THE NEW WORLD OF INDEPENDENTS 1998-05-04 (3)

ROSEANNE HARPER

LEOMINSTER, Mass. -- The small family-owned Victory Super Markets here has cooked up a fresh identity for itself, and it's paying off.

Building on a winning recipe that features its Market Square fresh food and meals concept, the 16-unit independent is poised to enter new markets currently dominated by "the big guys."

Victory's first foray into the home-meal replacement arena, Market Square, got its debut a year and a half ago, as reported in SN, March 24, 1997, at a 60,000-square-foot store in Kingston, Mass.

Now, a year later, "It is a success. We're very pleased with it," said Arthur P. (Jay) DiGeronimo Jr., Victory's president. "We even made money in the food court the first year. Not a lot, but we did. We had just hoped we'd break even."

In an interview with SN, DiGeronimo said that on every count, the Market Square concept has performed above projections, and that its food court area alone is contributing 3% of total store sales.

Anchored by a cappuccino bar and set off with huge, colorful produce displays, the Market Square fresh power aisle combines the ambiance of a European-style fresh marketplace with meal solutions that include ready-to-eat fare and a variety of chilled, ready-to-heat items.

DiGeronimo gives the concept a big share of the credit for pushing total store traffic and sales volume beyond what Victory thought it would be doing at Kingston.

"First and foremost, Market Square created an identity for us, and the investment has been worth it. Our return on investment has been better than we had anticipated," DiGeronimo said. And Victory executives view the creation of its new format as an excellent use of capital, because of what it will reap in years to come.

"Ultimately, developers and landlords will take notice, and that will give us opportunities in markets we wouldn't have ventured into with the traditional format," DiGeronimo explained.

The move is on. An expanded version of Market Square will star at the chain's newest and largest-yet store. It will include new elements such as a hot pasta station, a sushi bar, an Asian grill and a carving station.

The 65,000-square-foot store is set to open here in Victory's hometown, during the first week in June. It will replace a 31,000-square-foot traditional-format Victory store, that once was the biggest supermarket in town and now is the smallest, DiGeronimo said.

Later in the year, the Market Square concept will get its first out-of-state unveiling, at a store being built from the ground up in Derry, N.H.

Here in Leominster, the new store will stand just two miles from the site of an 800-square-foot grocery store the DiGeronimo family bought 75 years ago, which eventually led them into the supermarket business.

The journey from then to now has been a gradual one, DiGeronimo said. He added that, even five years ago, he would not have thought the chain would be taking the direction it is today. "Not in my wildest dreams," he mused.

Indeed, until the company opened its store in Kingston, it had clung to a traditional format for its supermarkets, with none topping 40,000 square feet.

As DiGeronimo explained the evolution, with time its new stores were made a little bigger and they carried more variety; but it was at Kingston that the chain made a sharp turn toward the future.

South of Boston, midway to Cape Cod, Kingston represented brand new turf for Victory. Previously, the independent had kept its units closer to its home base here, 45 minutes north of Boston.

Since the larger chains have held the lion's share of the New England market for a long time, Victory's previous strategy had been to "go where they ain't." As the other chains continued to expand, it became increasingly difficult to avoid going head-to-head with them, DiGeronimo said.

The Kingston site, however, was smack in the middle of territory staked out by the likes of Stop & Shop Cos., Quincy, Mass.; Shaw's Supermarkets, East Bridgewater, Mass.; and Hannaford Bros., Scarborough, Maine.

It was chosen on purpose. Victory officials figured it provided a good testing ground because, if they could make it work in the land of the giants, they could do it anywhere.

It worked.

DiGeronimo attributes the new format's success to a mix of traditional grocery products and decidedly upscale items merchandised in an environment that features flexibility, consumer education and a willing and able staff of trained associates.

Engineered for Victory by Design Associates -- Riesenburger, Roberts & Leenhouts, a Rochester, N.Y., consulting and design firm -- the winning concept does a good job of differentiating Victory from other supermarkets in the area, DiGeronimo said.

