ORGANIZING ORGANICS

ROBERT VOSBURGH

ASHEVILLE, N.C. -- At Earth Fare, less is more.

The natural-foods retailer has succeeded amid much larger, mainstream rivals in the area like Publix, Harris Teeter, Wal-Mart and Ingles, by maintaining a sharp border between what they offer in the way of natural and organic foods, and what Earth Fare sells.

"We need to be different, and we go to market knowing we can't be everything to everybody," said Michael Cianciarulo, president and chief executive officer of the five-store chain. "We start carrying mainstream items -- which are market- and promotion-driven -- and our entire focus changes."

Earth Fare does carry some conventional goods, but the retailer intentionally stays away from casting itself as a regular supermarket "because of our positioning in the market," said Cianciarulo, who certainly knows the difference between retailers like Earth Fare and traditional supermarkets. He worked for 32 years at Gooding's Supermarkets, Apopka, Fla., eventually rising to the post of president and chief operating officer.

"When I first viewed Earth Fare, I saw it with a supermarket guy's eyes," he recalled for SN. "It took four or five months of just sitting back and observing the culture here, before I realized just how different it is from the [mainstream] supermarket business."

Cianciarulo concedes the chain -- which devotes a lot of time and energy to education, customer service and interaction -- carries a higher labor cost than most retailers would care to tolerate. However, he's come not only to accept this reality, but to embrace it.

"My first instinct was real high labor, too much. What I would have done is cut, which would have been the wrong thing to do," he said. "But, after understanding how this business is done -- the training and the knowledge of the people who work here -- it changed my whole outlook on that."

Instead, Cianciarulo adopted a more selective plan that did include some payroll reductions, but emphasized finding labor efficiencies within the existing labor structure.

"I was not a believer when I came on board here," he said. "But when I eat the poultry we sell here and then go back to Florida and have commercial poultry, I can taste the difference. I admit I didn't have the respect for this industry when I came on board -- and I'm amazed by the knowledge and the dedication of those who work here, and the way we go to market and sell merchandise."

A significant part of Earth Fare's success can be attributed to its own acknowledgement that -- as a natural-foods retailer -- the chain's credibility with highly educated, high-profile consumers is based on limitations as to what it can sell. According to Cianciarulo, this sharply defined image actually helps maintain and grow market share.

"It does grow slower," he told SN. "We don't experience that 'spiked-up' effect that a supermarket often does because they're giving something away.

"But, we have a longer-term customer. And that's where we succeed. We had a Publix open a couple of years ago across from us in Charleston [S.C.]. And it didn't really affect us," he added.

Earth Fare is capturing loyalty in today's competitive atmosphere using a net of education, information and quality goods. Cianciarulo admits this blueprint flies in the face of price and convenience -- traditional industry standards that are today reserved for the biggest retailers.

"Wal-Mart's what they are. They've always stayed focused on price and have never deviated from that," he said. "We're going to focus on something else."

Even the nation's largest natural foods retailers -- Whole Foods, Austin, Texas, and Wild Oats, Boulder, Colo. -- are starting to act more like traditional supermarkets by putting conventional items in their stores, he added.

Cianciarulo attributed the independent chain's growth to good timing, among other factors. Consumers are soaking up tremendous amounts of information through new resources like the Internet, cable television and educational forums -- particularly in regards to nutrition and health.

"When you walk into our store, it stands for something," he said, noting customers appreciate being treated in a helpful, non-patronizing atmosphere that contains no "spin" or overt promotions.

"The natural/organic consumer will always find us," he said. "But the traditional supermarket customer we want to capture has preconceived ideas, so it's more difficult for them to come in unless they have a real health concern."

Indeed, Earth Fare stores operate under different customer motivators. Here, health-related issues propel traffic. Once inside, the uninitiated shopper may initially be confused: There are no BOGO offers; instead signage might promote the qualities of a particular tomato. In this sense, Earth Fare serves as a health and community center rather than just a food and price-impact destination.

The differentiation allows Earth Fare to leverage its image into profit. For example, during the holidays, the retailer sold about 1,000 all-natural turkeys at $2.19 a pound, per store, while conventional retailers gave frozen birds away as shopping incentives.

"It's a pleasure to sell something where people pay that kind of money and still come back and say thank you," Cianciarulo said.

Cianciarulo doesn't feel entirely safe from large-scale operators, however. Retailers like Kroger, Publix and others are increasingly incorporating organic, natural and whole-health-related products or even entire sections into their standard units. Produce in particular has been the gateway into the entire category of organic foods for mainstream retailers, Cianciarulo said.

At least 70% of the produce stockkeeping units in each Earth Fare store are organic, depending on availability and time of year. The rest of the average 5,000-square-foot section is devoted to locally grown product that may not necessarily be organic, but reinforces yet another bridge between the retailer and the community.

The department contributes about 12% to total-store sales, he noted.

"[Organic produce] has got to be a top-management commitment because produce managers actually hate it. I've been in stores doing a million dollars a week and look for their organic section, and it's the last table along the back wall and it's only the most popular items.

"Our whole customer base is into sharing information and our staff is very knowledgeable," he continued. "It's like going to Home Depot. There's a lot of products you wouldn't buy in there unless someone told you how to use them. We're the same way."

To ensure all employees possess the same relative level of issues-related knowledge, the retailer holds training workshops once a month that are "mandatory" in nature, since attendance is required to qualify for bonuses.

The chain has also developed a successful cafe program of organic hot and refrigerated foods, as well as an organic salad bar. Earth Fare prominently notes the department with a "Healthy Market & Cafe" marquee on smaller stores (though it's "Earth Fare, the Healthy Supermarket" on larger units).

"Food service is what we need to promote [as an industry], yet it's the one business [retailers] don't want to be in because it's harder to run," Cianciarulo said. "But in our business, it's so essential because it sells the inner store."

Cianciarulo recalled when Gooding's started offering fried chicken in the Orlando area. The program included proprietary marinades, a customized breading recipe and a special frying technique that became a hit with shoppers.

Earth Fare is doing the same with all-natural signature items not available anywhere else. More recently, the retailer began offering cafe items like orzo salad, lasagna and chicken salad in the refrigerated to-go section of the deli. In the process, Earth Fare stores not only became a destination, but the name itself became a brand.

"Early on, we were using Coleman Beef for our point of sale and now we have Earth Fare Beef, produced by Coleman," Cianciarulo cited as one example. "As small as we are, our brand is becoming very well known in the areas where we market ourselves."

Earth Fare's growth and its sunny outlook -- the retailer wants to open seven more stores within three years -- has caught the eye of traditional retailers. Top executives have toured various Earth Fare units, according to Cianciarulo. All are looking for new ways to tap into this growing consumer wave that connects health and nutrition with purchasing decisions and shopping patterns.

"I think they're puzzled about what we are," he said. "I suspect that they're thinking of turning their smaller stores into this format and building a big combo next to it."