Retail Memo: Washington D.C's Famous Georgetown Neighborhood Could Finally Get its Long-Desired 'Social Safeway' Supermarket

From the Natural~Specialty Foods Editor's Desk: Nearly three years ago Pleasanton, California USA-based Safeway Stores, Inc. embarked on the huge task of converting what are now about 1,755 supermarkets under numerous retail banners in the United States into what it calls its "Lifestyle" format.

Safeway's "Lifestyle" format is a fairly upscale store design package which features soft colors inside the store, hardwood flooring in departments like produce and wine, and spot lighting instead of bright lights, along with numerous other attractive design elements.

The "Lifestyle" format combines Safeway's traditional value-oriented style of food and grocery retailing with a greater focus on natural, organic, premium and specialty products merchandising across all store categories.

This merchandising emphasis includes expanded selections of natural, healthy and organic food and grocery products like Safeway's own popular O' Organics and Eating Right store brands, along with manufacturers' brands.

The "Lifestyle" merchandising focus also includes store branding of Safeway's fresh, prepared foods offerings, including its premium Signature Cafe brand of ready-to-eat and ready-to-heat items. Additionally, under the "Lifestyle" format Safeway has dramatically expanded the number of premium, specialty, ethnic and gourmet food and grocery items it carries in its supermarkets.

Perhaps the most interesting and important aspect of the "Lifestyle" format is that with it Safeway has tried to create a much more social supermarket. The retailer has used design features like outdoor patios and terraces in some cases, farmers market-style produce departments, wine cellars and old fashion butcher shop-style meat departments in both its new and remodeled supermarkets as ways to create a more social and enjoyable shopping experience for customers.

By and large the "Lifestyle" format has been a big success for Safeway, which has thus far converted about 70% of its U.S. supermarkets--which operate under such banners as Safeway (Northern California, Oregon, Washington state, Arizona, Colorado, Washington D.C., Maryland and Virginia); Vons (Southern California and Nevada); Carrs (Alaska); Dominicks (Illinios and Indiana) and others--into the "Lifestyle" format, according to CEO Steve Burd. Plans call for all of the supermarket chain's stores (except the handful of Pak-N-Sav warehouse stores it operates in Northern California) to be converted to the "Lifestyle" format by the end of 2009, Burd told Natural~Specialty Foods Memo earlier this year.

One strategy Safeway has been using during its three year "Lifestyle" conversion format is to expand the size of certain stores and upscale them considerably in neighborhoods in which the shopper demographics are strong for food stores offering a lifestyle experience along with expanded selections of natural, organic, premium and specialty foods.

The supermarket chain has a number of stores that were opened long ago that sit in such premium demographic neighborhoods. Many of those stores, such a one currently being proposed (a remodel) in Oakland, California's upscale College neighborhood, another in Berkeley, California and yet another in the upscale Georgetown district in Washington D.C., are older, small supermarkets that once fit well in these neighborhoods but have long outgrown the gentrification and upscaling that's gone on in them. These stores and others present a huge sales opportunity (at least a doubling of annual gross sales) if expanded and remodeled based on the respective neighborhoods' demographic profiles.

Washington D.C's Georgetown, home to Senators, lobbyists and the well known Georgetown University, has long wanted Safeway to grow and upscale the Safeway supermarket that's been in the neighborhood for decades.

This has particularly been the desire of Georgetown University students and faculty who like most university communities are on the cutting edge of the natural and organic foods trend. Additionally, the wealthy political and business movers and shakers of Washington D.C., many who reside in Georgetown, have wanted a Safeway supermarket in the neighborhood like the ones ("Lifestyle" format) in nearby Alexandria, Virginia, which is one of the more wealthier suburbs of the nation's capital city.

This desire for a more "social" Safeway has been discussed in the Washington Post newspaper, on numerous area online food forums, and in the pages of the Hoya, the student newspaper of Georgetown University.

Well, it looks like Georgetown University students and the Georgetown neighborhood's who's who of political and corporate residents and their frequently entertaining spouses are going to get their long-desired "social Safeway", according to a story in today's edition of the Hoya, the Georgetown University student newspaper that was founded in 1920.

And, according to the article reprinted below, it looks like Safeway plans to serve up a "Lifestyle" format supermarket for Washington D.C.'s Georgetown neighborhood (where former President John F. Kennedy lived before being elected to office) befitting the areas demographics, love of food and desire for a more social grocery shopping experience.

Perhaps the new Georgetown "Social Safeway" will be ready for the new U.S. President and his family when he--either Barack Obama or John McCain--takes office next year?

Safeway to Get a Little More 'Social'
The Hoya--Georgetown University
By Kaitlyn Gallagher Sep 01 2008

Who would have thought that a mundane trip to Safeway could turn into a social event?

