotiated with manufacturers on a weekly basis. Stores get automatic distribution of these non-advertised items, usually one or two at a time. "We have 230 customers on the program," Schlosser said.

Another new program is "speed to market," which gives retailers the ability to receive new items from the warehouse within 72 hours after the item has been shipped to Spartan. This cuts down considerably on the lead time, which usually can be up to 14 weeks.

"A significant number of customers -- north of 280 -- have signed up to receive the new items," Schlosser said. "For the most part, they are Center Store items from manufacturers like Campbell's, Procter & Gamble, Clorox and Kellogg."

Retailers have responded very favorably to both programs, Schlosser said, since they are seeing strong incremental sales. With the pallet program, Spartan is putting highly merchandisable items on sale and creating something of an impulse-oriented buying atmosphere, not unlike the club stores.

With the new items, Spartan ships out planograms and category information to help the retailer put the product in the right place, which also helps sales.

In addition to these new programs, Spartan offers its retailers a wide spectrum of promotional programs, from temporary price reductions to television advertising. "We are always looking to strengthen our promotional offers," Schlosser said. Spartan's customers provide syndicated data, which helps the wholesaler and retailer get closer to the consumer, which is "what it's all about," he said.

Spartan's major promotional program for retailers is called CLOUT. It offers merchandising help through retail counselors and through account managers who have an operational and sales focus. Retailers are also active participants in the CLOUT program and play a critical role in creating merchandising strategies.

Spartan also stages retail selling shows, in which general merchandise and health and beauty care buyers can come in and look at trends in the industry.

Not surprisingly, a private-label program is also a big part of the service offered to customers, especially in the center of the store. "Private label accounts for 15% of our dollars and 20% of total case sales," said Schlosser. "We have about 2,000 private-label stock-keeping units."

Spartan has two tiers of private label: the Spartan brand, which is the national-brand alternative, and the Home Harvest value-oriented brand. There are about 1,650 SKUs in the Spartan line and 350 SKUs in the Home Harvest line.

"Home Harvest, which replaced Save Right, is about a year old now, and it is doing quite well," said Schlosser. "It has produced more dollar sales. Private-label case sales [in total] are up 2 1/2%."

Most customers buy private label. "About 85% of our total line is in all of our stores," said Schlosser. "[Our brand] is widely recognized in our marketing area and is looked on as a national brand in this marketplace." Spartan services the tri-state area of Michigan, Indiana and Ohio.

Schlosser said that so far consolidation has had no major impact on Spartan, although it is clearly a growing concern. "Wholesalers are getting into the retail business to protect their wholesale business," he said, adding that wholesalers have seen the effect of consolidation on the supply side, especially with private label.

He explained that when a retailer or other large entity gets even bigger, they can put pressure on manufacturers to supply them first, since they are doing a larger volume business. Nonetheless, so far there are still other viable alternatives of supply, if one source runs dry, Schlosser said.

"Wholesalers need to be reflective" and not manifest a "knee-jerk" response, he said. "Our whole drive is to be cost competitive through efficient operations and look outside the box to [carve out] nontraditional roles: for example, consumer direct, third-party logistics and distribution services, and so forth. As we get better and more efficient, we can eliminate duplication, and our retailers benefit from that."

One program on the warehousing side that is helping with efficiencies is the "super combo." According to Michael Frank, vice president of logistics, Spartan is now shipping multitemperature commodities in one trailer. This allows the retailer to ship everything from dry groceries to produce and frozen food in one truck.

There's a cost savings for Spartan to run one truck, and from the retailer perspective, the back door is open only once. On the other hand, Spartan is now delivering every day, with a full offering. This gives the retailer a significant advantage, since it allows them to minimize back-end stock, and they get better inventory turns, less damage, lower labor costs and higher shelf-stock rates, Frank said.

"There are difficulties for Spartan," said Frank, since "all the commodities have to catch the same truck. We have to do a tremendous amount of internal cross docking between buildings. There are three buildings: one for perishables, one for general merchandise and one for grocery.

"The advantage is heavier on the retail side. Our advantage is that we have a sales presence in the back room of those stores more often, and it cuts out the street jobber for meat and produce," Frank added.

Spartan has been running the super-combo program for about a year and a half. To run the operation, the wholesaler had to buy several more refrigerated trucks, Frank said.

When asked about consolidation, Frank referred to the Food Marketing Institute's recent study, called "Vision 2005," which pointed out that while 12 years ago 367 wholesalers supplied retailers, that number has dwindled to 96.

"But the same study drew [the conclusion] that while there are going to be limited large national players, there will also be healthy regional players. Clearly, Spartan has positioned itself to ensure its role as one of those strong regional players," Frank said.