DEFINING THE DESTINATION

MARYELLEN LO BOSCO

MARLTON, Pa. -- One way that Zagara's Specialty & Natural Foods distinguishes itself in this upscale market is by making available an ample number of exclusive private-label selections in the grocery aisles.

Zagara's, a 25,000-square-foot unit here, has been a destination stop for the 11 years it has been in business, drawing customers from a radius of 10 miles or more, according to Alan Tempest, director of marketing for Genuardi's Family Markets, Norristown, Pa.

Recently acquired by Genuardi's, Zagara's is now poised for a major expansion, with two new units opening later this year, in Mount Laurel, N.J., and Jenkintown, Pa. An additional three stores are planned for next year, and, according to John Zagara, president, the chain will continue to open new stores at the rate of two or three per year.

Zagara said that the definitions of specialty and natural food depend on the customer. "Some people won't eat anything with artificial colors and flavors, and they define that as natural," he said. "Some customers feel that taste is almighty, and that's what makes it specialty food.

Others don't care if it's natural or specialty; it tastes good, then it's specialty. I want to make sure we are able to consume all that business, so we don't profess to be one or the other -- natural or specialty."

Zagara's philosophy seemed evident during a recent tour of the store. While there are many selections that can also be found in the natural-food sections of supermarkets, these selections are merchandised alongside products that may be high in fat or in sugar, or that may contain artificial ingredients. Clearly, there is no rule at Zagara's that prohibits the store from carrying certain kinds of products found in many categories at Zagara's, and, according to John Zagara, the presence of these items is one important component of how the specialty store distinguishes itself in the marketplace.

For example, in an aisle reserved for both bulk items and packaged beans and grains, 50 stockkeeping units of Zagara's packaged items are merchandised on Metro racks. They include grains, beans, pulses, seeds, fruits, flours and sugar. Blueberry muesli, whole-wheat stone-ground flour, barley, green peas, sesame seeds, whole filberts, licorice bits and long-grain brown rice are some of the selections available in Zagara's brand.

Zagara's spices are displayed on a 2-foot Metro rack, 10 shelves deep. Choices range from the ordinary to the exotic, with prices ranging from about $3 a jar to close to $5 a jar. Whole nutmeg and paprika are available, as well as whole fenugreek. Other spices are targeted toward ethnic cooking: gumbo file, herbs de provence, Creole seasoning and mild curry, for example. All Zagara's spices are labeled as non-irradiated. Another Metro rack next to the spices holds sea salt, chocolate, and both Frontier extracts and Zagara's extracts and essences. These included raspberry, cinnamon, coffee, banana, cassis, blueberry and lime extracts.

Zagara's coffee club offers 47 SKUs of whole-bean coffee, with prices ranging from $8.98 or $9.98 a bag to $17.49 a bag for Kona decaffeinated coffee.

Some of the other categories of Zagara's products include Riskless Bliss Caramel Corn, bagged bean and grain soup mixes, organic pasta (10 SKUs), marinara pasta sauce (24 ounces featured at $3.98), balsamic vinegar, barbecue sauce, olive oil, peeled tomatoes, natural meat, multigrain pancake mix, maple syrup, and tortilla chips and salsa.

As part of its expansion program, Zagara's will increase offerings in its private-label line "substantially" this year, according to the company's president. "We've created good, long-lasting relationships with some of our sources, and now that we've joined up with Genuardi's, we have the ability to bring in [these items] on a much larger scale. We are going to continue to protect that, so we can differentiate ourselves in the market better," Zagara said.

But Zagara's is also becoming Genuardi's private-label alternative in many specialty categories. Last year Genuardi's put 10 to 12 Zagara's private-label grocery items into Center Store. According to Zagara and Tempest, decisions to introduce Zagara's products into Genuardi's stores are made on a case-by-case basis.

"We are going more for the gourmet, natural and organic [items] and feel confident that we will be able to cover that gap -- where Genuardi's is covering the more conventional arena," Zagara said.

Indeed, when SN visited a new 58,000-square-foot Genuardi's unit down the street from Zagara's, the latter's private-label items -- such as caramel corn, pasta, tomatoes, salsa and chips and coffee -- were on the shelves, sometimes in special sections signed "Organic and Specialty." Opened in June, the store is Genuardi's first foray into the New Jersey market, and, according to Tempest, was on the boards long before the Genuardi-Zagara merger.

The Genuardi store makes use of some Metro shelving, as well as signage, to distinguish specialty items, but they are also integrated throughout the store. The new unit has a good selection of specialty groceries, both in Center Store, as well as in its Italian Market, located near the deli section. In this area, pastas, sauces, olive oils, condiments and cookies are merchandised on wood fixtures or floor displays, next to the fresh items.