In an effort to create a more welcoming atmosphere, owners of the Wisconsin Avenue Safeway are planning extensive renovations to turn the current grocery store into a “Social Safeway” shopping center almost 50 percent larger.

The new establishment is envisioned as a curbside, two-level shopping complex complete with an outdoor terrace and two parking levels.

Craig Muckle, a Safeway public affairs manager, said the renovation plans are still in the developmental stages. “We are still working with the Advisory Neighborhood Committee and the District government, so the start date hasn’t been identified yet,” Muckle said.

The building would be moved curbside to make it more accessible and inviting than its current spot behind a large parking lot. It would also be turned into a two-level complex, with the lower level occupied by separate businesses and the grocery store on the top. Safeway administrators are currently unsure which businesses would occupy the downstairs level, according to Muckle.

Muckle also said the terrace would be added to give weary shoppers a place to rest. “It essentially will be like an indoor/outdoor café setup where you can purchase food, sit and overlook the store.”

The enormous parking lot will be scaled down, but according to the renovations, parking won’t become scarce: There will be two levels of parking behind and below the store. As a result, there will also be two entrances.

The Georgetown store’s redevelopment is part of Safeway’s long-term rebranding strategy announced in 2004 in which existing stores in North America will get hardwood floors, muted lighting and improved produce, delicatessen, bakery and floral sections.

The renovations specific to the Wisconsin Avenue Safeway, though, such as the shopping area and outdoor terrace, were designed to suit the Georgetown community.

“Every store is different in and of itself, but this plan is strictly for Georgetown,” he said.

The square footage of the new store would be approximately 65,000 square feet, which will be nearly 45 percent larger than the existing store.

“I definitely think it will make the shopping experience more enjoyable, and it will definitely be a way for more people to meet,” said local resident and frequent Safeway customer Elizabeth Williams. “This already is considered the ‘social Safeway’ in D.C., but these changes will only make it that much more social.”

The closure of the current store during construction is projected to be an issue for local customers, but Muckle said he hopes customers will remain loyal to Safeway and use its home delivery service or visit nearby grocery stores in the interim.

Retail Memo: Food, Glorious Food: An Interview With Waitrose UK Supermarket Chain Chief Mark Price; the Now 'Not As Chubby Grocer'

Natural~Specialty Foods Memo has written often about the United Kingdom's upscale Waitrose supermarket chain which is owned by the John Lewis Partnership, which operates department stores under that name in the UK as well as Waitrose, and its Managing Director (CEO) Mark Price (pictured at top), who because of the now ever-decreasing girth around his waistline first called himself "The Chubby Grocer and "The Jolly Grocer," and now... "The Not So Chubby Grocer"

Yesterday, we wrote this piece about Price and Waitrose's new "Market Town" small-format (10,000 -to- 15,000 square feet) small town-positioned food and grocery store format, the second store of a possible 100 which opened last Thursday in the UK.

We've also written about Price and his "The Grocer's Blog," which he posts in daily on the Waitrose website.

In his blog, which gets about 40,000 hits a month, Price chronicles his daily efforts, often in minute details, to lose weight by a combination of better (and less) eating and exercise. Waitrose's staff nutritionist Moira Howie--who has a blog of her own on the website, along with a local hog farmer who sells local pork to the supermarket chain--often posts comments to Price's blog, praising him when he has eaten healthy or done a serious regime of exercise, and reminding him about his weight loss goal when he strays. The blog's readers also offer their comments on his weight-loss program and the other topics he posts about.

Waitrose chief Price also uses the blog to write about a variety of other things, from making friendly but often digging jabs at his competitors like Tesco CEO Sir Terry Leahy, Wal-Mart-owned Asda's CEO Andy Bond, whom he likens at times to his partial namesake James Bond, and fellow upscale food retailing CEO Sir Richard Rose of Marks & Spencer, who Price calls "The King of Pants," in honor of the fact that in addition to being an upscale food retailer, Mark's & Spencer is the number one clothing retailer in the UK.

Price also chronicles his Waitrose store visits, business travels, family vacations and other food-related and sometimes non food-related topics on his blog.

You can read a number of pieces we've written about Waitrose MD (managing director) and his blog here, along with related topics. There are links to Price's blog as well as the others in the stories at the link.

In today's London Times online, staff writer Andrew Billen has a well-written and comprehensive interview with Waitrose chief Mark Price. The interview took place at the Waitrose Estate, a 4,000 acre working farm complete with a Victorian mansion and other delights located in the English countryside. Leckford, as the estate is called, produces a variety of foods that are sold at Waitrose supermarkets, including fruits, vegeatables, meats and other local goods. Food fairs and other events also are held at the estate, which is owned by the employees of the John Lewis Partnership.

