Food & Politics Memo: Political Activists-Writers Insult U.S. Food and Grocery Industry With Their 'Obama Waffles' Mix

Two political activists-writers from Franklin, Tennessee USA this weekend insulted all the hard working Americans who toil daily in all sectors of the food and grocery industry.

The two writers, Mark Whitlock and Bob DeMoss, set up a booth over the weekend at the conservative political summit held by the lobbying arm of the Family Research Council in Washington D.C., where they sold a waffle mix with packaging depicting Democratic candidate for President of the United States Barack Obama in blatantly racist ways.

The front of the box of "Obama Waffles" (pictured at left) depicts the Presidential candidate with a huge grin, big lips and ears, and popping eyes next to a plate of waffles and the text "Change You Can Taste." The racial stereotype plays off the old, long-gone image of the pancake-mix icon Aunt Jemima, which is considered a negative racial stereotype.

On the top of the box, Barack Obama is pictured wearing a Muslim turban, next to text that says: "Point box towards mecca for tastier waffles."

Senator Obama, who is a Christian, has been the victim of numerous false smears, mostly on the Internet and on conservative talk radio, saying he is a "closet Muslim" and not really a Christian.

A caricature of Rev. Jeremiah Wright, the former pastor of the Chicago, Illinois church Senator Obama attended for two decades, is portrayed on the side of the waffle box as a missing person next to sayings (he made in a widely played video) including: "God damn America" and "Made in the US of KKA." Obama broke ties with his former pastor. (We don't find that racist. They are among the things he said.)

On the back of the box, Obama is depicted in stereotypical Mexican dress, including a sombrero, above a recipe for ''Open Border Fiesta Waffles'' that says it can serve ''4 or more illegal aliens.'' The recipe includes a tip: ''While waiting for these zesty treats to invade your home, why not learn a foreign language?'' (This seems in the acceptable bounds of political satire, although it's taste is questionable. It's the front of the box image and the top of the box image and text that are racist.)

In addition to their booth at this weekends event in Washington, D.C., the two writers have set up a website where they're selling the waffle mix via the Internet.

The two writers wore white chefs aprons and sold the waffle mix for $10 a box in their food show-style booth on Saturday. According to accounts from people attending the summit, the two were doing a brisk business selling the novelty waffle mix to summit participants until the organizers, who had approved the pair's participation along with other vendors at the summit, shut them down on Saturday afternoon, saying they were not previously aware the writers were selling "offensive material."

The box was meant as political satire, Mark Whitlock and Bob DeMoss, the two writers who created the mix, told the U.S press today in Washington, D.C, adding their was no racist intentions in depicting Obama on the front of the box.

We like political satire. But the "Obama Waffle" mix is far from mere political satire. By including the African American stereotype image on the front of the box, along with the picture of Obama in Arab dress, the two writers knew full well what they were doing, despite saying there is no racial or religious motivation on their part. They were tapping into an undercurrent of racism and religious questioning that exists among some segments of the American electorate, intentionally using that undercurrent to reinforce a negative stereotype for partison political reasons.

Had the two writers, who we suggest stick to writing and not food product creation, used many of the same messages they did, such as the text about immigration on the back of the box, and completely avoided any photographic images of a racist nature, it would be political satire. But they didn't.

It would be no different than if someone created say a John McCain laxative cereal novelty product, filling the package with images of the Republican candidate for President constipated and near death, creating an ageist depiction in order to play up on the concerns among some segmnents of the U.S. electorate about electing a 73-year old who has had cancer and suffers from serious injuries (he can't raise his arms above his head) from his time as a prisoner of war in Vietnam.

If there are any other so called political activist-writers out there considering similar food-oriented novelty items like the "Obama Waffle" mix, we encourage you to find another industry to piggyback on.

America's food and grocery industry is busy trying to produce, manufacture, distribute and sell products to consumers at a fair price in an environment with some of the highest food inflation and other economic challenges the country, consumers and the industry has experienced in many decades. They don't need 'no stinkin' political activist-writers mucking up their industry with racist food products, novelty or not.

The two writers from Tennessee have a right to create and market the waffle mix. But the two specific (front and top of the box) graphic images on the boxes are not only in bad taste but obviously racist. A little bit of creativity on their part could have created a better novelty waffle mix without the racist overtones. Guys: 'Don't quit your day jobs.'

Small-Format Food Retailing Memo: Not Technically 'Small-Format' But Whole Foods Market, Inc. is Going 'Smaller'

Small-Format Food Retailing Special Report

Amid a sluggish economy and slowing sales growth, Whole Foods Market Inc. is scaling down the size of new stores as the company finds massive grocery stores in most markets can't be justified.

The Austin, Texas, natural and organic grocer now plans to target new stores sized between 35,000 -to- 50,000 square feet, more than 20% smaller than what the company identified a year ago as its "sweet spot" amid successes with some large locations. The company is also renegotiating leases at several stores for smaller spaces than originally signed.

The size reduction by Whole Foods doesn't now make it a charter member of what we've coined as the small-format food retailing revolution going on in the USA. Instead it puts Whole Foods' stores right about in the middle in terms of the current average size of new supermarkets being built in the U.S.

