FOOD LION FRESHENS UP ITS VALUE-PRICE IMAGE

Mark Hamstra

RALEIGH, N.C. -- Food Lion is betting that it can preserve its low-price image while upgrading its offering.

The chain, based about three hours from here in Salisbury, N.C., and owned by Brussels, Belgium-based Delhaize Group, has completed the $60 million overhaul of its 68 stores in this market and is launching a promotional blitz this week alerting consumers to the changes.

In addition to a new decor package and lighting, the changes include new merchandising fixtures, an expanded perishables offering and changes throughout the store in terms of adjacencies and product selection. The overhaul of the market also included an extensive training program directed at improving customer service.

"It's a very holistic approach," Rick Anicetti, president and chief executive officer, Food Lion, told SN during a store tour last week. "It's about brick and mortar, it's about the product offering that we have, it's about rededicating ourselves to associate development, and it's about the way we position and communicate the Food Lion brand to consumers. It's not a one-legged stool."

One of the goals of the overhaul, he said, is to turn more secondary shoppers -- who tend to visit Food Lion primarily for groceries and dairy products -- into primary shoppers who generate bigger baskets, visit more frequently, and see the chain as a viable perishables merchandiser. The 1,200-unit chain hopes to roll the changes out to additional areas, with one unidentified market scheduled for a similar market-wide revamp next year.

The changes Food Lion has implemented here during the 10-month overhaul included some of the business processes Anicetti brought with him from his years at Food Lion's Scarborough, Maine-based sister chain, Hannaford Bros. Many of the new elements, such as the curved aisles at the larger stores, had been tested in Food Lion stores in other markets.

Several features are new to the Raleigh market, however, including the chain's first refrigerated wine cases, which act as a link between the perishables and wine departments, the latter of which also have been enhanced with a wider selection. Also new are Food Lion's first Nature's Place organic sections, which include about 40 feet of dry groceries and a refrigerated case with juices, soy milk and other products.

In addition, many of the merchandising fixtures, from endcaps that allow better product displays to refrigerated cases that display heat-and-eat meals more prominently, have been added in an effort to create a more convenient shopping experience, which was one of the primary goals of the market overhaul. New color-coded signage and other features create a "store-within-a-store" feel in each department, and also augment the stores' convenience.

"It supports the overall merchandising effort," said Pierre-Olivier Beckers, president and chief executive officer, Delhaize. "Just in the way it identifies the products, it makes it much easier for the consumer, and it supports the convenience approach that we want to offer customers throughout the shopping experience."

Anicetti said the new decor, which includes a whimsically sketched mural of food products along the perimeter walls, also creates a much "warmer" ambiance.

"In the past, Food Lion has been guilty of white walls, white ceilings, white floors, white fixtures," he said. "I think we've created a much softer effect."

Food Lion could face a challenge, analysts said, in maintaining its low-price image as it introduces the new look.

Andrew Wolf, analyst, BB&T Capital Markets, Richmond, Va., said Food Lion "will have to deal with the perception issue," noting that when Hannaford had stores in the Southeast, it suffered from a false perception that its prices were higher than competitors because its stores had a more upscale feel. "Managing their low-price image is really critical," he said of Food Lion.

The price message has not been lost in the Raleigh stores. Along with the new product-identification placards, large signs proclaiming "extra low prices" in block type are positioned prominently throughout. Even in the moderately upscale wine department, the emphasis is on low prices with several displays of sale-priced offerings.

A spokesman for Food Lion said surveys of customers in the market indicate that the message is getting through. Customers have been giving much higher marks to the stores for the quality of their perishables, while price perception has remained stable. Although he declined to reveal specific survey results, reports indicated that some stores have seen double-digit increases in sales of perishables.

Ads in the daily newspapers here this week were scheduled to promote the changes, bearing the tag line, "Take a Fresh Look at Food Lion."

Anicetti said some remodels slated for other markets were put on hold this year to pay for the Raleigh transformation. All new and remodeled stores going forward will get the new look, he said.

"I think it's the right thing to do," said Wolf of the remodels. "It's a challenge, but they should be doing it."