NATURAL CAUSE

LISA SAXTON

STEVENS POINT, Wis. -- Copps Corp. here has adopted a natural foods strategy aimed at mitigating the impending arrival of a Whole Foods Market.

Copps' 14th natural foods department, in the chain's recently opened Appleton, Wis., store, occupies 1,400 square feet near the produce department, said Kurt Krahn, the 18-store chain's natural foods and deli director. Copps also serves as a wholesaler for 38 other stores.

Madison is a hot spot for natural foods, according to Krahn. "I've got two [natural foods] departments [Madison and Green Bay] that do right around 4% distribution of total store sales on a regular basis."

And while three freestanding natural food stores in the Appleton market represent the current competition, Krahn is preparing to compete head-to-head with Whole Foods Market, Austin, Texas, which plans to open a store in Madison next spring.

Copps' natural food department's distribution ranges between 1.5% and 4%, depending on its size, Krahn said.

"But that Madison store is our best natural foods market," he said. "When we first found out that Whole Foods was planning on coming in with a store, our chairman of the board -- who is a very strong supporter of our natural foods program -- made it clear he wanted all the department heads to get down to Chicago to take a look at Whole Foods.

"He wanted us to see what they do and to see if there were things we could do inside our stores to basically raise the level of awareness on natural foods to our customers," explained Krahn.

"This way, when Whole Foods does open up, the impact would be felt less because customers would see us as providing an alternative to Whole Foods."

The fact that consumers can get all their grocery needs at Copps is another advantage over the country's foremost natural foods chain, said Krahn. "Whole Foods isn't going to have all the options; they're limited. If customers want to buy Oreos or Coca-Cola, they can get it at Copps. Plus they can go over and get natural foods products."

Krahn isn't worried about how Copps will compete on price with Whole Foods.

"Whole Foods is not much of a price operator," he said. "Whole Foods is not afraid to charge the price for the quality of product it sells. So we're not concerned about the pricing because we already are the lowest-priced natural foods store in Madison. And we've positioned ourselves from a price standpoint right off the bat."

Krahn said margins for natural food products "run a little higher" than for traditional groceries. "The margins vary by category, but we run near or just below the standard natural foods average for gross profit margins.

"We planned these departments right into the store. Actually, the location of our natural foods department is up front. It's a prime location.

"In the past," said Krahn, "we were retrofitting older stores, basically grabbing space wherever we could find it to insert the department. We've actually seen it start to move up closer to the front of the store over the course of time with the department's success.

"We feel the front is the best location for the department and that it should be integrated with the produce department. We also try to situate it so customers are able to flow through the department, as opposed to being able to avoid it."

Krahn said the fastest growing segment of the department is frozen foods. "A lot of that has to do with the quick-meal concept and also the fact that our department is the leader in providing vegetarian and/or meatless alternatives.

"One area that's just been huge for us is distilled water. We've got water quality issues in some of our areas and we've educated the customers about the strengths or positive aspects of distilled water as opposed to just purified drinking water."

Bulk foods has also become a strong category for Copps, Krahn noted. Copps averages between 75 items in bulk per store. "We carry wide varieties of grains, nuts and legumes. We use individual price look-up numbers. Our prices range all the way from 49 cents a pound for brown rice up to $6.99 for whole cashews.

"We carry a wide variety of bulk spices as well, with most of the stores having a 36-bin unit. And we've started moving a little bit more into the organic products, across all categories. That's been very good for us."

Copps' natural foods department houses items that also are merchandised in gondolas. "The items that we currently integrate out are the real key things like Snapple beverages," explained Krahn. "We've started to implement some limited integration out in the grocery. It's something that, personally, I'd like to see more of. But there's that turf struggle and category management issues as to how it ties into a category. It's a long-term goal for Copps."

In the new Appleton store, Krahn worked with the produce department to merchandise a broad selection of organic fruits across from the natural foods department. "So the tie-in is real clear to our customers.

"We basically have a main aisle that goes right between natural foods on one side and organic produce on the other. It's really expanding the concept."

Some of the slower categories for natural foods have been segments like cleaning and pet supplies. "They're small categories for us, but we have never put a whole lot of emphasis into those," he explained.

Copps' natural foods section has special wooden fixtures designed to fit in with the produce departments, which, for the most part, have wooden and crate-like displays. "We used wooden uprights, and the bulk bins are all in oak to give it a more natural feel."

Generally, the departments are made up of three gondolas and separate freezer and end-cooler equipment.

With all that going for it, it's the natural foods staff that pulls the whole department together, said Krahn, who was hired eight years ago to set up the program.

"The key to the success of our departments is the fact that we've been able to find people who have natural foods as part of their lifestyles," he explained.

Copps distributes an in-store circular to promote its natural foods. "We have not done that much outside advertising about the department. On TV we'll mention the fact that we have natural food departments in our store. But we don't do a whole lot of item-price advertising in our outside vehicles," Krahn explained, noting that the markets where natural foods performs best are a little more affluent.