For example, supermarket chains such as Safeway Stores, SuperValu, Inc., Kroger and most others are building new supermarkets that average about 45,000 -to- 60,000 square feet on the one end. Others such as regional players Wegmans (eastern U.S.) and HEB (Texas) have been building mega-supermarkets of about 100,000 square feet, at the other end. Then you have the small-format stores from Tesco (Fresh & Easy), Safeway (The Market) and Wal-Mart's soon to open Marketside, all which average from 10,000 -to- 20,000 square feet.

At its new "sweet spot" of 35,000 -to- 50,000 square foot stores, Whole Foods actually returns to its roots of the 1990's, when that was the size stores the natural grocer was focusing on. In the late 1990's to the present, Whole Foods went mega, opening numerous stores in the 70,000 -to- nearly 80,000 square foot range.

Smaller stores come with a host of lower fixed costs for rents and utilities, and also require fewer employees to run. That can help bolster key profitability metrics like sales-per-square-foot and sales-per-employee and improve the company's return on invested capital.

The smaller format was on display last week when Whole Foods opened its latest location in Richmond, Va. With 45,000 square feet of selling space, the store is smaller than most new ones open in recent years. But the store has mostly the same merchandise as larger stores, which should equate to comparable sales at lower costs.

It was also without any sit-down eateries that have driven up development and operating costs at some other stores. A Whole Foods in Fairfax, Va., for example, has four in-house restaurants including a barbecue joint called the Smokehouse.

The smaller Richmond store, meanwhile, has barbecue dishes available for self- service in addition to a hot food and salad bar, brick-oven pizza and a wine bar and cafe.

The moves for smaller locations come as Whole Foods is exhibiting signs that even the wealthiest consumers are cutting back on their consumption. Same-store sales rose just 2.6% at Whole Foods locations open at least a year, a far cry from the double-digit gains the food retailer enjoyed just a few years back.

Strong sales growth led to seemingly unmitigated growth by the chain, and store sizes followed suit. In 2005, Whole Foods opened its largest location, an 80,000-square-foot store in its Austin backyard that the company calls " enormously successful," and started to steadily increase the size of new locations.

But those larger format stores failed to live up to the performance of its Austin location and those in other dense, urban environments like New York. "

To be sure, Whole Foods, whose 270 stores average roughly 35,500 square feet, has continued to sign leases and open locations similar to its traditional layout and size. But the consumer spending slump has caused the company to rethink its development strategy, and retrench to store sizes from the past.

"With hindsight, reflection and some data points in front of us, we see that the really large stores are very powerful in limited markets and circumstances, and that smaller stores can also produce great returns for us," Chief Executive John Mackey said in an earnings call with food retailing analysts and media last month.

The real estate strategy is one of several moves Whole Foods is using to get back on track after its shares have lost more than half their value this year. The company has recently tried to emphasize value by offering more discounts and incorporating a value message into its marketing.

It is also planning on cutting back on new stores altogether, lowering its fiscal 2009 target to 15 new stores, down from a prior estimate of 25 to 30, as we reported previously.

Whole Foods also recently fired 42 headquarters employees as a cost savings measure.

As we've reported previously in Natural~Specialty Foods Memo, Whole Foods has had plans to open the first of its small-format Whole Foods Express concept stores in a former Wild Oats natural foods store building in Boulder, Colorado.

Initial plans called for that first Whole Foods Express store--which is designed to average 15,000 -to- 20,000 square feet and offer a limited assortment of natural and organic grocery items and feature fresh foods, such as produce and ready-to-eat and ready-to-heat prepared foods--to open this fall. However, as we previously reported, Whole Foods has been unable to agree on a new lease with the building's landlord at the Boulder site, which currently is still being operated as a Wild Oats banner store, so it has yet to start converting the building into the Whole Foods Express prototype store.

In fact, Natural~Specialty Foods Memo has now learned the Whole Foods Express concept is under review, as nearly everything at Whole Foods is, because of the supernatural grocer's significant drop in profits in the last quarter, which has resulted in the new strategies discussed in this piece, along with others.

Building and operating smaller stores isn't anything new for Whole Foods. In fact one of the chain's best-performing stores from a sales per-square-foot perspective is it 14,000 square foot store at 414 Miller Avenue in Mill Valley, in Marin County in the San Francisco Bay Area. That store averages between $500,000 -to-$600,000 a week in gross sales, according to sources in a position to know.

The Mill Valley store is where Whole Foods' co-president Walter Robb got his start. He opened the store in the early 1990's as the store manager, using his success with the Mill Valley store to move on to President of the Northern California Division and then eventually into his current position.

Additionally, the majority of the stores Wild Oats stores Whole Foods acquired in the merger last year are no bigger than 35,000 square feet, many being much smaller than that.

Whole Foods currently has plans to build some new stores even smaller than its new "sweet spot" size of between 35,000 -to- 50,000 square feet. These include two stores in San Francisco, one in the city's Noe Valley neighborhood and the other in the famous Haight-Ashbury district. Both of these stores are in the 17,000 -to- 20,000 square foot range. Another new store in development in Capitola, which is in Northern California's coastal region, also is smaller than 30,000 square feet.