As recently as two years ago, Victory was still wrestling with the challenge of setting itself apart in Kingston, in order to survive the heavy competition down the road and across the street.

"We had secured the site, which was an old Purity Supreme store, and we were about to begin renovating it, but we weren't sure what we wanted to do there," DiGeronimo said.

Indeed, he said that had he not visited a Wegmans Food Markets unit in Wilkes-Barre, Pa., Victory's Market Square concept might never have been born.

"When I walked into that store I had the epiphany of my business career. I thought it was great that anyone was doing this with food. My impression was that these people love food. The presentation was so good. It was fun."

DiGeronimo said it was then that he knew he had to somehow make food shopping at Victory more fun. "I just kept thinking about how we could do something like that."

Shortly afterward, he took several DiGeronimo family members -- both from his generation and from the older generation -- and key employees on a tour of several different Wegmans locations.

"I think the best thing supermarket owners and managers and buyers can do is travel," DiGeronimo added. "Go see what other people are doing. Go see Wegmans and EatZi's and Ukrop's. Just find out what's going on out there."

Not that Victory's Market Square is a copy of Wegmans' successful Market Cafe food courts, or anyone else's, for that matter. There are some Market Square features that could strike an observer as "Wegmanesque," but Victory's concept has its own unique flavor.

"We'll be adding new things to it, too, at the new store. There will be sushi and the pasta station, for example, and we'll bring the meat department into Market Square," DiGeronimo said.

"We've had tremendous success with bakery at the back corner of the Market Square aisle because of its placement. That's where we'll put meat and we'll move bakery up further in the aisle," he added.

The service, open-production meat department has been given a top spot in Market Square in the new store, "because meat is such a big part of home-meal replacement," DiGeronimo said. "We'll offer a lot of value-added meats, and then it gives us a great place to do cross merchandising [with items from other parts of Market Square]."

DiGeronimo said the learning process at Kingston has informed the additions at the new store; and some of those elements, such as hot pasta and the sushi bar, will be retrofitted into Kingston.

"One of the major keys to the success of Market Square is the flexibility that has been built into it. We can change as trends change, with little trouble. The Design Associates are experts at that," DiGeronimo said.

This flexibility has even made it possible to change merchandising displays around in Market Square on a weekly, and sometimes daily, basis in order to create a new look.

"Just about everything is portable. We can move the lighting around easily. The power grids that Design Associates installed allow that. The whole design of Market Square puts emphasis on color and putting spot lights on the food. The idea is to highlight the product itself and neutralize the space that doesn't have food displayed," DiGeronimo said. "For instance, with strawberry season coming, we can move out cases of strawberries and spotlight them." The movable lighting helps associates to create the desired lighting easily.

Since most of the displays are easily movable, the Market Square aisle is changed around at least weekly to create a different, random flow of traffic, DiGeronimo said. He had been concerned in the beginning that customers would not like the constant changing around, but his fears were unfounded.

"They like it. I've had no negative comments at all. It makes it more like an open-air marketplace where they can look around and move about easily to what attracts them."

DiGeronimo added that he believes Market Square's easily navigable traffic pattern, with its colorful displays of produce and appealing ready-to-eat foods, creates a marketplace environment that spurs customers to shop the area frequently.

"The whole idea is to get people into the European shopping pattern where they buy a little bit of product several times a week. In Europe, you buy your fresh products every day or so."

DiGeronimo pointed out that the idea of shopping frequently at Victory sets the stage for cross merchandising and the opportunity to get customers to trade up. They come back for fresh foods, either already prepared or for use as ingredients, and then see other items that will provide other solutions for them.

"They can take care of all their needs. In fact, one of the things in our favor is that we're still a traditional grocery, as well as a provider of upscale products. For instance, we've brought in Certified Angus meat, but we also carry all the regular USDA grades we have always had. And we have traditional lines of cheeses, but we can also point out a Pecorino we imported from Italy so consumers can try it," he said.

While the variety and presentation of high-end products can give Victory an edge over traditional operators, its regular product lines with competitive retail prices can also help compete with the specialty food stores and alternate formats that might spring up, DiGeronimo said.