Today's interview with Mark Price in the London Times, which you can read by clicking here, offers a good look at the Waitrose chief as a person, leader of a premium food and grocery chain, and UK business leader. It also includes some of the MD's plans for Waitrose in the future, along with his plans to continue positioning the upscale food chain as the UK's leading upscale premium, specialty and natural foods retailer.

Meanwhile, as you can see in the photograph at the top of this piece, Mark Price still has a way to go before he can retire the name he gave himself: "The Chubby Grocer." Even though he is now referring to himself as "The Not So Chubby Grocer" (which is fair), we want to continue to motivate the seller of premium and decadents foods and groceries to continue losing weight and a bit more of his girth. Therefore, we will refer to him for now as "The Not as Chubby Grocer."

We've seen Price prior to starting his diet and exercise regime, and without a doubt he isn't as chubby as before. But he remains "jolly," a flavor for which you can get in the interview, which we hope continues long after he reaches his weight loss and waist measurement goals.

Retail Memo: Analysis & Commentary: U.S. Upscale Grocers Need to Adapt to the Down Economy by Adding Value and in Some Cases Lowering Prices

The current economic news in the U.S. isn't good. The negative indicators abound. For example, The sub-prime credit crisis not only has a record number of homeowners getting their houses foreclosed on, but its also having a more profound macroeconomic result, which was witnessed the other day when Bear Sterns, the country's fifth-largest investment bank, nearly had an old-fashion bank run on its funds.

In order to prevent that from happening, banker J.P. Morgan and the U.S. Federal Reserve Bank loaned the company ten's of billions of dollars in a scheme not used in the U.S. since the great depression. J.P. Morgan then stepped in a couple days later, and with the Feds backing acquired Bear Sterns for $2 per-share, a mere fraction of what the investment bank's share price was just a week before.

Further negative economic indicators include record oil, gasoline and energy prices, food price inflation, rising unemployment and a host of other serious economic ills. About 50% of the professional economists in the U.S. recently polled by the Wall Street Journal said they believe the U.S. was already in a recession. Economic forecasters in states like Michigan and California are saying the respective states have probably been in recession since the end of last year.

We don't have to wait until a committee calls an official recession however to know the U.S. economy is in a severe patch. Like billionaire investor and chairman of Berkshire Hathaway said in this piece we wrote a few days ago, "The U.S. economy is essentially in a recession."

For example, food and grocery product inflation jumped by 4% between 2006-2007, the highest increase since 1990, according to the U.S. Department of Agriculture's Economic Research Service. And, of course, we don't have to tell you how much better the U.S. economy was doing in 2006 and early 2007, compared to its current performance. All indications suggest food and grocery inflation will rise at least 4% this year, and likely higher, according to the Economic Research Service's forecasts. As a point of contrast, in the mid -to- late 1990's food and grocery inflation averaged about 1%.

Retail prices on key food and grocery items has increased in the last year by far more than that overall 4% however. Eggs are up 15-20% over 2007 prices. Milk is up about 12%, compared to last year. Additionally, the commodity prices of wheat and corn, which are used in everything from bread and tortillas, to cereals, packaged and prepared foods, and in the case of corn as a major food additive and sweetener.

These soaring commodity prices have pushed the price of items like whole wheat bread up by 15-20% in the last year--and food products containing wheat and corn continues to increase since there's currently no light at the end of the price-increase tunnel in terms of when the commodity prices might stabilize.

For example, Supermarket chain buyers are telling us they've been receiving more frequent price change notices from vendors (in categories and on items across the board) than they can remember receiving in the last 15 -to- 20 years. Food manufacturers and marketers also are telling us not only are they getting significant price increases in the commodities they purchase but that the frequency of those increasing is record setting.

In low food and grocery inflation times (like the 1% 1990's) grocery retailers try to not pass on, or to pass on only a portion of, the price increases they get from their suppliers. However, in times of high food inflation like now, the retailers like to pass on the entire price increases, as the food inflation provides cover, so to speak, for doing so. It's also a must to do so in such bad economic times.

We believe, and are beginning to see evidence, that the current economic downturn in the U.S. economy could have serious negative effects on some upscale food and grocery retailers. In particular, we think the more middle-range upscale grocers like Safeway (Lifestyle format), Kroger (its upscale format), SuperValu (its more upscale banners) and a few others are likely to experience some significant sales downturns beginning in the second quarter of this year.

Our analysis also is that smaller, regional upscale food and grocery retailers (the single and multi-store independent and the smaller, privately-held regional chains) are at serious danger do to the current economic conditions in the U.S. One of the primary dangers to these grocers financial markets' credit crunch.