We generally define a small-format food store as from 10,000 -to- 20,000 square feet in size, as do most others. The two San Francisco Whole Foods stores in development listed above fit that small-format definition. The Capitola store comes very close.

These however aren't specifically designed small-format stores like the Whole Foods Express prototype is. Therefore, it's our analysis that Whole Foods should move forward with its Express format.

If it can't open the first store in Boulder because of the lease problems that's fine. There still are numerous places where it makes even better sense to open one of the stores, particularly in an urban location where such a store makes much more sense for Whole Foods than it does to do so in Boulder, where the decision to do so was based largely on the fact that after acquiring Boulder-based Wild Oats, Whole Foods found itself overstored in the city of Boulder.

However, it pledged not to close any of the stores in the city that was home to Wild Oats. Therefore the natural grocer decided to turn one of the former Wild Oats stores into the Whole Foods Express as a way to differentiate the Whole Foods brand in the now overstored city.

We suggest opening a Whole Foods Express store in San Francisco or New York as a first test. It makes good sense to do from numerous perspectives, including geography, density, cost, maximization of sales per-square-feet, and more.

Feel free to agree, disagree and offer your perspective by clicking the comment link below.

Small-Format Food Retailing Memo: The 'Eco-Convenience' Hybrid Store Trend Continues to Emerge: 'Locali Conscious Convenience' to Open First Store

Small-Format Food Retailing Special Report

A new small-format, hybrid grocery and convenience-oriented store is coming to Hollywood, California. And the company hopes to create a regional chain of the stores throughout Southern California.

Locali Conscious Convenience, which is currently under construction, is set to open its doors this fall. The market, located at 5825 Franklin Avenue in Hollywood, seeks to make healthy eating and eco-friendly household necessities easily accessible to those on the go, says CEO Greg Horos. Roughly translated from Italian, locali means "community" or "where it's happening. "

According to CEO Horos, the small-format, environmentally-focused hybrid grocery and convenience market "will be a hip version of the mom and pop corner store. Locali will also be a place for people in the community to connect with each other and their food sources. There will be an emphasis on local and organic food artisans, producers and growers in the inventory line up. However, refined sugar, hydrogenated oils, high fructose corn syrup and genetically modified products will be missing from the shelves," he says.

"I like to describe it as the sustainable version of 7-11," Horos says. "We’ll have healthy and eco-friendly versions of the all the typical things you’d find at a convenience market…with the exception of cigarettes and lotto tickets…No clean versions of those," he added.

"We’re building (the store) to LEED (strict green building guidelines) standards and working with the city of Los Angeles to make sure we can supersede those standards as much as possible. We have a lot of terrific value adds for the community. I’m most excited that we’re offering exclusively organic and biodynamic wines and beers, too."

Besides the energy efficient building measures and appliances, Locali Conscious Convenience will also provide for the disposal of compost, in addition to recycling waste. A percentage of their proceeds will benefit a variety of local and international charities geared towards improving overall wellness, according to Melissa Rosen, a company spokesperson. The retail space is being designed by Los Angeles-based MASS Architecture & Design, Ms. Rosen says.

"Locali conveniently connects the community to eco-friendly food, beverage and lifestyle products. By providing easy access to socially and environmentally responsible goods, Locali promotes conscious consumerism and healthy living," Ms. Rosen says.

Locali Conscious Convenience is a unique hybrid concept, combining green retailing with small-format food and grocery retailing, natural and organic niche. However it's not the first or the only retail format of its kind in the U.S.

In June of this year we wrote and published this piece,"Retail Innovation Memo: The 'Econvenience Store' Will Be the Next New Thing, and is A Convenience Store Industry Green Retailing Trend in the Making," about Green Spot Market & Fuels, a hybrid small-format convenience and grocery store that opened in the Dallas, Texas region earlier this year.

In the story, Natural~Specialty Foods Memo predicted we would soon begin seeing other, similar format stores opening in the United States, calling the eco-hybrid convenience/grocery store an emerging trend.

Hybrid eco-convenience stores popping up all over

It appears we're on to something with that prediction. In addition to Texas' Green Spot and Los Angeles' soon to be Locali Conscious Convenience, we've learned a hybrid eco-convenience-grocery store chain named Good to Go ECOnvience Center recently opened its first store in Grand Chute, Wisconsin USA on May 1, 2008.

Good to Go, which like Green Spot and Locali Conscious Convenience also bills itself as "the first eco-convenience store in the U.S.," says it has plans to open 150 of the green convenience-oriented stores in Wisconsin, Iowa and Northern Illinois by the end of 2010, which is a very ambitious store opening program.

Good to Go says its stores also are built using LEED green building guidelines. The Good to Go ECOnvenience Center features a green roof with plants and sod that minimize absorption of sunlight that could heat the building and force overuse of its HVAC system; energy savings during the summer cooling season can be as much as 25 percent. The soil also acts like a sponge to absorb rain and reduce storm water runoff by as much as 95 percent after a one-inch downpour.

