THE NEW ERA 2006-05-08 (4)

ROSEANNE HARPER

Niche marketing has come out of the corner and taken on new importance for food retailers looking for ways to grow.

For years, large chains tried to be one-stop-shopping destinations. Yet cultural changes, channel blurring and demographic shifts created opportunities for specialized retail formats. Supermarkets that tried to satisfy everyone were criticized for pleasing no one. To their credit, retailers are shifting gears and targeting niche markets including such diverse groups as busy mothers, Hispanics and animal welfare advocates.

Larchmont, N.Y.-based D'Agostino recently targeted shoppers who support the humane treatment of food animals. Officials said they understand the demographics in their market and know, for instance, many middle- to upper-middle-class residents have some connection to the American Society for the Prevention of Cruelty to Animals.

"I knew the Certified Humane [product program] would be a good thing to do because people are interested in all-natural, and I've spent some time on farms. I care about animal treatment," said Nick D'Agostino III, president and one of the owners of the 21-store chain. "I talk to customers and they like the idea. They have an understanding of it. Certification by a third party gives them confidence. It's not just a vendor saying it. They believe it and it shows them we care. A good example is veal. There's the image a lot of people have that those animals are mistreated, and we make it clear the only veal we carry is Certified Humane."

Sales of veal and other products are up since the chain switched in January to a veal company that is certified by the Humane Farm Animal Care, Herndon,

Va., and added other products that meet the requirements for certification.

"We think it's bringing us new customers," D'Agostino said.

There are plenty of other success stories. One retailer uses signature prepared foods to stand out in a crowded market. Reaching Hispanics with carefully selected fresh produce items is driving sales for several chains, while a service counter has more than doubled seafood sales for one independent retailer.

Niche marketing delivers another bonus - by appealing to specific groups, retailers attract new customers who are likely to fill their carts with everything else they need to feed their families, retailers said. Interesting displays aimed at one group can also capture the attention of other shoppers.

Retailers can benefit by putting energy and money into attracting particular segments of the overall market, industry sources told SN.

"A lot of retailers refer to 'the consumer' as if consumers have been cloned and have the same needs. They try a one-size-fits-all approach that doesn't fit," said Brian Salus, president of Salus & Associates, a Midlothian, Va., consulting firm that works with a number of retailers.

Other industry experts said they think retailers just don't want to put the money into niche marketing.

"There are too many retailers who look at niche marketing as an expense when they should look at it as an investment," said supermarket industry veteran Burt P. Flickinger III, managing director of Strategic Resource Group, a New York-based business strategy consulting firm. "An important market is the Latino shopper. The big chains, with the exception of a few like Bashas,' H-E-B and Publix, do a poor job of marketing to Latinos."

Day's Market, a single-unit independent in Heber, Utah, however, is aggressively courting Hispanics. Chris Hummer, produce manager at Day's, which is supplied by Associated Grocers of Salt Lake City, said he saw the population changing in his market area a few years ago and decided to bring in products that appeal to Hispanics.

In a 12-foot section in the produce department, he is merchandising specialty ingredients that Hispanics frequently use in cooking, including fresh, dried and pickled chilies; jicama; jamica, a dried hibiscus flower; and tamarindo. There are about 30 different items piled high in colorful, terra cotta bowls. Pi±atas sway over the top of the display.

"It's convenient for Hispanic shoppers and, of course, they buy other things as well. It's boosted sales for the whole department," Hummer said.

Customers who linger generally buy more, he said. Hummer pointed out that Hispanic customers buy more groceries per trip than other shoppers and they also purchase more fresh items, especially produce and meat, because they cook a lot from scratch.

Hummer said he positioned the display at the beginning of the produce aisle, the first in the traffic pattern, so it's one of the first things customers see. It displaced containers of cut fruit, which have been consolidated in another display.

"You know, the display looks great," Hummer said. "It slows down the non-Hispanic customer, too."

Carey Henning, co-owner of Henning's Market, Harleysville, Pa., is targeting the busy consumer who wants to put dinner on the table quickly - or better yet, eat dinner there. A tall, lighted sign at the edge of the parking lot announces what's featured on the menu on any given day.

Henning's, having moved into new space three years ago, decided to target several niche markets with different areas of its newly designed quarters. There's a meal ingredients aisle for shoppers who just want to grab the ingredients for one meal in a hurry. There, the merchandising scheme puts together entree items, side dishes, even condiments and paper plates. Then, on the other side of the 62,000-square-foot store is the food-service operation featuring a large variety of items, most of them made from scratch, on a self-serve buffet.

"Our buffet is very successful," Henning said. "I know we bring new people in with it. Right now, we're starting a theme night and we'll be increasing our seating by 30 or 40 seats. That'll be in addition to the seating for 180, which is sometimes completely occupied."

The lunch business is big, sometimes creating traffic congestion and a shortage of seating, Henning said. To ease the gridlock, he has taken out a service hot food counter and has made two self-service counters so two lines can form. Customers do line up at lunchtime to help themselves to the freshly cooked fare that retails for $5.99 a pound, Henning said.

His prepared, hot foods sales have doubled year-to-date. Building on that success, Henning in February launched an all-you-can-eat evening buffet priced at $7.99 on Friday, Saturday and Sunday.