These independents and regional chains generally don't have a corporate cash-flow to tie them over like the upscale banners of larger supermarket chains do. (for example, gourmet grocer Bristol Farms is owned by SuperValu.) As a result, if sales drop significantly and the grocers need temporary operation funds, the difficulty of obtaining a credit line, or the interest rate cost of doing so, could put them in serious financial and operation straights.

The good news for these independent and regional upscale grocers is that they've been there before, and have survived previous recessions. Those retailers that have survived severe economic downturns in the U.S. have done so because they are in touch with their customers and communities. They also haven't been afraid to innovate and change--including lowering prices temporarily if needed--until better economic times arrive. It's all about increasing value during the down times.

Those upscale retailers at the very top-end and those with a solid niche, will fair much better, we believe. For example, our analysis is that Whole Foods Market should only feel partial effects from the recessionary economy, as it's niche is strong enough we believe to avoid serious sales losses. However, we predict the supernatural grocer will have to get more aggressive on its pricing in order to keep its same-store sales from eroding throughout the rest of this year.

There currently are signs that shoppers are beginning to trade down and search out bargains as their wallets and purses (and available credit) grow emptier because of soaring gasoline costs, the credit crunch, escalating food costs and other negative economic factors. Even worse, their confidence in the economy is very low.

Discount warehouse food store chains like Costco Wholesale, BJ's Wholesale Club and Wal-Mart's Sam's Club, have all recently posted strong same-store sales gains in the last couple months. Further, Wal-Mart just reported solid sales overall and at its Supercenters, which sell food and grocery products at a discount. In fact, Wall Street investment houses last week gave strong buy recommendations for Wal-Mart stock, primarily on the strength of its increased food and grocery sales.

Costco, BJ's, and to a lessor extinct Sam's Club, sell extensive selections of specialty, gourmet and natural-organic foods at prices generally lower than upscale supermarkets. With shoppers visiting these club format stores more frequently because of the bad economic times, many likely will make many of their upscale-oriented purchases while in the club stores, which is going to hurt the upscale grocers sales and margins, especially because these are higher-margin categories.

Dollar Stores like Dollar Tree, Family Dollar, Dollar General and others also are thriving in the current economy, as consumers--including upper middle-class shoppers--search out bargains. These stores carry fairly large grocery product selections, most for a dollar each as advertised

Another sign consumers are searching out lower priced food and grocery stores is the fact that salvage grocers, those grocery retailers who buy overstock, discontinued and slightly blemished products, are reporting increased sales, and saying they're doing dramatically more business than they've done in the last 10 years or so. The salvage grocers also are saying they're seeing lots of new faces (shoppers) in their stores.

Upscale food and grocery retailers that sell basic grocery items as well as more upscale offerings like prepared foods, specialty and gourmet foods, natural and organic products, and other higher-end goods, will need to get more competitive on their everyday pricing strategies in order to stave off the combination of a poor economy and cash and credit-strapped consumers.

People have to eat, and not all consumers are in a position to buy in bulk at stores like Costco, Sam's Club or BJ's Wholesale Club. They either don't need the quantities the stores sell, can't afford to spend a considerable sum of money on any one shopping trip, or just don't like shopping the huge, big box stores. Many of these consumers also would prefer to shop at a more upscale supermarket than visit a combination of stores--a salvage grocery for their hot buys, a warehouse club for loading up, and the upscale supermarket for the specialty, organic and prepared foods items.

However, that's what many consumers are starting to do. It's the economy, stupid, as that old political saying goes. We think upscale retailers can retain many of these shoppers by tightening up operations, buying better, lowering margins a bit for the rest of the year, and offering far better in-store and newspaper promotions than most currently do. The key is to not become a tertiary retail venue for shoppers, who only come shop the upscale store after they've been to a warehouse club and discount store like Wal-Mart.

Many upscale supermarkets have been spoiled by the good economy, allowing the stores to serve primarily as primary grocery shopping venues, and to a lessor degree as secondary stores. The current state of the U.S. economy is changing that. However, upscale grocers can weather this economic storm, even is they see a significant shift in some shoppers from primary to secondary, if they focus on providing value in both basic grocery items and in more upscale offerings like specialty, natural and organic, and prepared foods.

Our analysis suggest there will be some shakeout in the upscale grocery retailing sector. Some upscale grocers will put off building new stores they already have on the planning docket. Others will even close some stores. A few--those who fail to adapt and provide better value during the economic downturn or recession--might even fail completely.

Failing completely, and even closing stores, doesn't have to be an option though. The key is to add value. Buy better, promote more, take a little margin hit, and get ready for a better day--and better economy, which will come, perhaps as early as mid 2009.