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    EXCLUSIVE: Grocery Chain Unveils Giant Concept in Small Format

    Lancaster, Penn. -- The last time Ahold-owned grocery chain Giant Carlisle launched a new concept the resulting store was akin to a small city in scope—expanded departments and services that included everything from dry cleaning to babysitting. This time around, Giant downsized its box.

    Lancaster, Penn. -- The last time Ahold-owned grocery chain Giant Carlisle launched a new concept the resulting store was akin to a small city in scope—expanded departments and services that included everything from dry cleaning to babysitting. This time around, Giant downsized its box. Giant To Go, a 4,422 square foot convenience store pilot, made its debut in a gala grand opening attended by Progressive Grocer in Lancaster, PA on Wednesday.

    Located at the edge of the new Richmond Square retail/residential development, Giant To Go features 3,100 SKUs in ready-to-consume and take-home foods, beverages and gas. It also sells scaled down assortments of fresh meat and produce. Merchandise is supplied by c-store distributor McLane Co. (for candy and salty snacks) and by Giant’s Lititz, Penn. supermarket store (for groceries and certain baked goods). Ten percent of merchandise is private label. Giant To Go also sells stamps, lottery tickets, tobacco and money orders. And it rents Red Box DVDs via a kiosk. Local laws prohibit alcoholic beverage sales.

    “You hear big is beautiful in the U.S.,” joked Sander van der Laan, who headed up parent company Ahold’s multi-format Albert Heijn operation in The Netherlands before taking the helm of the Giant division in July. “But after building bigger and bigger stores, we decided to develop a new format. While it is called a c-store, it is not a c-store in the traditional sense.”

    Giant has no plans to abandon its large formats—the “small city” Giant Super Food Store that van der Laan referred to was unveiled in Camp Hill, Penn. in 2005. A third Super Food Store will open this summer. And in 2010, $4.7 billion Giant will open a second Giant To Go. The majority of Giant’s 149 stores, which operate under the Giant and Martin’s names in Pennsylvania, Maryland, Virginia and West Virginia, are in the 65,000 square foot range.

    For the future, Giant believes having diverse formats is the way to go. But it needs to perfect each concept. Once it does, van der Laan believes Giant To Go could work well in markets that are too small for a full-size supermarket. “We need to learn first from a P&L perspective,” he added.

    The Lancaster location, which involved intense research, has been under development for the past year. “During this time, more than 50 people worked together,” said Jodie Daubert, senior vice president of perishables. “They represented all business areas—and all our customers—in developing this new format.”

    Still, some observers question the wisdom of rolling out a new format in the midst of one of the worst recessions in decades. Plus, many of the categories offered by Giant to Go—such as chilled beverages and fountain drinks—are carried by established area c-store competitors like Sheetz, Redner’s and Hess.

    Giant To Go’s fresh food is a clear differentiator, as is its aggressive pricing structure. While fresh is a small part of the overall mix, emphasis is on popular fruits and vegetables used in everyday cooking. Produce includes red grapes, cut fruit and whole cantaloupes, which are merchandised front and center in the store. Against the back wall are bagged salad mixes, peppers, onions, potatoes, carrots, strawberries, oranges and apples. Fresh meats include chicken, ground turkey, pork tenderloin and chopped beef. “It’s an intensely selective assortment,” said van der Laan.

    With meat, groceries and general merchandise, Giant benefits from its existing large scale distribution system. It offers supermarket pricing on products supplied directly by the company. For example, a 50-ounce bottle of Tide retails for $8.49, Fancy Feast cat food is 57 cents and dry cereal is in the $3.39 range. Distributor-supplied items—such as candy—are generally products whose package sizes are not carried by Giant’s larger stores. Carbonated soft drinks and other beverages are drop-shipped directly to the store.

    Van der Laan also expects Giant to Go to benefit from Giant’s overall store brand recognition. “Brand value is a big part of our strategy going forward,” he added. Giant’s large supermarkets, for example, have Savor Coffee shops; Giant to Go offers this brand, which is supplied by Barrie House. Coffee flavors include cappuccino and French vanilla cream.