"When it comes to our customers, we haven't set out to change the direction the wind blows. Rather, we have adjusted our sails," said Angie Nikolas, vice president of neighborhood relations for the retailer. "We're very proud to bring 24-hour convenience that minimizes the impact we make on our environment.

"Similar to Green Spot and Locali Conscious Convenience (although each have unique aspects as well), Good to Go's focus is on selling healthier natural and organic food, grocery, beverage, snack and prepared foods items as part of its green theme.

In Portland, Oregon, a company called Full Moon Foodies is working on creating a chain of small-format hybrid convenience-grocery stores with a green and natural products focus.

"I got tired of having to hop into the car to drive to a mega-organic mart, fight for parking and waste time standing in long lines whenever I needed a few items," Ellisa Wee, the retailer's founder says.

According to the company, "the retail concept provides customers with a knowledgeable staff; a modern, upscale store design; multiple community-based urban locations; and extended hours past those of grocery stores."

"We're not trying to re-invent the convenience store or the organic/natural food concept, we're trying to make it more accessible," Wee says.

The Full Moon Foodie's aren't the only retailers looking to penetrate (or perhaps create) the eco-convenience grocery niche however. A company called SeQuential Biofuels, which operates numerous fuel stations throughout Oregon and Western Washington state, has created a natural convenience market, which it is locating on site at its many fueling stations. Those stations offer conventional gasoline, biofuels and other green technologies. Many of the eco-convenience stores are solar powered. The stores also buy used vegetable oil form businesses and consumers and then turn it into biofuel.

The small-format store, called the Natural Market, sells conventional, natural and organic snacks and beverages, along with a limited assortment of grocery items. It features fresh, prepared foods, along with fresh produce. The stores also sell beer and wine, putting a special emphasis on locally-produced brews and wines from the Pacific Northwest region where the stores are located.

All of the coffee cups and straws used for the store's fresh brewed organic coffee are 100% compostable. Additionally, the retailer says it picks each product to sell in the stores "based on where, how, when, and by whom it was made," "Every effort has been made to source local, organic products, a company spokesperson says.

Part of the small-format continuum

We see this emerging small-format eco-convenience hybrid grocery-convenience store retailing trend as a "kissing-cousin" to the small format food and grocery retailing revolution happening in the United States, as well as in Europe and Asia. The eco-convenience stores are a variant of what is a multi-format small-format food and grocery retailing trend if you will.

For example, while there are qualitative differences between Tesco's Fresh & Easy Neighborhood Market, which now has 86 stores in Southern California, Nevada and Arizona, and what these retailers are doing--chiefly that Fresh & Easy is putting more of an emphasis on being a primary shopping venue with a low price focus on selling basic groceries and prepared foods--there are numerous similarities as well.

For example, the Tesco Fresh & Easy format puts a major emphasis on healthy and natural foods, preparing its fresh, prepared foods without using artificial ingredients and colorings. Fresh & Easy stores also sell lots of natural and organic grocery products and are positioned as environmentally-friendly markets just like the hybrid eco-convenience stores are, along with offering craft beers and specialty wines like the hybrid eco-convenience-grocery stores are doing.

Therefore, we view this format development as a continuum of sorts, as well as a natural foods variant of the tradition C-store format just as in many ways the natural foods store is a variant of the traditional supermarket.

As part of this format continuum, you have small-format grocers like Trader Joe's with a specialty and natural products focus, and Safeway's "The Market" format which offers basic and specialty groceries in a more upscale environment on one end. In the middle you have Tesco's Fresh & Easy and the soon to open Wal-Mart Marketside, which are hybrid combination basic grocery stores and fresh foods markets. And at the other end you have the small-format, no frills stores like Aldi and SuperValu, Inc.'s Sav-A-Lot, which are deep or hard discount limited assortment grocery stores.

Sitting alongside these various small-formats on this continuum you have the traditional convenience store, the supermarket and the natural foods store. It's like taking a piece from each one; the sums becoming the whole (format).

You can add to this the new hybrid eco-convenience stores, which are combining the traditional C-store format with a mini combination grocery and natural foods store, while still including gasoline fueling stations which offer traditional petroleum-based gas but also are adding cleaner biofuels.

All of the formats are going after two things in the main: the time-pressed shopper who might be tired of shopping at big box stores, along with a share of that shopper's stomach. Each has a similar but different niche. But in one way or the other all are competing against one another for that share of the consumers' stomach, and in many cases her 21rst century "green" conscious as well.

Small-Format Food Retailing Memo: 'How Sweet it is': New York City's Economy Candy; A Small-Format Urban Store With A Single Focus

Small-Format Food Retailing Special Report

It's a small-format store that's been around for 71 years. And it has a single category focus: candy.

From the most premium chocolate bars and natural and organic confections, to everyday candy bars, exotic brands and much more, Economy Candy on New York City's Lower East side not only is a veritable one-stop shop for everything candy, it's also a category killer of sorts, selling its huge selection of sweet treats at discount prices, hence the store's name.

The family-owned and run, narrow but long store with high ceilings--which also sells scores of varieties of nuts and dried fruits along with its candy massive selection--was founded in 1937 by current owner Jerry Cohen's father.

