Innovation Memo: Innovation Will Be Just as Important, and Maybe Even More Important, In An Economically Challenging 2009

The temptation in very bad economic times like the present is to hunker down, cut-back and just stay the course. This is true for all companies in the the food and grocery industry, from small natural and specialty foods manufacturer-marketers and single-store retailers, to global food companies and large retail chains.

The problem with taking that approach only is that it tends to shut down innovation, which is something industry companies of all shapes -- suppliers, marketers, distributors, retailers -- and sizes -- small, medium, large and mega -- need to continue doing in an economic recession. In fact, one could argue that although its much more difficult to do, innovating during a serious economic downturn is perhaps the most important time to do so.

Cutting back, hunkering down, trimming expenses -- these are all essential things to do in this global recession. They are survival mechanisms and strategies. But companies and individuals need to do so in a way that preserves, and even encourages, innovation. It can be done. The first step towards making it happen is to recognize it.

2008 has already ended in parts of the world, and will do so in just a few hours in other parts like the United States. So as the new year, 2009, begins -- a time when we all look to changes --one change we won't be seeing is an improved global economy. No indeed. In fact, we, along with many others, see the current global recession lasting through all of 2009, and likely getting worse before it starts to get better.

This does not mean innovation must come to an end though, or even slow down. Rather it just needs to change, to adapt, as all strategic elements must in a super-sour economy.

To this end, we've put together a list of recent articles and reports regarding innovation. All of the articles look forward to innovation in 2009, in a difficult economic environment. It's must reading for the new year. The list: click on the green titles below:

~Innovating in the Great Disruption
By Scott Anthony

~An Entrepreneur's Look at 2009: The End or A New Beginning?
By David Silverman

~Special Report: Making Innovation Work

~Special Report: Slimming Innovation Pipelines to Fatten Their Returns

Retail Innovation Memo: The 'Econvenience Store' Will Be the Next New Thing, and is A Convenience Store Industry Green Retailing Trend in the Making

Alvaro Garza of Dallas, Texas is a retailing pioneer in a brand new green-oriented retailing concept which Natural~Specialty Foods Memo predicts will become a convenience store industry retail niche trend in the not to distant future.

Mr. Garza and a partner recently opened an "econvienece store" (the 'e' stands for eco) named the green spot market and fuels in Dallas, Texas, in a converted and remodeled Mobile gas station.

The two retailing eco-entrepreneurs' have turned the traditional convenience store, the product mainstays of which are gasoline, snacks (mostly junk food) and beverages (mostly soda and beer) on its head, creating a format which not only doesn't merchandise junk food but puts an emphasis on selling natural and organic foods, including grab-and-go prepared items, healthy snacks and generally good-for-you beverages that taste good too.

The green spot market and fuels also sells fair trade organic coffee rather than the traditional C-store java, and serves the organic fair trade brew in compostable cups made from corn, which also are used to contain the all-natural soda's from the store's soda taps. No Coke and Pepsi at the green spot.

The Dallas "econvenience store" also offers biodiesel fuel in its fuel pumps and is the only service station or convenience store in Dallas County (which is a huge area) doing so currently, according to co-owner Garza.

Garza has researched the "econvenience store" concept in the United States extensively and says other then his green spot market and fuels, he's found just one other similar comprehensive and fully-integrated "econvenience store" in the U.S. That store is in Portland, Oregon, he says.

Dallas TV station WFAA recently did a report on the Green Spot, which its customers are calling one-part Whole Foods Market, one-part 7-Eleven.

You can read WFFA's report here, as well as view the video of the piece the station aired in Dallas here.

Natural~Specialty Foods Memo believes Garza and company are onto something major with their "econvenience store." The C-store format, which has as its two main product categories fuel and food and drink, offers a perfect concept for green retailing in a niche manner.

We believe this to be particularly true for entrepreneurs who are looking for a way to differentiate themselves in convenience store retailing. Chains control the C-store arena in the main, and it's difficult for independents to compete in the retailing category.

However, the "econvenience store" format offers a real point of differentiation for independents. It also taps into something consumers already spend their money on in the billions of dollars annually in the U.S.--natural, organic and healthy foods and beverages. There's nothing radical anymore about selling these foods and beverages in any type of retail format store.