"We get people from farther away," he said. "When you go out to eat in the evening, you tend to drive a little farther."

Henning credited Salus with helping him put together an interesting.

"Grocery shopping bores people," he said. "What excites them are specialty stores. So, that's what we tried to do here, break it up into small areas that are convenient and fun to shop."

Another retailer, who just completed remodeling one of his three stores, also targeted busy meal preparers with a menu featuring made-from-scratch meals to take home.

Mark Brigido, co-owner of Brigido's Fresh Market, North Providence, R.I., filled up his menu with Italian dishes "made like nobody else makes them," he said. Signature meatballs and eggplant rollatini are the stars on a from-scratch menu with at least 24 new items, made to appeal to families. Coming in the fall is bolo, a Portuguese meat pie that Brigido's grandmother used to make.

Brigido worked with consultants Jim Frackenpohl and Meg Brewer, principals at Rochester, N.Y.-based Making A Statement, to re-do his flagship store. The trio aimed to make the fresh departments a destination by targeting busy cooks and health-conscious consumers. "We wanted to make sure each of his fresh departments had some signature products, and it is working," Frackenpohl told SN.

"We tell retailers that if they can't identify a niche market they want to target, they can create one with products unique to their stores," Brewer said.

"Mark's sales are up double-digits in all his fresh departments and I'd attribute that to niche marketing," Frackenpohl said.

Brigido confirmed the sales jump. The store's meat/seafood director, Eric Marsland, said he attributes an actual doubling of seafood sales in the last year to a new service seafood counter. An array of value-added items, prepared in-store, such as teriyaki-marinated salmon filets and breaded scrod ready for the oven, get a lot of the credit, he said.

With the remodel completed last fall, the service seafood department was one of the first departments to see dramatic sales increases.

"On Christmas Eve, we sold $8,000 in shrimp alone, and that was on a day we closed three hours early," Marsland told SN.

Just this past Good Friday, seafood sales had quadrupled from last year's Good Friday when the store had only self-service seafood.

"A lot of the success stems from the fact that there's someone there to help customers and answer their questions. People aren't that used to buying seafood so they want a place they can trust. We've given them that," Marsland said.

Brigido's also added a full-service in-store bakery, and increased the selection of all-natural and organic products in the fresh departments.

In fact, mainstream retailers increasingly use organics to reach a niche market.

"We don't have very recent figures, but I can tell you that the wedge of the organic sales pie that belongs to supermarkets is getting bigger," said Holly Givens, spokeswoman for the Organic Trade Association, Greenville, Mass. "It's not a groundswell, but there's a steady increase."

Reaching the Market

Identifying a desirable niche market is just the beginning. Courting the market requires a continuous effort, and many retailers balk at making the commitment of time, money and marketing, sources told SN.

"They see it as an unnecessary expense," said Burt P. Flickinger III, managing director, Strategic Resource Group, New York, a business strategy consulting firm. Actually, the effort usually pays off, said Flickinger, a supermarket industry veteran.

"Effective niche marketing requires an investment in emailing, drive-time radio and cable TV spot ads," he said. "That's a few hundred dollars - not expensive, except maybe during election time."

Retailers said they make a point of getting the word out to shoppers, and also train associates to do the same. For instance, at Brigido's Fresh Market, North Providence, R.I., meat/seafood director Eric Marsland said his success in selling seafood can be traced right back to effective training. Associates know which species are mild and which ones are best for grilling, and they tell customers what's coming next. For instance, in the summer there will be a clambake kit available, with everything included, he said. As outdoor cooking season approaches, the retailer will use bag stuffers to let customers know the kits are available.

When D'Agostino, a family-owned independent based in Larchmont, N.Y., decided last fall to aggressively promote Certified Humane products, the retailer called a press conference to spotlight the meat and dairy products that are certified by Humane Farm Animal Care, Herndon, Va.

It doesn't hurt that the company's president is the program's No. 1 supporter. Nick D'Agostino III is personally pushing the promotional efforts. He's even gone so far as to request other vendors to get the certification.

"It's tremendous when the president and one of the owners gets behind a cause like Certified Humane because it gets everybody rallying around it," said Anderson Chung, marketing director for the chain of 21 stores.

ROSEANNE HARPER

Finding Your Niche

WASHINGTON - To stay ahead of the competition, food retailers are opening niche market stores and expanding specialty service, including fresh food departments, according to the 2005 edition of the Food Marketing Institute study, "Facts About Store Development."

Surveyed companies said they were extremely interested in developing niche stores to reach highly selective consumers and build market share. Among the most popular formats: gourmet/specialty, offered by 66.7% of companies; followed by natural/organic, 50%; and ethnic, 25%.

Retailers also are relying more on specialty services and departments to attract and keep shoppers, according to the report. Among the notable trends, the report pointed to dedicated space for cooking demonstrations, offered by 72% of new stores. The trend is being driven by consumers who have less cooking experience and consumers who seek to broaden their range of skills and view cooking as a special event, the survey noted.

To offer convenience, more than half of the companies also have a coffee bar in at least one store.

The findings were based on responses from 77 companies that are members of FMI, representing 4,208 stores.