Retail Memo: Supervalu, Inc.-Owned Cub Foods Opening Second Store of its 'Neighborhood-Focused' Supermarket Format in Eagan, Minnesota USA

Neighborhood Food & Grocery Retailing USA

Supervalu, Inc.'s Stillwater, Minnesota USA-based Cub Foods supermarket chain opened its second smaller-format (for the retailer), neighborhood-oriented supermarket in Egan, Minnesota today.

The new 42,000 square foot Cub Foods neighborhood-focused supermarket is located at 1020 Diffley Road in the eastern part of the city. It's the food and grocery retail store anchor of the new Diffley Marketplace center just recently completed in Eagan, Minnesota, which has a population of about 64,000 residents.

Cub Foods, which originally was an independently-owned Minnesota supermarket company, was acquired by Supervalu, Inc. in 1980. There currently are 57 Cub Foods supermarkets operating in Minnesota's Minneapolis-St. Paul Twin Cities region.

At 42,000 square feet, the grocer's new neighborhood-oriented supermarket format, is considerably smaller than the average Cub Foods supermarket, which are 68,000 square feet.

The neighborhood-focused stores are still called Cub Foods. The retailer didn't create a separate name for the stores and it doesn't use "neighborhood market" in the name.

The smaller supermarket that opened today in Eagan, which is the second store of the design and the second supermarket in that particular Twin Cities region city, is specifically designed to be a neighborhood supermarket, according to the retailer. Both of Cub Foods' neighborhood-focused supermarkets are located in Eagan thus far.

The store uses warm colors and incorporates design elements from the local neighborhood into its look in order make the statement the store is the neighborhood residents' neighborhood supermarket, for example.

The neighborhood-oriented design also is more upscale than Cub Foods' standard 68,000 square foot supermarkets, which are full-scale superstores with a discount pricing emphasis.

"Customers will notice an original layout for the fresh produce section, offering an expanded and unique product assortment. The store will also feature a larger selection of frozen food items, a more substantial natural and organic foods section and a full-service floral department," a Cub Foods spokesperson told Natural~Specialty Foods Memo.

"Other amenities include a pharmacy, a large bakery and a full-service TCF Bank," the spokesperson added in describing some additional unique features of the retailer's neighborhood-focused supermarket format and new store, compared to its standard average 68,000 square foot Cub Foods superstores.

Scott Lichtenberg, the store director of the new Eagan East Cub Foods supermarket, tells Natural~Specialty Foods Memo, "The store has a strong focus on the fresh (in-store departments and product selection) side of the business, and our customers will notice many unique offerings. The store was designed and built to maintain the great Cub tradition of low prices and great values," along with being more upscale and neighborhood-oriented.

Although not a "small-format" grocery store (we define small format as between about 10,000 -to 25,000 square feet), the new Cub Foods format without a doubt is a "smaller-format" for the grocer. And at 42,000 square feet compared to 68,000 square feet (the average size of 55 of the chain's 57 supermarkets) it's a significant smaller footprint for the retailer -- 26,000 square feet less worth of significance to be precise.

Even more interesting is the specific focus on creating a "neighborhood" supermarket format, and doing so not only via the store's design but also using the neighborhood framework in choosing the store's departmental and category emphasis.

Small-format and neighborhood market trends

Cub Foods' focus in doing this fits well into two trends we've been writing about and have put a considerable editorial focus on since August, 2007. Those trends are the growing significance of small-format food and grocery stores as well as the trend towards neighborhood-oriented supermarkets.

Small-format stores, 10,000 -to 25,000 square feet, tend by their size and nature to be neighborhood-oriented food and grocery stores. Although that's not always the case, particularly with the hard discount formats like Aldi, Lidl, SuperValu's Sav-A-Lot and others that depending on the country they are located in (Aldi and Lidl are global, Sav-A-Lot is U.S. only) are often positioned to be a bit more regional than just "neighborhood" in terms of the customer base the retailers' want to attract. In other words, there is no rule small-format stores must be neighborhood-focused stores.

Neighborhood-oriented supermarkets however don't have to be small-format by our definition in terms of size. They are nearly always smaller than superstores though, per the Cub Foods comparison to its average store size -- 42,000 square feet compared to 68,000 square feet, for example.

Generally speaking, in the U.S. neighborhood-focused supermarkets (other than small-format) range from about 20,000 square feet to about 45,000 square feet. For example, Wal-Mart Stores, Inc.'s Wal-Mart Neighborhood Market supermarkets are in the 40,000 -to- 45,000 square foot range.

U.S. multi and single-store independent grocers, which are America's original neighborhood food and grocery store retailers and still hold majority distinction in that category in most states, are all over the place in terms of the sizes of their neighborhood supermarkets. The supermarkets range as small as 8,000 -to- 10,000 square feet to as big as 45,000 square feet. A good average seems to be about 15,000 -to 35,000 square feet for U.S. independents operating neighborhood and community-focused supermarkets.