While its true biodiesel is in its infancy and therefore not a very lucrative proposition, start up "econvenience store" retailers can still offer gasoline alongside the biodiesel at the pump. Additionally, as electric cars become more common, we see a niche for having battery charging kiosks at the stations as well, which can provide an additional revenue stream.

Further, we would suggest having numerous pressurized air hoses (say at 25 cents for a certain period of time) so bicycle riders can fill their bike tires up at the store. Once they learn its availability, they will make it a regular stop, thereby also buying beverages and snacks at the store while filling their bike tires. In fact, anything that's an logical "eco-product niche" makes since for the "econvenience store."

Another idea is to hook up with a local group and hold weekly farmers' markets in the "econvenience store" parking lot. A farmers' market fits the format perfectly, as well as being a great way to introduce consumers to the store, along with generating lots of food traffic, which in-turn will generate even more word of mouth communications.

Today, natural and organic food and beverage items taste as good or better than conventional C-store fair. They also can be sold at a reasonable retail price by "econvenience store" retailers as long as they don't try to make Whole Foods Market gross margins.

Since convenience store format stores have much lower overhead (small and no frills) and have far less operating expenses than say a Whole Foods Market does, doing so is achievable. Further, "econvenience retailers" can make a higher margin on the products than traditional C-store retailers do in many cases and still do well in terms of volume.

Imagine the look on the face of the traditional C-store customer in Dallas when they go into the green spot for a six pack of beer, a pack of cigaretts (which the store doesn't sell at all), a couple of ham sandwiches on white bread, a cheap burrito and a couple of Cokes.

Of course, once they get inside, they will buy despite their startled look because they're hungry and thirsty.

Perhaps after they instead purchase a bottle of Vitamin Water, a delicious sandwich on whole wheat bread, a tasty organic instead of cheap, tasteless burrito, and a six pack of organic craft beer, they just might not only be happy, but also might go out and convert their pickup truck to biodiesel fuel, as well as stopping in every morning at the green spot for a fresh-brewed cup of organic fair trade coffee in a compostable cup made from corn, on their way to work.

Food Retailing Innovation Memo: Ada's Creates its Own Lifestyle Natural and Organic Foods' Retailing Niche Using Bold, 'Big Idea' Innovation

Florida family-owned Ada's Natural & Organic Foods Supermarket understands store format innovation and lifestyle-oriented food retailing better than most retailers. The two-store, and soon to be three-store, Florida natural products retailer not only offers an extensive selection of natural and organic fresh foods, grocery products and non-foods in its supermarkets, it also creates a special lifestyle theme for each store.

The natural products and lifestyle grocer's latest format innovation will come later this year in August or September when it opens a 20,000 square foot lifestyle-oriented natural and organic foods supermarket in Naples, Florida.

The store will feature a Japanese-inspired Zen Garden theme throughout its 20,000 square feet. There will be Koi fish swimming in a large, elaborate pond, Japanese architecture throughout all the store's departments, and Japanese decorations at every turn of the store's aisle.

Ada's, which is owned by Florida's Bonadias family, creates a unique, one-of-a-kind theme for each of its stores. The flagship store in Fort Myers, Florida for example uses a tropical rain forest theme throughout the 28,000 square foot store. The store includes a large, temperature controlled bulk foods room even, which in done-up to look like an ancient lost temple. (Think Harrison Ford in Raiders of the Lost Ark or Michael Douglas in Romancing the Stone.)

Company co-owner Ed Bonadias says its all about creating lifestyle. "We want to offer our customers a lifestyle they might not normally have, through a variety of products, services and atmosphere." Ada's certainly lives up to that goal.

The independent grocer recently opened it newest and second store in nearby Cape Coral, Florida. Although the Cape Coral lifestyle store is only half the size of the Fort Myers market at 14,000 square feet, that size difference doesn't result in any compromises on the grocer's thematic lifestyle format.

The Cape Coral store takes its inspiration from the Canadian woodlands and mountain ranges. There's a temperature controlled bulk foods room just like in the Fort Meyers store, but in this case its designed to look like a log cabin, befitting the Canadian woodlands' theme. There are live waterfalls in the store, and areas that make a shopper feel like she's hiking in the pristine Canadian Rocky Mountains.