But there's effort that must go into educating the supermarket consumer, DiGeronimo said. And it's an effort carried out by "a staff that's willing to do what has to be done." The education of the consumer and the staff are also crucial ingredients in the Market Square recipe, DIGeronimo said.

"There's a big learning curve when it comes to getting customers to trade up. You just can't expect everybody to buy the higher end product without giving them some to try," DiGeronimo said. That's where "sampling, sampling, sampling" comes into play.

"We're committed to introducing customers to foods they're not familiar with." The Kingston Market Square aisle has demo stations as a major feature, and even more stations will be added in new stores, he said.

Sampling and educational fliers and pamphlets are the cornerstones of customer education at Kingston, DiGeronimo said.

"One way we know that more customers are trading up at Kingston is that holiday sales there are so good. Holidays are when people are apt to buy something special. For Easter, for example, at Kingston, we had a 25% increase in total sales over a normal week while our next best store had only a 12% to 14% increase," DiGeronimo said.

Just as a blaze of color from the in-your-face produce department catches customers' attention, the cappuccino bar and gourmet pizza station are designed to give them a sense of warmth and comfort.

Commenting on the cappuccino bar as an anchor, DiGeronimo said, "Think about coffee, what a social occasion it offers. People meet for a cup of coffee." He added that the coffee bar invites customer-associate contact.

"It's sort of natural to ask a customer who's standing nearby or looking at the menu if he'd like to try a latte or a cappuccino. Looking at the whole food court, you know we've joined the fight and have gone into the restaurant business," DiGeronimo said.

The cappuccino bar will continue to anchor future Market Square food courts, and hot foods will still form the centerpiece because they underscore freshness and also provide an easy way for the customer to try the foods, DiGeronimo said.

A gourmet pizza station has served, for instance, to introduce customers to the quality of the product; and now that they're aware of it, they're buying more chilled pizzas to take home, DiGeronimo pointed out.

The same is true of fresh soups. They're still offered hot, but chilled containers are now outselling hot soups three to one, he added. That has occasioned the addition of 12 feet of cases for chilled, prepared products at Kingston. In addition to in-store prepared items, the cases are stocked with some entrees and sides from regional manufacturers such as DeLuca and Hans Kissle.

"We'll have at least 28 to 36 additional feet of cases for chilled product at the new store," DiGeronimo said.

Still, the selling opportunity that ready-to-eat foods presents is a crucial ingredient, he emphasized, and recruiting chefs and other staff from the restaurant industry has proved a boon to sales volume.

"Chefs are great at finding ways to use products that haven't sold. We're not afraid to roast too many chickens because we know our chefs have great chicken soup and pot pie recipes that they'll use those chickens in."

While DiGeronimo credits the concept developed by Design Associates with his store's success, Design Associates give much of the credit to Victory's follow-through and attention to store-level execution.

Terry Roberts, a partner in Design Associates, told SN that a year and a half after the introduction of a concept, "It's almost unique in our experience that we see execution still at this level. We don't often get the opportunity to be on the same page like this with a retailer."

Jim Riesenburger, another partner in the consulting and design company, agreed. "They sell food at Victory. It's not bottom-line thinking there; it's top-line thinking. If you pay attention to the top line, the bottom line takes care of itself. Jay knows that. He has accepted our vision."

Riesenburger praised Victory's owners and management team for giving Design Associates free rein to create an integrated HMR concept for the chain. "They're committed to the idea of it and recognize the synergies between the different parts, while the big chains tend to want to try HMR piecemeal," he said.

Will the expanded Market Square concept at the newest store be Victory's prototype for the future?

DiGeronimo says no. "The Design Associates won't allow us to say anything is a prototype, because it sounds like it's forever. Our concept is evolutionary. We'll change as often as we need to to keep up with trends."

He's already thinking about what changes and improvements the chain might implement after the new store has its Market Square up and running.

"We've built the lunch business, and the chilled products are selling. Now, we have to start thinking about a supper menu. We'll have to pay more attention to the evening."