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To say that the supermarket business has been challenging for independents during the past year is indeed an understatement—and it's likely that things won't get much easier. Industry watchers predict that during the next five years, nearly 2,000 stores will be shuttered, thanks to mighty Wal-Mart. On the other hand, across the country, from Kulpsville, Pa. to Anaheim, Calif., some hard working operators are proving that despite pressures from Bentonville and what appears to be a never-ending increase in operating expenses, independents can emerge triumphant.
I asked some of our industry's leaders to share their views on what worked for them in the past year, as well as their strategies for growth in the next. Their answers comprise sound advice to those independents that are struggling to succeed.
Rich Niemann Jr.
Niemann Foods, Inc.
When I first visited Niemann Foods back in January 2002, I was amazed to learn that the Niemann family and its 3,000-plus associates had more than doubled the size of their supermarket company in just three years. With 45 stores in either conventional or limited-assortment formats, the Quincy, Ill.-based operation was at that time growing into a food retailing force in a competitive Midwest market.
Needless to say, when I spoke with company president and c.o.o. Rich Niemann Jr. last month, I wasn't surprised to learn that the company had added more units to its competitive arsenal. Its latest count? Sixty-three. More stores are sure to follow next year, although the company keeps mum on such matters.
"Our greatest accomplishment during the past year has been growing our sales by about 8.5 percent over 2003 in a very competitive and challenging environment," says Niemann. "Keep in mind that rising health care costs and increasing competition continue to present many challenges to our bottom line."
Niemann, whose family implemented an ESOP program in 1997 as a way to attract and retain dedicated associates, continues, "What it takes to compete today is a great team who manages those challenges by trying to improve every single day."
Recently appointed to NGA's board of directors, Niemann believes that "more of the same" lies ahead for all independents. "I feel that you must know what your brand stands for and you must work relentlessly to build that brand with your customers."
Knowlan's Super Markets, Inc.
A member of Progressive Grocer's Retailer Advisory Board, Lauri Youngquist, e.v.p. of Vadnais Heights, Minn.-based Knowlan's Super Markets, insists that diversification and remaining focused on consumers have helped her family's seven-store operation to grow during the past 12 months.
"Recently our team developed a new cafe-and-grill concept combined with a high-end coffeehouse," notes Youngquist. "Dunn Bros. Grill and Cafe, which is located in a freestanding facility, opened this past summer. It provides customers with the opportunity to relax next to a fireplace surrounded by comfortable sofas and chairs, all while enjoying casual dining which includes crepes, fresh pastries, grilled sandwiches, fresh salads, tasty soups, and an assortment of appetizers."
Further piquing customer interest in the café is the amenity of on-site wireless Internet access, including the availability of Web-enabled computer terminals. "As our diners and coffeehouse customers relax or spend time online, they may observe our coffee beans being roasted daily. We believe this concept is an excellent extension of our foodservice operation," says Youngquist.
Pleased with the additional top-line sales generated by the Dunn Bros. operation, Youngquist is likewise concerned about the "extraordinary increases in operating expenses" that severely impact her company's net profit. "We've experienced tremendous increases in health and welfare costs, fuel expenses, and supply costs. As a result we've focused our efforts on maximizing the efficiency of our deliveries, as well as developing new packaging and supply options, and ways to reduce energy consumption."
Youngquist's advice to single-store operators: "Provide a more comfortable and efficient shopping experience. Focus on customer lifestyles and needs to provide the services and selection of products they want."
Clemens Family Markets
During 2004 Kulpsville, Pa.-based Clemens Family Markets has experienced what most independents today can only dream about—an increase in same-store sales.
"It's been an extremely exciting yet challenging year for our company," observes Mark Batenic, c.o.o. and e.v.p. of the 25-store chain. "By implementing category management in all of our conventional stores and rolling out a marketing program that has grown customer count and sales per customer, overall same-store sales continue to grow."
Along with operational improvements, Batenic also attributes the company's growth to the quality of its associates. "We've invested significantly in employee training, and our turnover for the year was well below industry averages," he notes. "Our people are our key asset with our customers. They are the face of Clemens."
Batenic, who’s worked in the food industry for over three decades, offers simple advice to independents. "The future is bright if you're truly willing to work hard," he says. "You can't take anything for granted in this business, so make sure that your message and your selling proposition are targeted to the audience that you intended. Don't try to cover the waterfront with your store and offerings by trying to be all things to all people."
He concludes: "Focus on your strategy and execute, execute, execute. Most importantly, be patient and don't expect major results overnight."
Jax Markets, Inc.
On the West Coast Bill MacAloney, chairman and c.e.o. of Anaheim, Calif.-based Jax Markets, Inc., is busy executing.
Operating three conventional supermarkets that cater mainly to Hispanics, MacAloney is recognized in boardrooms across the country as one of the most respected independents in the business. Serving on the FMI board of directors for the past 23 years, he is also a past chairman of Unified Western Grocers and highly regarded in his community—so much so that he was elected mayor of Villa Park, Calif.
As his political term concludes this month, MacAloney looks forward to devoting even more time to the business he founded nearly 35 years ago. "The key to success in this business hasn't really changed over the years," he says. "It's about meeting the needs of your customers."
Stressing that technology plays a more important role than ever in the supermarket business, MacAloney notes, "Independents must get up to speed with technology and take advantage of the efficiencies it can bring to their operations in many areas, such as procurement, labor scheduling, and accounts payable."
It's also crucial to make the effort to get a broader perspective on the market, he adds. "Independents must continually see what's around them. They must get out of the store once in a while and attend industry trade events such as the FMI Show in Chicago. Too often independents worry about the cost of the trip. I've found that whenever we do attend, we always manage to pay for the trip by bringing home innovative ideas and new products."