When the senior Cohen opened Economy Candy in 1937 it was the typical old-fashion candy shop of the era, consisting mostly of bulk bins full of every imaginable variety of candy, from jawbreakers to chocolates, along with selling boxed chocolates for the gift market.

Today the younger Cohen, Jerry, who runs the store along with his wife Ilene, son Mitchell and a few dedicated employees, operates what New Yorkers call the "Noshers Paradise of the Lower East Side."

Economy Candy, which is located at 108 Rivington Street in the Big Apple, is packed with every imaginable variety of candy. The Cohen's follow the old retailing strategy of stacking product high and selling it cheap, filling the store's long, narrow aisles with stacks of discount-priced confections, including ethnic candy items that appeal to Jews, Hispanics and others.

The family-owned store, which has loyal customers from multiple-generations, also sells a variety of specialty and natural foods items, including teas, coffees and other products a a sideline. Jerry Cohen (no relation to the Ben & Jerry's founder of the same name) understands complementary merchandising well.

What makes Economy Candy so popular and what has maintained an astounding level of customer loyalty is that adapting to today's market and customer hasn't meant abandoning its essential quality as a neighborhood candy store, Cohen says.

Commenting on his philosophy of constantly bringing in new items, Jerry Cohen says: "You need to have whatever it takes to get people in. Teas, sugar-free and low-calorie candies, gift baskets and hand-dipped chocolates are among the products that filtered in as the inventory has changed to reflect the changing urban landscape of today," he says about his philosophy and the store.

Economy Candy also keeps to its origins. Along with offering hundreds of varieties (maybe thousands) of packaged candies, the store merchandes scores of candy items in bulk, along with offering numerous varieties of dried nuts and fruits in bulk bins.

These items range from the basic nut varieties like almonds, walnuts and cashews, to more specialty varieties like Hazelnuts, all sold at value prices. The store also offers a variety of its own special nut blends, creating various combinations and selling them in bulk.

The same is the case with dried fruits. Among the varieties offered include: dried apples, blueberries, strawberries, cranberrys, tart cherries, dried cantaloupe and many others.

But it is candy that's at the heart--literally and merchandising-wise--of Economy Candy. upscale, downscale, premium, conventional, natural, organic (and candy brands that can't be found elsewhere) are shelved and stacked throughout the store. It's a shrine to the ingredient sugar. And speaking of sugar, walking through the store one can't help smelling that sweet scent no matter what part of Economy Candy you are in.

Service also is at the heart of Economy Candy. Knowing customers by name, letting them nosh on the sweet treats in the bulk bins as long as they don't make a meal out of it, and seeking out rare brands and varieties of candy for customers are all a part of the family-style customer service the Cohen family practices at their 71-year old small-format, value-priced candy store on the Lower East Side.

Economy Candy is an excellent example of how a small store with a single-minded focus, combining reasonable prices with category expertise and superior customer service, can not only survive but thrive, even in the biggest city in the United States.

Lessons from the store's merchandising and operations, category expertise, affordable pricing, superior customer service, and more, are valuable to food and grocery retailers of any size and format. We also think there's room in the retail space for more small-format, single-focus (with some complementary categories of course) stores.

And such single-focus, category killer stores don't have to be huge warehouse stores. Rather, like Economy Candy, they can be smaller footprint stores, as long as the format and execution at retail are done in a superior way.

Economy Candy is a sweet case study in doing it all well from a merchandising, operational and customer service perspective.

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.

Marketing Memo: Store Brands 2.0: Better Store Brands and Brand and Shopper-Marketing Changing How Food Retailers Sell Their Own Brands

From the Natural~Specialty Foods Memo Editor's Desk: On August 6 we wrote about Safeway Stores, Inc.'s plans and initial strategy to market its O' Organics and Eating Right organic and healthy food and grocery (store) brands to competing retailers in the U.S. and to retailers throughout the world: Marketing Memo: Safeway's Challenge: Going From Store Brand Marketer to Consumer Brand Marketer With its O' Organics and Eating Right Brands.

Both brands have been so successful for Safeway that it is that success (above expectations) which provided the idea for the grocery chain to take the brands beyond the walls of the retailer's own stores and market them to its U.S. competitors and to food and grocery retailers throughout the globe.

Safeway is part of a growing trend among food retailers to go from being "private label" sellers to "store brand" marketers with their own-brand food and grocery products.

Traditionally, especially among American supermarket chains and mass merchandisers, private label was viewed primarily as a retailer's price and value store brand. The product quality was generally good but not outstanding, the packaging utilitarian, and the marketing focus strictly price and shelf placement. More sales promotion really rather than marketing.

This private label emphasis started to change slightly in the late 1980's when supermarkets like Loblaws introduced its more upscale Presidents Choice brand, which the Canadian food retailer eventually marketed to supermarket chains in the United states, as well as using it as its higher end store brand in its Canadian stores.

By the mid -to- late 1990's numerous other supermarket chains were starting to create better quality and looking store brands, along with using beginning to use some classical brand marketing strategies to create different levels (and brand names) of store branded products: super value, value, premium, natural, organic and the like.

