FPAA Attendees Hear How to Differentiate from Competition

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FPAA attendees hear how to differentiate from competition

December 11, 2005

NOGALES, AZ -- Retailers need to be focused on their businesses to be competitive in an environment of blurred retail channels, according to speakers at the Fresh Produce Association of the Americas annual Nogales Produce Convention & Invitational Golf Tournament, here, Dec. 1-3.

Rick Smith, director of produce for the Modesto, CA-based Save Mart Supermarkets Inc. supermarket chain, told the audience that regional players such as Save Mart and Wegman's have found a niche in the marketplace.

"In order to survive, you have to be different and create a unique environment," Mr. Smith said. "Quality, variety and customer service are all necessary."

One example Mr. Smith pointed to is that Save Mart processes fruit and gets it into its stores the same day. As a result, revenues from Save Mart's fresh-cut line are up 45 percent year to date beginning in January, Mr. Smith said. The chain offers stone fruit year round and its organic sales have climbed from a previous rate of 0.5 percent of its total produce sales to 3 percent.

The primary produce category of the chain is tomatoes. "I may run different tomato ads, not because there's three types of consumers but there's a variety of uses," Mr. Smith said.

The independently owned Save Mart chain of 125 stores operates under the banners Save Mart, S- Mart and Food Maxx. The chain has $2.5 billion in annual revenues, 10 percent ($250 million) of which is in produce sales. All its stores are in California, serving the major markets of Bakersfield, Fresno, Modesto, Stockton, East Bay, Sacramento, Northern California and the coastal region. Yosemite Wholesale, a Save Mart-owned distribution center located in Merced, CA, supplies the chain's stores with fresh produce.

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In July, Save Mart executives held a meeting with key suppliers to kick off a new supplier planning initiative that is an integral part of its ongoing implementation of category management business principles. The meeting focused on planning for Save Mart and Food Maxx in 2006, and set in motion a formal process for how Save Mart will manage its business with suppliers going forward. One of Save Mart's goals from the meeting was to communicate to its supplier partners the size and importance of the Save Mart and Food Maxx banners to Central Valley consumers.

Save Mart has aggressively acquired stores -- for example buying 24 Food 4 Less stores in 2002 -- remodeled its stores and closed some of its unprofitable stores, Mr. Smith said.

Thirty-eight percent of the chain's customers are Latino, and the organization's customer list is also high in Asian consumers, Mr. Smith said.

The business drivers for the Save Mart chain in 2005 include strengthening its connection with its customers and building "our image in the grocery aisles and at checkout stands," Mr. Smith said.

Fresh produce is in a state of flux because of so many competing retail channels, Mr. Smith said. He said that of the Safeway, Kroger and Albertsons supermarket chains, "one or two will fall out." He said that Safeway appears to be rebounding but that the Albertsons chain -- which is for sale -- is struggling.

Veronica Kraushaar, president of Scottsdale, AZ-based Vanguard Marketing Strategies/Vanguard Ethnic Marketing, told the audience that retailers are on a tightrope of consolidation, cost-cutting and channel competition.

Supermarkets are losing share through channel competition. One approach to stemming the tide of losing share is to take short-term pain while building growth and demand, Ms. Kraushaar said.

Ms. Kraushaar pointed to supermarket chains Kroger, Supervalu and Safeway as "showing the right strategy, having battened down the hatches and reduced financial risk." The three chains implemented tough cost controls, boosted their credit profiles in the face of weak operating conditions, reinvented themselves to customers and "positioned away from the 1,000-pound gorilla," Wal-Mart.

Ms. Kraushaar encouraged the audience to know the "retail realities." She said that they should be aware of conventional vs. alternative account strategies, have the "expected" sown up, focus on service and not just product benefits, and build dependence on consistency by delivering continuity and being a year-round supplier.

Ms. Kraushaar said that people need to be educated about their industry and business, provide standards for rejections and shrink, deliver category assistance, embrace technology such as returnable plastic containers and radio- frequency identification, and understand "push" vs. "pull" selling.