Retailers are looking to the produce department to help them win the battle for consumers, and that could mean new opportunities for Chicago distributors and wholesalers.
“There is an increasing importance on fresh produce,” said Bill Bishop, chief architect of Barrington, Ill.-based Brick Meets Click and Willard Bishop Consulting.
“There is more emphasis on winning produce in this market, and that’s a meaningful change. “It is going to be more common for people to look for ways to stand out and differentiate themselves with produce,” Bishop said.
Besides the exit of the long-standing Dominick’s chain, Bishop said another big change in the market is how the new management of Jewel-Osco has been successful in revitalizing its 200 or so stores, upgrading merchandising and customer service.
“I was surprised by the ability of new management to have a short-term, positive impact on the business,” he said. “It’s making a difference,” he said.
There is no doubt Jewel is trying to change directions, said Anton J. Marano, vice president of sales for Anthony Marano Co., Chicago.
“They are going back to what used to work for them,” he said. “I think they are finding their roots again.”
The exit of Dominick’s and the reemergence of Jewel suggest an uptick in competition, Bishop said.
Jewel-Osco, now owned by the New York-based Cerberus Capital Management LP, has not been making extensive capital improvements to its stores but there are reports the stores are sourcing more local food, and upgrading standards for commodities like berries, grapes and apples, said Dick Spezzano, owner of Spezzano Consulting Service, Monrovia, Calif.
Promotional pricing for Jewel’s is also much more aggressive, Spezzano said.
“They went from being the highest priced now to the leader on promotional pricing,” he said.
Mariano’s raises the bar
Mariano’s, with about 13 stores in Chicago land and more planned in the next years, has stores routinely ringing up sales of $1 million a week.
T.J. Fleming, director of sales for Strube Celery and Vegetable Co., Chicago, said Mariano’s gives the perception of being high-end without high-end pricing.
Other retailers in Chicago have to stand up and meet the challenge, Fleming sad.
Spezzano said he considers Mariano’s the “best in class” in Chicago, with qualities to compare to New York-based Wegmans Food Markets.
Mariano’s does a great job with store layout and maintains strong produce quality throughout the day and evening, Spezzano said.
Farmington Hills, Mich.-based Plum Market, an organic and natural foods grocery, came into Chicago in the past year, said Rob Strube, president of Strube Celery.
Scarsdale, N.Y.-based Mrs. Green’s Natural Market Inc., a natural food market, also just opened in downtown Chicago.
“They are going off the high-end Mariano’s and Whole Foods,” he said.
Another high-end organic store called Fresh Time is expected to open a Chicago location in January, Strube said.
Cincinnati-based The Kroger Co. may be coming into Chicago as well, Strube said.
“There are a lot of people coming to Chicago, which will hopefully gives us more channels to sell,” Strube said.
Meanwhile, Bishop said, Meijer continues to grow in the Chicago market with the supercenter concept.
Spezzano agreed and said Meijer’s should expand into whole health markets in Chicago in 2014, with plans to open about 50 such stores in four years.
Some of the smaller players are dong a progressively better job on produce, Bishop said. With 140 stores in Chicago, Aldi is on the rise in produce sales, Bishop said. With attractive discount prices for items like pomegranates, Aldi’s will draw more consumers, Bishop predicted. Independent retailers like Pete’s Fresh Market, Oakbrook Terrace, Ill., also are doing well, he said.
Spezzano said Bentonville, Ark.-based Wal-Mart Stores Inc. is making inroads with its Neighborhood Markets.
“They finally got the return on investment they needed to have with the neighborhood stores,” he said.
There is less urban resistance to a 40,000-square-foot Neighborhood Market compared with a supercenter.
“They could be contender in the market for some of the Dominick’s,” Spezzano said.
Retailers such as Mariano’s and independent grocers seem to be concentrating on fresh departments, or the perimeter of the store — produce, deli, bakery, meat, dairy — and leave the center sections of the store to the big-box stores such as Target, Wal-Mart and Costco and others, Marano said.
“It changing the whole face of retail, almost getting shoppers to go back to two stores or three stores than a one-store shop,” Marano said. “Be competitive on items that you can really show your value and sell in which is produce, meat, dairy, deli.”