About five years ago retailer branding started getting kicked up a notch with Safeway Stores, Inc. creating O' Organics, Kroger improving its store brands and developing its own natural and organic store brands, regional supermarket chains like Wegmans and Publix doing the same, as well as mass merchants target and Wal-Mart greatly upscaling their store brands.

Natural foods retailers Whole Foods Market and Wild Oats (now part of Whole Foods), along with specialty grocer Trader Joe's and the Costco and B.J's Wholesale club chains, were a major influence on these supermarket chains in terms of developing the higher quality and more niche oriented store brands like O' Organics. All of these retailers were leaders in the creation and marketing of these store brand 2.0 lines.

Along with this development, food and grocery retailers started putting much more emphasis on store or shopper-marketing of their store brands, developing and using numerous marketing-oriented ways to build the brands besides the past reliance and traditional emphasis on price and display building in-store only.

The marriage of higher quality store brands and shopper marketing is in full bloom today. Food and grocery and discount chains led by Safeway, Kroger, Wal-Mart (which right now is developing an upscale food and grocery store brand), Target, Trader Joe's, Whole Foods, Costco, BJ's (and others) and numerous regional players, are beginning to view their store branding operations in more classical brand marketing terms rather than as merely an extension of the procurement department, which is how private label was handled for decades.

Jim Lucas, who is the executive vice president of the shopper marketing division for DraftFCB, a marketing and advertising agency in Chicago, writes about what we call store brands 2.0 and shopper marketing in an article in tomorrow's (August 25, 2008) Advertising Age. Mr. Lucas' piece is informative theoretically but also extremely applicable and hands on. That's why we wanted to bring it to Natural~Specialty Foods Memo readers. Below is the piece and by Jim Lucas.

The Newest Brands? Open for Business
Retailers Have Switched Gears, Marketing Their Stores and Labels and Strengthening Bonds With Shoppers
By Jim Lucas: August 25, 2008

Many marketers are rapidly becoming more concerned with how retailers think. They want to know their concerns, objectives, equities and images and how they go about creating bonds with shoppers.

That's because today's retailers are evolving far beyond their historical role as simple points of distribution for selling national brands. They have changed their approach, marketing their stores as their own brands and systematically building better, stronger relationships with shoppers.

As a result, on behalf of our clients, we must now help the retailer build its business.

Think about it: With the average U.S. household making 150 to 200 store visits a year, it seems reasonable that while shoppers might make several trips to their local stores each week, they may not purchase the same branded products each time. Thus, shoppers generally have more contact and experience with their local retailers than with the majority of national brands.

Going their own way

Clearly, the nature of retailers' value creation has dramatically changed. And rather than just establishing loyalty to branded products, retailers want voices of their own. They are seeking to establish their own brands, and they are doing so by tailoring their customer experiences, differentiating them from their competitors' and creating better, ongoing relationships with shoppers.

Today's retailers have made huge inroads in fortifying their relationships with shoppers. Research by "Private Label Strategy" authors Nirmalya Kumar and Jan-Benedict E.M. Steenkamp clearly suggests that the nature of shopper loyalty is changing. While many shoppers are still loyal to brands, a significant portion increasingly are loyal to stores. This may be largely a function of convenience, but at the very least, retail brands are becoming more established in the minds of shoppers.

For example, Aldi, the European hard-discounter extraordinaire, has done a good job making its customers feel like smart shoppers. It has been aggressive in driving down prices on branded consumer package goods through strongly negotiated deals with manufacturers. It has created a wide range of store-brand products that also keep the price of the average shopping basket down. Its small, Spartan store formats help make the shopping experience more efficient. It has also developed a number of near-legendary promotions featuring "hot-priced" items ranging from well-known brands of wine to laptops specifically designed for and sold through Aldi stores, which are known as a place to "treasure hunt."

Believing that their long-term growth is tied to shopper loyalty, retailers increasingly want to develop their own shoppers. And because it is easier to get additional shopping trips, and increased purchases per trip, from shoppers who like your store, retailers are consistently using organized, data-driven, shopper-insight approaches. Retailers as diverse as Best Buy, H&M, Zara, Tesco, Tchibo, Kroger and Safeway are creating better touch points and shopping experiences to build stronger, more-loyal shoppers. This is largely the result of the creation of their own voices -- their retail brands.

U.S. supermarket chain Kroger is a prominent example of such a makeover. While working hard to become more efficient in its operations, Kroger also has negotiated sharper prices for its shoppers, has developed its store brands and is experimenting with new formats (for example, Kroger Right Now, a convenience, vending-machine format at gas stations). Kroger also is leading retailers in its investment in a shopper-loyalty program (with Dunhumby, the same firm that was instrumental in establishing Tesco's successful shopper program), the kind of strategic investment that provides an advantage in developing shopper insights and the ability to uniquely tailor the shopping experience to reach core shoppers.

