Industry Change Means New Tactics for Grocery Outposts
The grocery store is in a state of constant flux, buffeted by changing technologies, disruptive forces and shifting consumer desires. That means franchised grocery outposts are in constant flux, too.
Saladworks recently moved past the testing phase with grocery operations. The company will be in five Shoprite grocery stores in and around its core markets of New Jersey and Philadelphia. Saladworks CEO Patrick Sugrue met a Shoprite executive who was bringing grocery stores to food deserts, and as they got to talking they realized there could be a truly mutually beneficial partnership in the grocery store.
“The idea that their salad bars they were losing money on them each week, and frankly it was very consistent with our research: Consumers are increasingly disinterested in going to a salad bar that other people are reaching over. As a result, the sales are declining in what you might call a cafeteria-style salad bar,” said Sugrue. “They were interested in taking a money loser, but recognizing the desire for fresh healthy salad concept and basically put a Saladworks in their store.”
He said it was “very successful” almost immediately. By taking over the salad bar with a small, 150- to 200-square-foot box and utilizing shared prep areas, it became an efficient outpost and a boon for the grocer, too.
“Not only were they hitting sales greater than our pro forma but getting great feedback from the guests,” said Sugrue. “The unexpected benefit is actually guests were coming directly to the store to get a salad, then they’d do some fill in shopping while they were there. That was an unexpected benefit that got them excited about expanding.”
But like anywhere, location was extremely important. For Saladworks, it had to be front and center, right by the produce section.
“We found it's absolutely critical to this is a billboard walk in. You go in the door and walk right into the Saladworks store within a store. You haven’t even gotten your grocery list unfolded or opened on your phone and you see a solution in front of you. So you go, ‘Wow, I don’t want to wait, I don’t want to go home and prep and cook and all that tonight,’” said Sugrue. “So what we find by having it up front, it doesn’t undermine the grocery basket or basket size, you’ll still buy what you need, but what it does is simply confronts you with a more attractive dining occasion.”
That location is a tricky thing for other brands taking on grocery or other in-store operations. Marketing isn’t a free for all within a grocery store that’s trying to sell its own goods and many retailers want that same space for customer service or its own enticing offers. But without that premium spot, it’s just not worth it for Sugrue.
“Frankly, our advice for grocers, we know those spots are value but they are typically coming into a produce section anyway, and this only supports the freshness of your produce section,” said Sugrue. “You see it as a window to the rest of the store. We think that’s a key point and a requirement going forward. If someone wants to put us in the meat section in the back of the store, you won't get the results that you want or we need without this location.”
Ben’s Pretzels, which has had grocery operations in Meijer and Walmart for several years, has seen ups, but also some very disruptive forces.
According to co-founder and CEO Scott Jones, the Indiana-based company had good success initially. But lately, it’s been spotty. He said the ultimate indicator of success is still brand execution.
“Where we’re doing really well, is where we’re providing them with a really authentic Ben’s experience where that feel welcomed, and saying, ‘Welcome to Ben’s Pretzels,’” said Jones. “That might be someone that’s in 5 feet or 10 feet of our space, just letting them know where there. In stores where we don’t have our customer service executed well, they’re not getting as many sales.”
But, he’s been on the awkward end of grocery and retail disruption in two ways. First, as both Walmart and Meijer save on labor by moving to more entrances and more self-checkout lanes, the grocery outposts see traffic split.
And while they negotiated for strong sight line clauses in their master lease with Walmart, layout changes as the company leans into ecommerce has been a “blessing and a curse.” New digital pickup “towers” are dotting Walmarts.
“Some of those are directly across the main aisle form our stores. So while that customer is waiting it’s a matter of saying, ‘Why not wait with a pretzel?’ In others stores, it might just be positioned that it takes away some self checkout lanes and potential customers that would see us on the way out,” said Jones.
He said they’re figuring that all out, and some locations continue to thrive despite the layout changes.
Another big change has been just who’s shopping. Meijer embraced digital delivery with its partner Shipt in 2018, rolling the service out across the Midwest where Jones counts many franchised stores.
“In some stores, it happened overnight. All the sudden, all the moms that came in during the day were replaced by green shirts,” said Jones. “So the customer sales are still happening but the customers are not there. So we now find ourselves marketing to Shipt, so when the Shipt employee comes in to buy groceries, we’re offering a a combo meal at the Shipt discount price.”
He said the company is still a big fan of grocery and department store outlets, but change is constant. But nothing so far has disrupted the delicious smell of fresh pretzels.
“It’s irresistible and it's very important, that’s one thing we’re very gracious to our host stores. They understand the allure of that fresh baked bread smell,” said Jones.