That's a lesson MacAloney says many operators have yet to learn. "Unfortunately there are too many independents out there who think we're still selling a lot of cake mix."
Fresh Encounter, Inc.
With 34 stores in the Buckeye state, all in the shadows of Wal-Mart, Meijer, and Kroger, Fresh Encounter, Inc. has increased its size by nearly 20 percent during the past 12 months.
"Increased competition from the likes of Wal-Mart and Kroger has forced our organization to meticulously examine site selection and our marketing strategies," says Eric Anderson, s.v.p. of marketing for the Findlay, Ohio-based company. "We continue to research new markets and re-evaluate existing markets for long-term viability. Overall our goal is to localize our marketing efforts to meet the needs of each individual community that we serve."
Anderson, a member of the Ohio Grocers Association board of directors, encourages store personnel to take active roles in their communities. "I see even more consolidation over the next year, especially with the continued growth and buying power of Wal-Mart," he notes. "Community involvement and store-brand positioning will be critical for independents and large players alike.".
How can the independent survive and thrive in today's competitive market? "Read, research, and redevelop," emphasizes Anderson. "It is so important to know what your competitors are doing every day. Redevelop strategies for merchandising and marketing -- and don't ever be afraid to try something new."
Taking on Bentonville from Lincoln, Neb. is IGA Retailer of the Year Pat Raybould, who operates 19 stores.
"During the past year, a couple of new Wal-Marts opened up close to some of our stores and we did take a hit, but it wasn't as bad as we expected," confirms Raybould. "Our store directors rallied their troops, improved store conditions, and have been effectively competing against the retail giant."
"As a company, part of our strategic plan includes improving our meat departments. We have also remodeled several stores and are completing a few more renovations at a slightly more accelerated rate than originally planned."
While battling the supercenters has been grueling, nothing has challenged Raybould more than the adjustment to working with a new wholesaler, two years after the fall of Fleming.
"The biggest problem was a lack of immediate access to some of the brands and varieties that our customers bought for years," notes Raybould. "We also lost some leverage with the brokers and vendors that we used to deal with when we were supplied by Fleming."
Moving forward, the Rayboulds and their senior management team feel that communication will be crucial to a successful long-term relationship with their new wholesaler, Associated Wholesale Grocers, based in Kansas City, Kan. "We recently implemented a wholesaler review process which involved surveying store directors, department directors, and some department managers on various aspects of our wholesaler's service and operations. We sent this data to AWG in advance of the review, to allow them to prepare and be able to provide solutions during our review. We expect the process to be very positive.
"Independents can never stand still," advises Raybould. "Strive to make improvements in every aspect, but stay realistic and concentrate on improving only a couple of key areas at a time."
Schild's IGA SuperCenter
Also on the move in Ohio is Dave Schild. Celebrating 35 years in the business, Schild has expanded and remodeled his IGA SuperCenter despite being locked in battle with a new 50,000-square-foot competitor in town -- the Ahold-owned Tops Market.
"We lost substantial business during the first two weeks, but our sales began to bounce back just three weeks after Tops opened," explains Schild. "We're hoping the trend continues, because in just another month the Wal-Mart in our town will have completed its expansion into a supercenter."
Supplied by Supervalu, Schild's business will soon implement the wholesaler's center store strategy and debut the popular Sterling Silver meat program. "We will play to our strengths in the meat department and diversify from Wal-Mart in areas which we feel are [Wal-Mart's weaknesses], especially customer service. Additionally, we'll continue our community involvement and play up our IGA five-star rating that we've earned for five years running."
In the meantime Schild, like most independents, expects even more relentless competition from the world’s largest retailer. "Wal-Mart will continue to brainwash mayors and community leaders," he says. "Of course, the politicians will try to convince everyone that all those small businesses going bankrupt in their communities are really not Wal-Mart's fault, but the fault of that 800-pound gorilla in their living rooms." In other words, they'll try to pin the rap on small businesses themselves.
"Diversify," concludes the industry veteran, "or simply stand by and watch your net worth get transferred to Bentonville."
Second-generation storeowner Buzz Belloni is extremely concise in expressing his views on the industry. "My concerns in no particular order are as follows: health care, health care, and, last but not least, health care," says the operator of Belloni Foods in Brewster, Ohio, with a laugh.
Independent Retailing Editor Jane Olszeski Tortola can be reached at [email protected].
NGA’s year of fighting diligently
There was little rest during 2004 for the National Grocers Association as it strove to serve the independent retail community. Here is how s.v.p. Frank DiPasquale sums up the trade group’s activity over the past year:
"As we look back on 2004, I hope our members would agree that we helped them in the development of successful marketplace differentiation strategies in areas such as competing with supercenters, the complexities and discipline involved with being a successful fresh foods/foodservice operator, and understanding the opportunities to compete in a value-price retailing environment, as well as providing our members with timely and important research in areas such as compensation and benefits, family business challenges and issues, and financial management.
"Additionally, we’ve focused our efforts on key public policy issues such as repealing many aspects of the mandatory country-of-origin labeling legislation, eliminating the death tax, combating efforts to increase the national minimum wage, repealing a mandatory ergonomics standard, and addressing the ever increasing costs of debit/credit transactions by some notable card companies.
"Finally, NGA continues to emphasize the critical importance of leadership skills in today’s complex business environment, and the critical need to reach out and create alliances that will provide our members with more tools and resources that should allow them to better compete in the marketplace. Specifically, we provide our members with an opportunity to attend one of the finest leadership development programs in the U.S., the NGA/Cornell Executive Leadership Development Program.
"Moreover, NGA has developed a coalition comprising universities and industry leaders whose focus is to improve the universities’ level of service to the food industry through improved and timely research, provide a more relevant and focused curriculum, and assist grocery/food companies in improving their recruiting efforts on campus."