The strategy used in the Italian Market at Genuardi's is similar to Zagara's store merchandising strategy, which favors integrating shelf-stable products throughout all areas in the unit. Probably because of the small size of Zagara's, the floor plan appears to be almost circular, with the periphery departments closer to the grocery aisles than is usual in more conventional stores.

In addition, Zagara's makes ample use of cross merchandising. For example, next to a "Deli Condiments" case that contains refrigerated dips, tahini and cous cous, as well as shelf-stable cocktail sauces and jarred pickles, are a stack of Baird's pickles in a wooden fixture. On the other side of this condiment case is a green wood merchandising unit shaped like a house that holds Wild Thymes brand of chutneys, fruit spreads, preserves, dressings, sauces, mustards and balsamic vinegars.

Natural AFC items are stacked at the sushi counter: Wasabi salad dressing, teriyaki and sesame-seed sauce, rice vinegar, and miso cup-a-soup. On the deli counter are a large number of mustards and sauces. At the front of the store and across from the bakery is the fresh-bread station, called Zagara's Ownmade, which wraps around into the grocery section, where some packaged loaves are merchandised on a wood fixture.

Much of the shelf-stable items in the grocery aisles are merchandised on metro racks. For example, in the cereal category, 15 feet of Metro shelving, six shelves high, is devoted to such brands as Nature's Path, Erewhon, Barbara's, Kashi, Health Valley and Arrowhead Mills. Nearby are rice and soy drinks as well as cereal cups.

While most of the food in Center Store can be classified as natural or gourmet, there are some everyday items. For example, in the bulk section are candy items such as Sourpatch Kids and licorice bridge mix, as well as granola, nuts and seeds, grains and flours. In the beverage section, near natural and organic juices, nectars and sodas, are Canada Dry sodas and seltzers, along with Pepsi, Coke, Sprite and Mountain Dew.

The Zagara's unit makes ingenious use of space, cutting some grocery aisles in two places for easier walk-through and access. Because of the way the aisles are set up, there is great variation in the width and height of Metro shelving, as well as in the sizes and shapes of floor stacks and endcaps. Although Zagara's is not a full-service supermarket, the product selection is wide, as are price points. For example, while Zagara's balsamic vinegar was $2.98 for a 16.9-ounce bottle, an 8.5-ounce bottle of imported balsamic sold for $10.98 during SN's visit. Similarly, an imported bottle of olive oil, 25.5 ounces, sold for $24.98.

Zagara's here in Marlton also maintains freestanding "Home Store" and "Body Natural" units a few doors down in the same shopping plaza as its food store. The small Home Store, which sells decorative items, is also the base for Zagara's catering business. The tiny Body Natural unit stocks vitamins, herbs, homeopathic remedies, medicinal teas and cosmetics and body products.

The new Zagara's stores, which will range in size from 30,000 to 40,000 square feet, will incorporate "natural nutrition" departments, according to Zagara, as well as have other additional features. These may include a cooking school, a "Fresh Mex" concept, and a number of other new concepts that Zagara did not wish to divulge to SN.

"Future stores are designed to really attack all the senses," he said. "We need to keep pushing the envelope in terms of quality and service, and also provide an experience to the customer -- a quality of life experience."

There will be no set formula used to open each new Zagara's unit. "It depends on population, ethnicity, income. We have to be able to dance with each community. It can't be a cooker-cutter operation. It needs to be able to zig and zag," Zagara noted.

Zagara's has maintained its own identity and autonomy since the merger with Genuardi's, according to the company's president as well as Genuardi's Tempest. Decisions to open new units in each chain are also made independently.

The merger is described by Zagara as a "very strategic and brilliant decision on the part of both companies." Zagara told SN, "We are able to cover more of the market area. Cross-pollination of staff has enabled us to increase our ability to attract more customers and obtain better bottom lines."

The Marlton store is in an upscale neighborhood with lots of supermarket competition. Also to be found along a 3-mile stretch on Route 73, where Zagara's is located, is the new Genuardi's, recently renovated Super Fresh and ShopRite units, and a Fresh Fields that came to town less than a year ago. An additional, newly opened ShopRite unit, about 5 miles away, is also competition, since people from this more sparsely populated area can now shop in their own neighborhood.

According to Zagara, Fresh Fields has had an effect on business, since "certain customers will always try the new guy." On the other hand, he said, increased competition can also create a "mecca," bringing more people into the marketplace.