Fresh focus

Safeway, another U.S. food retailer, recently has aligned itself with freshness and quality. Its lifestyle-store format has remade perishable areas such as produce, ready-to-eat meals, bakery and salad bar while creating new category/aisle descriptors (for example, Poetry in Bloom for floral). Its "Ingredients for Life" campaign extends the freshness/quality focus beyond the store. Moreover, its creation of store-brand product lines Eating Right and O Organics is designed to meet shoppers' needs. Such store-brand product lines are not simply about price points but are in sync with customers' lifestyles -- and unique to Safeway. It will be interesting to see how the marketplace reacts to Safeway's announced rollout of its house brands to competitive grocery chains. Will the availability of those brands at other stores cannibalize Safeway trips and sales?

It's an intriguing move because there does not seem to be a clear historical precedent. For example, Canadian-based Loblaw sold its President's Choice products to other retailers, typically in the U.S., so increased sales were generated from the additional distribution. But typically only one retailer or store banner carried the President's Choice items in a given market; thus there was really no competition for shopper loyalty or trips.

These supermarket examples, which similarly exist in other retail categories, indicate a fundamental change in how retailers are now approaching profitability. While efficiency is important, it's a "greens fee." Whether they be Whole Foods Market (natural/organic), H&M (celebrity design) or Zara (fresh fashion), retailers see long-term profitability as linked to their ability to provide unique shopping experiences that create loyal shoppers.

This shift in perspective suggests that the brand-marketing discipline many grew up with -- and the marketing-mix tools previously used -- have evolved. Retailer brands are now about connecting with shoppers' lives to build bonds and differentiate one retail experience from another.

Complex brands

Retailers are focused on positioning themselves through alignment with shoppers' lifestyles, and these positionings are less about marketing platforms than strategic cultural ideas.

It is also worth noting that retailer brands are generally complex, with many more dimensions than a traditional CPG brand, demanding that retailers turn to a new and growing set of marketing-mix tools to create the voices of their multidimensional brands.

The new marketing mix being used to create and maintain these retail brands is a far cry from the traditional one. Store ambience, layout, category organization, food theater, store-brand product lines, shopper programs, design, assortment and websites are just a few of the tools being used.

Today's retailers are first and foremost "meaning managers" or "choice editors" aligned with the needs and lifestyles of their shoppers. Retailers and manufacturers together must align with shopper needs to create unique shopping experiences and programs that help shoppers choose one store over another.

Working together

It is also important for retailers and manufacturers to align business goals, including driving traffic to the store or a specific destination in the store; creating larger sales receipts, better conversion rates, solution selling and cross-selling; and improving the total shopping experience -- for example, making it easier or more engaging, entertaining, educational or inspirational to shop.

Manufacturer brands must provide solutions that align with and help build and leverage retailers' equities, are tailored to retailers' needs and objectives, and are consistent with the positions the retailers are trying to establish and maintain.

Today's challenge for brand marketers is to help leverage retailers' marketing-mix tools (the shelf, category organization, in-store media or loyalty programs) or co-create new tools (new media, unique offerings, tailored products or packaging) to help retailers build stronger, better brands.

ABOUT THE AUTHOR
Jim Lucas is exec VP-director of the shopper-marketing division of DraftFCB in Chicago. He previously served as director of strategic planning and research at Draft, Chicago.

Independent Grocer Memo: Birmingham, Alabama USA's Western Supermarkets Goes its Own Way Against the Big Chains With Service and A Local Focus

From the Natural~Specialty Foods Memo Editor's Desk: The Birmingham, Alabama USA food and grocery sales market has become considerably more competitive and fragmented over the last decade, says Ken Hubbard, the owner and president of seven-store Birmingham-based Western Supermarkets. He's the local guy.

"You've got the big box stores on one end, the smaller independents in the middle and on the other end the pharmacies, convenience stores and others also selling groceries," Ken Hubbard says in describing today's Birmingham, Alabama retail food and grocery retailing market.

Over the last 10 years, Wal-Mart, Inc. has been building and opening Supercenter after Supercenter in the Birmingham market, making it the number one seller of food and grocery products today in that market, according to locally-compiled statistics.

In addition, discount retailer Target has been adding stores in the market as has the very successful Florida-based Publix supermarket chain. Then there's longtime region market share leader Bruno's supermarkets, which is growing once again, and the famous southern USA's Piggly-Wiggly chain, along with all of those other format retailers Ken Hubbard describes.

Then there's Hubbard's own seven-store Western Supermarkets, the hometown multi-store independent grocer. Despite all this competition, including from mega-Wal-Mart, Hubbard, like numerous of his fellow independent grocers throughout the U.S., is surviving and doing well.

Hubbard's Western Supermarkets is surviving and even thriving by focusing on those key things a locally-based food retailer can do best, which include offering superior, personalized customer service, along with product selections customized to local shoppers needs, tastes and desires. The independent generally knows these local consumers best because he lives and works among them daily.

A key to Western Supermarkets' success is that it customizes elements of the design and merchandising of each of its seven stores based on the neighborhoods they're located in. For example, a number of the stores feature extensive wine selections, which draw customers not only from the neighborhood, but also from throughout Birmingham and even neighborhing cities. Western Supermarkets publishes two wine newsletters as part of its wine merchandising program, the Wine Celler, pictured above, and another newsletter named the Grape Press, which you can view here.