Independent supermarkets need not be neighborhood-focused either. In the U.S. there are numerous multi and single-store upscale and discount format independents that are more regional in nature, for example. Gourmet, specialty and natural foods-focused stores are one example, as are large independent discount superstores as well as ethnic food markets.

A possible small-format future for Cub Foods?

Being a regional chain, we think its smart for Cub Foods to have created this neighborhood-focused, smaller -format banner or format because it allows the grocer to go into more locations in its market region, the Minneapolis-St. Paul region. With 55 of the average 68,000 square foot superstores in the market, finding more niche locations is key for such a food and grocery retailer.

We would suggest Cub look at adding "neighborhood supermarket" to the stores' title though. Perhaps: "Cub Neighborhood Supermarket." would be good, allowing the format to be differentiated from the discount store. along with using the name to reinforce the "neighborhood-focus" of the format and stores.

Urban Fresh by Cub

Additionally, since Cub Foods is owned by Supervalu, Inc., which is experimenting with its own small-format banner, "Urban Fresh by Jewel," at its Illinois-based Jewel supermarket chain, which operates supermarkets throughout Illinois and Indiana, it might be a good idea for the company to use this expertise to experiment with a small-format store with its Cub Foods chain. [Read this September 18, 2008 piece from Natural~Specialty Foods Memo for more information on "Urban Fresh by Jewel": Small-Format Food Retailing Memo: First 'Urban Fresh by Jewel' Small-Format Food and Grocery Market Opens Today in Chicago's Lincoln Park Neighborhood.]

Cub Foods' market area, Minneapolis-St. Paul Twin Cities, is an urban region anchored by two big cities, the Twin cities mentioned above. Both cities have vibrant urban cores, like Chicago where the first 15,000 square foot "Urban Fresh by Jewel" opened earlier this year.

Minneapolis-St Paul also also have other similarities to Chicago: All three are big Midwestern cities with a similar consumer culture, for example. Downtown Minneapolis and St. Paul, like downtown Chicago, also have a lack of food stores in the downtown core, as well as in a number of urban neighborhoods. These are all good criteria for a small-format store.

Cub Foods could even name the small-format store "Urban Fresh by Cub Foods." We would locate the first "Urban Fresh by Cub Foods" test store in downtown Minneapolis, which is a vibrant downtown in a vibrant city, has lots of upscale workers and residents, and increasingly is seeing more and residents moving downtown into new condominium projects. Since "Cub" means little (like a bear cub) a small-format store is a natural for the chain.

We even think Supervalu could adopt the basic "Urban Fresh by Jewel" format, which is an upscale format which features lots of fresh, prepared foods, specialty, natural and organic products, fresh produce and meat departments, wines and craft beers -- but also offers a good selection of basic food and grocery items at decent prices -- customizing and localizing the format a bit in design and merchandising for downtown Minneapolis. Localizing is always key.

It's food for thought.

After all, as we've been writing about since August, 2007, there's a small-format food and grocery retailing revolution going on both in the United States and globally. That size and format trend is ties to the neighborhood food retailing trend in the U.S.

It's our analysis the small-format and neighborhood-oriented food retailing "revolutions" will only gain steam because the current global financial crisis and recession are slowly forcing people to think smaller -- smaller homes, smaller cars, smaller bank accounts, smaller budgets and the like. This change to a smaller and more frugal lifestyle will result we believe in a growing popularity among consumers to shop at smaller grocery stores, assuming the pricing is as or near as good as it is larger stores and the product selection is of a limited assortment but still decent.

The majority of U.S. consumers will still shop at big stores like Wal-Mart Supercenters Costco and supermarket company superstores. But we think they will shift a significant portion of their spending to neighborhood-oriented markets because of the convenience, savings on gasoline and a desire for a more simple, easier shopping experience.

This is already happening with Aldi and Supervalu's Sav-A-Lot stores in the U.S., as well as in the case Trader Joe's specialty markets, which draw shoppers from as much as 40-50 miles away in many cases. Numerous competitive neighborhood-oriented supermarkets also have been reporting increased sales this year, particularly when gasoline was at an over $4 a gallon. It is about 40% less than that right now. But it will go back up.

Further, in the U.S. there is a trend towards people moving from the suburbs to big cities in many parts of the country. This trend and the resulting increased population in these cities -- Los Angeles, San Francisco, Chicago, Seattle, Minneapolis to name just five -- is and will create more demand for stores located in the urban centers that offer a good selection of both basic groceries and more upscale product selections, including specialty, natural, organic and premium, prepared foods.

