The Hubbell & Hudson upscale, specialty supermarket in the wealthy The Woodlands communtiy in Texas. [Photo credit: Gary Fountain for the Houston Chronicle.
Natural & Specialty Foods Retailing in Troubled Times
Despite the financial meltdown, credit crisis and recession, there still are plenty of rich folks in the United States. You know, the old saying: "The rich get richer." Over the last eight years that saying has been true as the U.S. has seen the greatest redistribution of wealth from the middle class to those Americans who comprise the top 5% of income earners and wealth holders in the country in recent history. Old sayings tend to become "old sayings" because they are true.
Many of the rich -- both the old rich and the new rich -- live in suburban enclaves in the U.S. These communities always seem to have names to them, which is a part of the developers' marketing scheme. Give a neighborhood a fancy name, brand it as exclusive, and those with money will follow, the thinking goes. And it most often works, assuming the community being branded as such isn't located on top of a landfill or next door to a former toxic waste site.
One of those wealthy U.S. enclaves we speak of is The Woodlands in suburban Houston, Texas USA. See, doesn't the name scream of wealth and exclusivity?
America's wealthy also need upscale, specialty-oriented grocery stores, of course. And right now the wealthy are just about the only ones shopping at such stores. The masses are jumping ship at Whole Foods Market and Dean & Delucca and sneaking over to Wal-Mart and Aldi for most of their food and grocery purchases. For example, Wal-Mart Stores, Inc.'s profits reported on Tuesday increased by 10%. Conversely, Whole Foods Market, Inc. experienced a 40% drop in quarterly profits.
We kid a bit -- just a bit -- about the rich and upscale, specialty supermarkets. Upscale supermarkets, such as Hubbell & Hudson in The Woodlands, are for everybody -- assuming "everybody" is willing to spend a higher portion of their income for food and groceries, which right now is difficult to do for many and impossible for an increasing number of American consumers.
But of course, you can still do 85% or 90% of your shopping at a Wal-Mart Supercenter or Sam's Club, Costco, Aldi, Sav-A-Lot and other discount food stores (the basics), then do 10%-15% (the gourmet stuff) of your shopping at a specialty food store or supermarket.
After all, indulgent, premium foods are far cheaper than shopping for clothes, consumer electronics or cars right now. Its also much easier on consumers' credit cards, assuming they have any credit left. And, a human has to have at least a tiny indulgence or two in this short life.
The folks who live in The Woodlands in Texas though aren't feeling the economic pains directly in our pocketbooks like the rest of us are. It's more like stock portfolio pains for most of them. If they are feeling the pains like the average American who is wondering how to make ends meet at the end of the month, they should sell their home and pocket the difference, allowing them to live a grand lifestyle in a less expensive community. Housing values remain high in The Woodlands, by the way.
The folks in The Woodlands aren't in the main trading down when it comes to food and grocery shopping either, although we bet some of them should be. And most residents of The Woodlands are still doing lots of entertaining, offering specialty, gourmet and premium prepared foods and beverages.
The Houston Chronicle has a story about the independent specialty supermarket in The Woodlands, Hubbell & Hudson, which we mentioned above.
According to the founder and CEO of Hubbell & Hudson, Cary Attar, the company is doing fine despite the current financial crisis and recession because of a number of factors, including the location of the store in the wealthy community as well as what he says is his neighborhood grocery store approach, along with stocking such a varied selection of specialty delights in the store that even the less than wealthy can't resist buying a few premium food indulgences.
Read the story, "Specialty grocer defies downturn," from the Houston Chronicle here.
As we write about often in Natural~Specialty Foods Memo, the independent supermarket sector continues to survive and thrive in the United States because smart, savvy and successful independents create niches, like Hubbell & Hudson has done, rather than attempt generally to go head-to-head with the big and even smaller chains.
For example, Hubbell & Hudson's Cary Attar says his research shows many of the stores customers make only one trip to his store for every for trips they make to a more discount-oriented supermarket. However, because he sells lots of specialty products and value-added prepared foods, all which allow for a higher market basket, he is fine with this frequency among a segment of store shoppers.
They also seek out the right locations for their niche, whether its a community like The Woodlands in Texas for Hubbell & Hudson's well-designed, attractive and well- merchandised specialty supermarket or a particular neighborhood in need of say a small-format discount-oriented neighborhood market.
Customer service is job one among successful independents. Notice in the Houston Chronicle piece how Hubbell & Hudson's founder Cary Attar talks about the importance of being a "neighborhood" market. He isn't counting on the fact he's created a wonderful specialty food emporium to carry the store through. He knows customer service with a neighborhood touch is a must for his store to succeed. We call that independent grocer humility and good horse sense.
Of course in these times it helps if you're in the upscale, specialty supermarket business to have your store or stores in a community or in communities where wealthy people live. Lots of consumers with lots of disposable income is a good thing when selling specialty, organic and gourmet food products priced at the upper end.
But to survive in this downturn a grocer must do far more than that. Without the three simple basics outlined above -- and they are far from the only elements needed to succeed -- even the finest specialty food market in the wealthiest neighborhood has no guarantee of success.