Another example of this localized merchandising is that three of its seven stores have "The Original Soupman" gourmet soup bars in them. There are numerous other examples of this neighborhood marketing and merchandising, which is one way the multi-store independent competes with the big chains without trying to match them on price.

This prescription--service, niche marketing and localization--is the same formula allowing thousands of multi-store and single-store independently-owned and operated supermarket retailers to continue to succeed in the U.S. despite the continued competitive pressure from big discounters like Wal-Mart and Target, warehouse clubs like Costco and BJ's, giant national supermarket chains like Kroger, SuperValu and Safeway, and mega-regional chains like Piggly-Wiggly, Bruno's and Publix in the Birmingham, Alabama market.

Birmingham-based Western Supermarkets is 60 years old this year. Ken Hubbard, who worked for the local supermarket chain's original owners as a bag boy in 1960 while attending college, and a partner bought the company in 1987. A little later Hubbard bought out his partner, becoming the sole owner of the seven-store hometown mini-chain.

Roy L. Williams, a staff writer for the hometown Birmingham News newspaper, profiled Ken Hubbard and Western Supermarkets in yesterday's edition of the paper. Below is that profile of the 60-year old successful multi-store independent grocer in a market full of white hot competition, with numerous retailers of various formats all after a bigger share of shoppers' food and grocery dollars.

Western Supermarkets hits 60-year milestone: 7-store chain puts focus on service

By Roy L. Williams: Birmingham News staff writer

Ken Hubbard earned some of his tuition to the University of Alabama in 1960 by working as a bagger at Western Supermarket's Five Points West store.

Today, Hubbard is now sole owner of the seven-store chain that this fall will mark 60 years in business - a milestone that comes amid the toughest operating environment seen in decades for the grocery industry.

Hubbard, who along with former partner Ed Goodwin bought the company from co-founder Inos Heard in 1987, says Western is managing to weather what he calls the toughest economic storm of his career, brought on by stiff competition from bigger rivals and soaring gasoline and wholesale food prices that have pinched grocery margins.

"Despite it all, we've been blessed to experience overall same-store increases over the last year or so," said Hubbard, who bought out Goodwin in 1996.

He didn't release sales numbers for the chain. Darwin Metcalf, Western's president and chief operating officer, said Western's value-oriented FoodSmart stores in the Festival Center on Crestwood Boulevard and Keystone Plaza on U.S. 31 in Pelham have especially benefited as consumers have grown more cost-conscious.

Hubbard acknowledged that Birmingham's grocery landscape has changed over the past decade since Bentonville, Ark.-based Wal-Mart Stores Inc. began adding supercenters that sell groceries. The world's biggest retailer has commanded the No. 1 market share for groceries in the area Birmingham for several years now, according to the Shelby Report, a Georgia-based grocery industry research firm.

In addition, discount retailer Target and Florida-based Publix Supermarkets have expanded their presence in Birmingham in an attempt to wrest market share away from long-established players such as Western, Bruno's Supermarkets and Piggly-Wiggly.

"The grocery market in Birmingham is much more fragmented than it used to be," Hubbard said. "You've got the big box stores on one end, the smaller independents in the middle and on the other end the pharmacies, convenience stores and others also selling groceries."

Recent months have added the challenge of surging prices for grocery staples such as milk, eggs, rice and items made from corn. Consumer prices for food items have been rising at the fastest pace in 17 years, putting pressure on operators.

Western has managed to survive by sticking to its roots, said Jack Taylor, the Joseph S. Bruno professor of retailing at Birmingham-Southern College.

"Bruno's used to be like that when run by the Bruno family," Taylor said, referring to the Birmingham-based grocery chain that once dominated the area's grocery business. "When Bruno's was bought out by KKR (an investment firm) in the early 1990s, that's when the chain began to struggle."

After a period when it was controlled by a sister firm based in South Carolina, Bruno's operations are again based in Birmingham. After the return to Birmingham, executives pledged to strengthen service, refocus the product assortment and improve the decor in the chain's stores.

Unable to compete on size, Hubbard said Western has focused on customer service. Half of its full-time employees have been at the company 10 years or more and all of the general managers of its seven stores have been with Western at least 20 years, he said.

Taylor said Western "isn't the cheapest store," but staying small allows the chain to focus on meeting customer needs.

"I bet the meat market managers at Western know regular customers by name, something you can't get at the big chains," Taylor said.

Western has also focused on making each of its seven locations cater to the communities they serve, Metcalf said. Western converted a store at 7737 Second Ave. South into a concept called The Village Market to meet the needs of East Lake and Roebuck residents who wanted a neighborhood market, he said.

"It's more of a market concept," Metcalf said. "It's not so much what we carry there, but how much. We may carry turnip greens or fruits by the pallet load at certain times."

The Mountain Brook location at 2717 Culver Road is known for its wide assortment of 3,000 wines, which draws patrons from as far away as Mobile and Huntsville.

Hubbard, whose son Brett serves as Western's director of deli and floral departments, said he is confident Western will be able to weather its latest economic storm.

"We plan to be here for a long time," Hubbard said. "We have no plans to add any new locations. We will just focus on continuing to provide better service at our existing locations.