Cub Foods also is doing a neighborhood-oriented thing with the opening of its second neighborhood-focused supermarket in the Twin Cities region city of Egan. The retailer is donate a half-ton (1,000 pounds) of non-perishable food items to Second Harvest Heartland Food Bank that serves residents of Eagan, Minnesota.

Small-Format Food Retailing Memo: The Small-Format, Neighborhood-Oriented Food and Grocery Retailing Trend Continues to Emerge and Grow in the U.S.

Giant Eagle, Inc's (supermarket chain) first Giant Eagle Express small-format, neighborhood-oriented food and grocery store in Harmonville, Pennsylvania is about 15,000 square feet. (Photo credit: Pittsburgh Post Gazzette.)

Neighborhood Food Retailing USA

We've been writing extensively about what we termed the "small-format food retailing revolution" in the United States, and what we call the "international small-format food retailing revolution," since we started Natural~Specialty Foods Memo in August, 2007.

In conjunction with our small-format focus, we've written extensively about what we have called a return to neighborhood food retailing in the U.S., which goes hand-in-hand with the re-emergence of smaller-format food and grocery stores in the country.

We've received lots of correspondence from the mainstream press about our small-format food and grocery store and neighborhood food retailing reporting, coverage and analysis, including from reporters from the New York Times, Los Angeles Times (and other U.S. papers), business publications and daily papers from Canada, Mexico, Europe and Asia, and other mainstream publications, along with Blogs.

It has been interesting to receive this correspondence.

What we've also started to notice is that the mainstream press has discovered what we've been writing extensively about for 15 months -- that small-format food and grocery retailing and neighborhood food retailing is indeed a growing trend in the United States.

For example, on October 3, the Pittsburgh Post Gazette ran this story, "Tight economy has shoppers, grocers looking to neighborhood stores." The piece, by staff writer Teresa F. Lindeman discusses many of the issues we've been writing about since last August in terms of the external and economic factors involved in the small-format grocery store trend in the U.S.

It also talks about Tesco's Fresh & Easy Neighborhood Market, Wal-Mart's Marketside, Giant Eagle's Giant Eagle Express and SuperValu, Inc's Urban Fresh by Jewel" all small format chains, all which we've written about extensively.

And today, the Associated Press, which is syndicated to nearly every newspaper in the U.S., ran this feature story, Like shoppers' budgets, grocery stores shrink, which so far has been picked up and published by a number of American newspapers.

The AP piece also features a discussion of many of the issues we've been writing about, and suggested last summer would be occurring now, for the last 15 months regarding small-format food retailing in the U.S. and the greater focus on neighborhood markets.

Our analysis of the growing small-format food retailing trend in the U.S. isn't one that says smaller format, neighborhood grocery stores, which have never gone away completely in the U.S., are going to replace larger supermarkets and mega discount stores like Wal-Mart Supercenters, Costco club stores or Super Target combination food, grocery and general merchandise stores.

Rather our analysis is that the growing small-format trend, which is a unique event because major chains like Wal-Mart, SuperValu, Safeway, Tesco and others are driving it in the U.S., is a new layer of an old concept -- the independent neighborhood grocery store -- which is an American original.

Mega stores aren't going to go away. However, in our analysis fewer of such stores will be built and more smaller, neighborhood-oriented food stores will be built over the next decade.

We already are seeing evidence of this emerging. For example:

>Wal-Mart recently said it will built fewer of its combination food, grocery and general merchandise Supercenters (which average 180,000 square feet) next year and in 2010 than its original plans call for.

Wal-Mart also is building numerous smaller Supercenters and of course opened its first four small-format food stores, Marketside, in the Phoenix, Arizona Metropolitan region on October 4.

>Target Stores has recently decreased the size of some of its new Super target grocery and general merchandise mega-stores, and in some cases even shrank the stores significantly and decided not to add the grocery side in a few cases.

>Costco is looking at building smaller club stores in urban areas like the store it has in San Francisco's South of Market neighborhood. This even includes the possibility of building smaller, multi-story Costco stores in large cities.

>Supernatural foods retailer Whole Foods Market, Inc. has decided to downsize a number of the new stores it has in development. The retailer also is questioning whether or not it will even continue to build and open any additional stores in the 60,000 -to- 80,000 square foot range, something it has done a lot of in the last five years, in the future.

Our analysis is that just as cars, houses, bank accounts, retirement fund portfolios and other key aspects of American life are getting smaller, and will continue to do so for most Americans for the next few years, so too in many cases will food and grocery stores trend towards getting smaller.

But although size does matter, it's not just smaller square footage that's important in this analysis. What is equally important is that the reason the small-format trend is here to stay for a significant number of years is that it's neighborhood-driven. In other words, small-format food stores aren't just growing in quantity and popularity because they are small. They are doing so because they are designed to serve as neighborhood markets -- just like the independents have done and continue to do in the U.S. -- although to a far-lessor degree today than in the past because of the emergence of the big box chain store.

