The traditional supermarket can’t seem to catch a break.
First, Walmart transformed its stores into supercenters with groceries. Then the recession happened, and discount outlets such as Aldi and Save-A-Lot began going gangbusters.
Now, there’s a new wave of upstarts shaking things up: smaller-format, fresh grocery concepts. And many of them have their sights set on St. Louis.
At least four such companies plan to set up shop — if they haven’t already — in the region. Most of them highlight “fresh” and “market” in their names: Fresh Thyme Farmers Market, Lucky’s Market, the Fresh Market and Fields Foods.
The newcomers’ locations are about half the size of a typical grocery and dedicate a greater proportion to fresh foods — produce, meats, prepared foods — and a relatively smaller portion to “center store” items such as cereal and ketchup.
“Our center store is fresh,” said Chris Sherrell, president of CEO of Fresh Thyme Farmers Market, which is planning to open 10 to 12 stores in this region. “Their center store is Coke and Doritos.”
Indeed, they are trying to capitalize on the rising interest in healthier, nonprocessed foods and local and organic produce, positioning themselves as a more affordable alternative to Whole Foods Market.
But for their part, Schnuck Markets and Dierbergs Markets note that they, too, offer a wide selection of fresh foods, which includes local and and organic produce, while also offering a full array of items to make them a one-stop shopping experience.
ON A ROLL
“Fresh-format stores have been on a roll in a market that has otherwise been pretty stagnant,” said Jim Hertel, managing partner with consulting firm Willard Bishop LLC.
In 2012, these fresh-format stores saw the most dramatic sales growth of any type of grocer, with sales increasing 23 percent to $12.7 billion, according to Willard Bishop. That compares to a 2.9 percent increase among traditional supermarkets for a total of $442.6 billion in sales.
“This is certainly not good news for Schnucks and Dierbergs,” said Jason Long, a St. Louis-area retail consultant with Shift Marketing Group. “But I don’t think it will impact them too much.”
Rather, the traditional grocery operators are feeling the cumulative effect of being chipped away from all sides — discount formats, convenience stores, Walmart, Target, Whole Foods and Trader Joe’s. All of those together will take a toll, he said.
So far, the traditional grocers here have proved resilient. Long noted that people thought Walmart’s big push into groceries several years ago would mean the end of conventional supermarkets. That hasn’t been the case.
Schnucks and Dierbergs have held on by going a bit higher-end, making themselves into the local food experts, offering cooking classes and recipes, a wider selection of organic, natural and imported food, and nutritional information, he said.
Indeed, Jim Fisher, a marketing professor at St. Louis University, said Schnucks and Dierbergs have not been resting on their laurels. They’ve been upgrading these stores with sushi bars and organic produce as well.
“They are grocery chains that are at the head of the pack in terms of innovation,” he said.
And Fisher noted that these new operators don’t have a full array of items, so customers will likely still shop at the traditional grocery stores to stock up.
Dierbergs spokesman Todd Vasel noted in an email that it has “long-established partnerships” with local farmers and producers and has been fully engaged in natural and organic foods for more than 14 years.
“Dierbergs’ reputation was built on strong fresh-perishable departments,” he said.
Lori Willis, a Schnucks spokeswoman, noted that Schnucks is a hometown grocer with 75 years in this community. She added that competition makes everyone stronger — and that’s a good thing.
“Schnucks has never shied away from competition, nor do we focus on it,” she said. “We keep our focus on our customers.”
A Shop ‘n Save representative did not provide a comment.
STAKING OUT LOCATIONS
One of the biggest competitive advantages of Schnucks, Dierbergs and Shop ‘n Save is the prime real estate they’ve already staked out around the region. So the newcomers will either have to go directly up against them or find holes in the market.
Fields Foods, a St. Louis-grown concept that opened its first 37,000-square-foot location near Lafayette Square in January, is focusing its growth on so-called “food deserts” — neighborhoods where other grocery options are lacking.
Locally made products are marked at Fields Foods in St. Louis on Wednesday, March 26, 2014. Photo by J.B. Forbes, jforbes@post-dispatch.com
“We’re looking very hard here in the urban core and the central corridor,” said Chris Goodson, one of Fields Foods’ principals.
While the company hasn’t settled on its next location, it plans to open about six new locations in the next few years and as many as two dozen in the next five years. The stores will be located both in St. Louis and outside the region along the Interstate 55 and Interstate 70 corridors.
Goodson said his concept is different from the others on their way to the region because of its big emphasis on partnering with local vendors and farmers. He added that he doesn’t see Fields Foods as direct competition to the traditional operators because it’s choosing different locations.
“We’re not dropping onto Manchester next to Schnucks and Dierbergs,” he said.
But that is exactly where the other new competitors are going. Lucky’s Market, a concept based in Colorado, has plans to open stores in Rock Hill and Ellisville. The latter will go into the shuttered Straub's building there. A Lucky’s spokesman was unavailable for comment.
And Fresh Thyme Farmers Market, which is just getting off the ground, is putting its first few locations in this region in major retail corridors in Fairview Heights, Ballwin, and Kirkwood. Those stores are slated to open next year and are among the 60 to 70 stores it plans to open in the Midwest in the next five or six years.
Fresh Thyme’s Sherrell said he is open to a variety of locations from food deserts to being in the middle of downtown to outer ring suburbia.
“We look at where our customer is and certainly we take into account the competition,” he said, but added that not afraid to open a store across the street from a Schnucks and Dierbergs. “We’re looking for middle America and a little higher.”
Another concept, the Fresh Market, which has more than 150 stores nationwide, is working to put in a store at Clayton and Hanley roads in a former Schnucks building. The company would not comment on its expansion plans or on that store since it has not yet been publicly announced.
A Fresh Market has also been part of a development proposed by the Koman Group near Olive and Interstate 270 in Creve Coeur.
Hertel of Willard Bishop said these new concepts tend to attract younger, higher-income and better educated customers.
“The format has great appeal for 20 percent of the population,” he said. “It probably has less appeal or is less affordable to the other parts of the population. So I think there’s going to be opportunities on both ends of the scale.”
After all, he noted that the hot sector in the grocery market is those limited assortment discount stores such as Aldi and Save-A-Lot.
“The growth is kind of like a barbell,” he said.
As for the traditional groceries, they are seeing that middle ground shrinking. But he suspects they will figure out a way to survive.
“That old formula is probably not going to continue to work forever,” Hertel said. “But I think they will adapt.”
Source: http://goo.gl/JVgEsa
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