The new Cape Coral Ada's also has a twist we can't recall ever seeing in a supermarket before: The Bonadieses' have built a two-story fitness center which is connected to the store. When one thinks about it the logic of this innovation is impecable; natural foods, natural products and fitness--the two go together like fruits and vegetables.

The fitness center is open 24 hours a day and even offers shoppers free classes like Pilates, spinning and aerobics. And get this dash of merchadising brilliance: shoppers exercising next door in the fitness center can give their shopping list to an Ada's personal shopper, who will fill the list and have the groceries waiting for the customer when she finishes exercising.

An important thing to note about Ada's is that the independent retailer doesn't use these unique lifestyle themes in its stores as a substitute for good food retailing and product merchandising.

In fact, the opposite is true. In terms of customer service, the grocer will only hire employees with past industry experience, either at another retail food store or for one of their suppliers. A big focus is providing customers will answers to any question they might have. And if a store staffer can't answer the question, Ada's has computers nearby where the employee can search until he or she gets finds an answer to a shopper's question.

In the area of natural product selection and merchandising, the grocer packs its stores with not only popular natural foods products, but goes out of its way to stock niche natural and health foods items other natural products grocers might not have. The stores sell about 1,000 different types of glutten-free products for example, and that inventory grows weekly. (A family member is allergic to glutten, which inspired the grocer's focus on the category.)

As part of its lifestyle-oriented approach to food retailing, Ada's also likes to create food theatre in its stores in the form of product sampling. Both stores have about 18-20 product sampling stations located in them. The new Naples store will have even more. Nearly all of the sampling tables offer tastes for shoppers all day and night during store hours. The idea is to combine the unique theme of the store with top-level service, an extensive and unique product selection, and lots of retail theatre. Constant innovation is a theme the family comes back to and executes often.

It's worked well thus far. The family bought the original Ada's store in 1993. It was 900 square feet and had two employees. That original store was in Fort Myers. Since then, the family made two moves, ending up in the 28,000 square foot Fort Myers flagship store described above. And of course, as mentioned, they recently opened the second Ada's in Cape Coral, with the third and newest store set to open in about 7 months in Naples. Today, the grocer has more than 100 employees for the two stores. That number will grow even more when the 20,000 square foot Naples store opens in August or September.

What Ada's Natural & Organic Foods Supermarket demonstrates is that with retail format and operational innovation, an independent can not only do well, but thrive. The family tells us they plan to open 4-to- 5 new stores in the next few years. Each new store, like the existing ones, will have its own unique lifestyle theme, while maintaing and improving on the grocer's product selection, merchandising and customer service metrics.

The family also is thinking "big idea" innovation outside of the supermarket businesses, but with the lifestyle them taking center stage. The family corporation's ultimate goal is to open an all-inclusive, completely organic Disneyland-like resort in the Carribbean.

Plans thus far call for an all-organic resort--not a chemical or preservative would be used for example--with a 1,500 room hotel, featuring among other things organic bed sheets and bathroom towels, 17 restaurants serving only organic foods and beverages, a chemical-free water park, an ice skating rink, movie and live entertainment theatres (organic popcorn only), and a casino. Ten-percent of the resort's profits would go to supporting local agriculture on the island and another 10% would be donated to international environmental causes, the family says.

We have no idea if the family will ever get their organic mega-resort built. Although they just might. Regardless though, it's that kind of "big idea," innovative thinking that allows the grocer to experiment in its stores, and to differentiate itself from Florida big guys Publix and Whole Foods Market, for example. It's also the type of thinking which allows the retailer to realize food retailing can indeed be theatre and to try new concepts like the full service health club as part of a supermarket.

This innovative thinking is on tap with some new concepts for the Naples store as well. For example, the in-store cafe in the new 20,000 square foot store will have an entire "glutten free" buffett, along with a regular one. The store also will feature an extensive organic pet food and sustainable pet products' department, which will sell many pet products currently mot offered for sale in most U.S. retail stores.

More surprises are on tap for shoppers when the Japanese Zen Garden themed Naples, Florida Ada's opens this summer, according to the Bonadies family. We like to hear that. May the retail innovation never end.