This means a few things.

First, it offers a new opportunity for the big chains to create small-format operations in conjunction with their larger store operations. Doing this can provide some real cost savings for retailers like Wal-Mart, Tesco, Safeway and the others.

Second, it's our analysis the small-format food retailing trend provides a renewed opportunity for independent grocers to thrive in the U.S. Independents are the original small-format neighborhood grocers and still do it the best.

Third, we see the small-format, neighborhood food retailing trend providing a new opportunity for traditional convenience store operators.

These chains and independents sit right between convenient retailing and neighborhood food retailing, straddling that definitional fence. As such, they can create new formats, as many are currently doing, that are hybrid grocery and convenience stores.

This offers the c-store chains particularly a new way to broaden their offerings away from the traditional c-store staples of alcoholic beverages, cigarettes, gasoline and "gut buster-quality" ready-to-eat foods, all of which are declining categories, into a more diversified product category mix. Not closing their traditional c-stores but diversifying with a new format. Pennsylvania-based Wawa is a good model of a very successful hybrid convenience store/grocery store retailer.

There is still a long way to go in the small-format trend in the U.S. We are just seeing the beginning of it at present. Our analysis is that the neighborhood retailing aspect of the small-format trend will get even stronger and we will see various different formats, as we are beginning to see at present, emerge to serve neighborhood residents' food shopping needs.

We will be covering and analyzing the small-format and neighborhood food retailing trend, as we have been for the last 15 months, extensively. We may even have a couple more new terms to coin.

Independent Grocer Memo: Going Where A Chain Store Used to Be; Texas Independent City Market Welcomes the Opportunity

Neighborhood Food Retailing USA

The Minyard supermarket chain may have given up on its store in the Westcliff Shopping Center at 3511 West Biddison Street in Fort Worth, Texas USA because it was underperforming. But that didn't stop independent grocer Kurt Jaeger from buying the store and spending a serious chunk of change to remodel the market from floor to ceiling.

Jaeger, who already owns an independent supermarket in nearby Burleson, Texas, says in a story published today in the Fort Worth Star-Telegram, that he knew the former Minyard supermarket could be a success if remodeled and given the proper independent touch the moment he toured the empty store.

So he bought it. Took it over and named it City Market, which is the name of his first store.

In July, Coppell,Texas-based Minyard Food Stores sold 37 of its stores to Grocer's Supply Co. of Houston. Grocer's Supply is Jaeger's wholesale supplier, and he acquired the site from them.

The store has been completely revamped. Walls and murals are freshly painted, shelves have been rearranged and restocked, and several new freezer cases have been installed. The produce section has been expanded, as has the selection, and the beer and wine offerings have also grown, according to the Forth Worth Star-Telegram. Tomorrow the store celebrates a big grand opening.

You can read the story, "Neighborhood grocery returns to Westcliff area," by staff writer Sandra Baker here.

As we often write, the independent food and grocery retailing sector in the U.S. is a vibrant one. Every so often a pundit or two will state that independents are an endangered grocery retailing species. However, American independents prove those pundits wrong each and every day, opening new stores and very seldom closing existing ones compared to other types of retailers.

Despite the growth of huge supermarket chains with a near national reach in the U.S., along with the discounters like Wal-Mart, Target and Costco that do have a national presence, the independent neighborhood grocer not only continues to survive in America, most are thriving.

Most independents survive and even thrive by sticking to the basics -- and then adding their own unique touches.

On the financial side they don't generally over-leverage themselves. They tend to follow a prudent pay-as-you-go philosophy of doing business.

On the merchandising side successful independents know the neighborhoods their store or stores are in like the back of their hands. They then create and nurture a niche -- be it upscale, natural-specialty or discount -- based on this knowledge of the market area.

In terms of customer service, independents invented this concept in grocery retailing. Nothing can be to high touch for many independents, be it offering carry out service, home delivery, special product orders or other neighborhood-oriented customer services features for their customers.

Successful independents also become part of the community rather than just being a grocer that has a store in the community. And like this community focus, most successful independents also create a sense of community and family among their employees and customers.

Another very important key to the success of independents in the U.S. today is the way their wholesale suppliers work closely with the retailers, offering financing, store design services, marketing, advertising and merchandising support, and other forms of expertise and help, like Grocer's Supply is doing with Kurt Jaeger and his now two City Markets stores.

Kurt Jaeger and his two City Markets supermarkets are a good example of creating a niche, offering superior customer service and focusing on community. The independent grocer has been very successful with this approach at his City Market number one. And we have a feeling if he follows that same formula he will make his City Market number two in Forth Worth, Texas equally as successful.

[Photo Credit: Paul Moseley: Forth Worth Star-Telegram.]