    Giant’s supermarkets are also well known for prepared foods and baked goods. Hence, Giant to Go offers hot dogs and hot sandwiches (including Polish sausage and chicken) from its roller grill. There are also pre-made sandwiches and “grab and go” Buffalo Wings, fresh soup, rotisserie chicken, quiche, salads, pizzas, stromboli, calzone and California rolls. Local favorites--such as pickled eggs made with red beets--are part of the center section, as are some fresh fruit offerings.

    In baked goods, cookies, bread and rolls are baked on the premises. Pies, cakes and donuts are made three miles away at the Lititz store and brought to Lancaster several times a day via a new Giant to Go delivery van. Other foods are also transported this way.

    And Giant to Go honors the same rewards programs ---and runs the same promotions—as Giant’s supermarkets. For every $100 shoppers spend using their Giant BonusCard, they receive 10 cents off the purchase of a gallon of gas (gas is sold at 65 Giant store locations).

    Giant To Go does face some challenges--beyond the lackluster economy. Van der Saan wonders how clearly consumers will understand Giant To Go—even though the company is trying to make it clear that the concept is related but different. Signage, for example, uses the same type font and red color in the word “Giant;” but the “To Go” part is in a green circle. Still, said van der Laan, consumers “know Giant as a supermarket. Will they expect the same selection in a smaller store that has a different customer focus?”

    Giant’s current distribution method is also problematic in that it is labor intensive. Since Giant To Go offers fewer product facings that its supermarkets, case packs are broken down in the Lititz store and then loaded into the Giant To Go van.

    The latter could easily change once the company has a few more c-stores. Then, it could probably break down case packs at the warehouse.

    Looking to tap into consumers’ convenience shopping trips, several traditional supermarket companies have launched smaller footprint stores in the past year. British powerhouse Tesco currently operates about 115 Fresh & Easy small grocery locations in the Southwest U.S. and American behemoth Walmart opened its first Marketside convenience stores in the Phoenix market recently. In addition, Giant Eagle, no connection to Giant Food, announced recently that its was planning to expand its two-year-old Giant Eagle Express prototype store by three to five additional units over the next year or two.


    While new to the U.S., Ahold’s Sander van der Laan is no stranger to launching and operating new store formats. Before joining Giant Carlisle as president and CEO in July 2008, van der Laan spent 11 years at Ahold’s Albert Heijn, a Netherlands-based company whose 800-plus stores come in a variety of sizes and colors.

    Dave McNally, Ahold’s USA’s former CIO, describes the executive as a “superb merchant.” But McNally, who worked alongside van der Laan in The Netherlands before installing an Oracle platform for U.S. stores last year, is only talking about the tip of the van der Laan iceberg. The base is comprised of a well-rounded blend of food and CPG experience.

    A former Unilever marketing executive, van der Laan joined Albert Heijn more than a decade ago as vice president of perishables. He also served as general manager for Gall & Gall, an Ahold-owned liquor chain. At Albert Heijn, he moved the company beyond traditional supermarkets and into convenience stores (AH to Go), hypermarkets (Albert Heijn XL) and online shopping. And he implemented a highly profitable EDLP pricing strategy. The latter was a major contributor to the company’s recent strong financial performance.

    Albert Heijn recorded 2008 sales of 9 million Euros. Its operating margins were 7.2 (as compared to 4.9 at Giant Carlisle). Albert Heijn’s 2008 operating income increased by a whopping 13.1 percent over 2007’s figure. At Giant-Carlisle, the figure was a modest 2.6 percent. As is the case with many European supermarket chains, private label accounts for about half of Albert Heijn’s sales.

    Van der saan replaced Carl Schlicker. Schlicker was named president and CEO of Ahold’s Northeastern Stop & Stop chain. The Giant To Go concept was conceived during Schlicker’s tenure.

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