Wrapping Up the 2020 NGA Show
Who’s buying Cub Foods from United Natural Foods Inc.?
Maybe no one.
At least that’s what Chris Testa, president of the Providence, R.I.-based wholesaler, told the Progressive Grocer team at the 2020 NGA Show, which wrapped up Tuesday in San Diego.
Since acquiring Supervalu in late 2018, UNFI has sought to concentrate on its wholesale business by divesting the retail banners picked up in the merger. With a baker’s dozen of Shoppers Food & Pharmacy stores already divested, the company is looking to offload the remaining stores, and said in October that Cub, a longtime Twin Cities mainstay grocery chain, would likely be sold off during 2020.
But the brand is a shopper favorite and its network includes a strategic automated distribution center near Minneapolis, Testa noted. “Cub is a great franchise. If we don’t sell it, that’s OK, too,” he told PG during an interview at UNFI’s NGA Show booth, though acknowledging that “it’s hard to be good at both” retailing and wholesaling. And while UNFI is actively seeking a buyer for the chain, “We don’t have to sell it,” Testa said. “We’re not going to get rid of it just to get rid of it.”
Meanwhile, UNFI will be investing time and resources into being a stronger partner for independent grocers. With standardized reporting and a united sales team presenting one face to its customers, UNFI is dedicated to helping independent operators at “building up the store, selling more within the same four walls,” Testa said.
UNFI is offering what Testa called its “deal thesis,” with easier ordering and receiving, plus cost savings by aggregating purchasing. Additionally, UNFI is offering to help indies get into new categories like natural foods and save them money by taking over certain professional services like credit card processing.
“We can take the money out of their operations beyond just the product on the truck -- a full toolbox,” Testa said.
Additionally, UNFI is starting to offer natural products through its warehouses historically dedicated to conventional products, and vice versa, to give customers easier access to a wider range of products, Testa said. And increasingly, those warehouses are going to be automated, which Testa said will “allow us to more efficiently pick slower-moving items with a higher accuracy rate.”
With net sales up but operating losses mounting in UNFI’s first quarter of 2020, Testa told PG that with the integration of Supervalu nearly complete after 14 months, he expects a smoother road ahead.
Now UNFI is “ready to start playing offense,” Testa said. “If we made a mistake, it was thinking we’d get there faster.”
Growing the Show
Reflecting on the past three days of the show, NGA President and CEO Greg Ferrara said he expected the final number of attendees to approach 3,500. Ferrara lauded the partnership with Clarion Events, which acquired an equity stake in the show two years ago, for allowing the trade group to concentrate more of its efforts on education sessions for members as well as programs like the Match program that offers guaranteed meetings between retailers and suppliers.
“They bring resources that allow us to grow the event,” Ferrara said of the show, which is moving back to Las Vegas in 2021 after two years in San Diego. “We’re intimately involved on the education side.”
Ferrara noted that hiring and training employees is his members’ most pressing issue, a challenge common to larger operators as well. He said the low unemployment rate and rising wages are putting additional pressure on independent grocers who are already challenged by intense competitive forces. Ferrara says ecommerce and the threat of Amazon are another big challenge for his members, but many independent grocers are winning “by offering what the big chains and the digital grocers can’t: a localized experience that is attractive to shoppers.”
A challenge for the trade group, Ferrara noted in an interview with the PG team, will be NGA’s legislative agenda, with lawmakers’ attention expected to be monopolized by election year activities.
A final afternoon of educations sessions brought the 2020 NGA Show to a close, with some key takeaways:
The Many Faces of Meal Solutions: Delis, bakery/cafe concepts, franchise locations -- they’re all things that independent operators have explored to drive traffic and sales with prepared foods. Brooks Davis, owner of Mississippi-based Brooks Grocery (one store, a second on the way), in presenting “A Fresh Approach to In-Store Deli,” explained, “We really don’t have a deli -- we have a kitchen, and it works.” As he further explained, that kitchen is little more than repurposed back-of-house space, demonstrating how versatile indie operators can be to achieve success. With a growing list of house-made signature items, Brooks Grocery sells thousands of pounds of fresh salads, take-and-bake casseroles, chicken pot pies, pimento cheese and smoked meats. Meanwhile, in a session on fast-casual dining, Bryan Neiman related how his family’s Michigan-based Neiman’s Family Market launched in-store cafes and scratch-made bagels to great success, while Tom Clark shared the success story of how his Utah-based Clark’s Market incorporated an A&W fast-food franchise with groceries, gas and, of all things, a bowling alley to create a unique and profitable experience.
Turning Over a New Leaf: How can independent retailers leverage the trend in CBD products? Russell Zwanka, author and food marketing professor at New York’s Siena College, offered this eight-step strategy: Apply category management standards, stay on trend (target products that help sleep, anxiety and inflammation), have an expert, offer active and passive point-of-sale material, protect your customers by sourcing organic products, stay informed on products and regulations, select reputable suppliers, and get pharmacists on your side to offer whole-health solutions.
In-House or Outsource for Ecommerce: When it comes to ecommerce, should retailers create their own programs or partner with a third-party service provider? There are pros and cons to each, explained Mark Kemp, IT director for Ohio-based Riesbeck’s Food Markets. Doing it in-house may be cheaper overall, with a keener grasp of the brand message, but the operator may lack experience and the start-up cost might be higher. Outsourcing may offer higher revenue potential and require less staff labor, but may result in less brand consistency, profits and control.
Center Store Ain’t Dead: Center store is not only alive, but it’s actually thriving, and it’s all due to ecommerce, according to Darrren Caudill, senior VP of merchandising and marketing at Cub Foods: “Our average basket is about $40. The basket with delivery is around $90. And the basket with click-and-collect is well over $100. Center store is the foundation of ecommerce because the basket is higher and the center store categories are moving more with ecommerce.” To drive center store growth in-store and online, Caudill says grocers need to have a laser focus on in-stocks, shift with the mix, make the in-store experience a true experience, and make sure center store assortment has the right flow.
More Snacks, Fewer Meals: David Walsh, VP of membership at SNAC International, made a stunning revelation during his session at the NGA Show: 7% of consumers do not eat meals, and that number is growing every year. “On-the-go snacks are replacing meals more than ever before. More than 90% of consumers snack multiple times per day.” Among the trends Walsh discussed: snacks are increasing in every channel, including ecommerce; functional snacks such as high protein, collagen and other wellness attributes are hot; 88% of consumers are willing to pay more for snacks that are perceived as “healthy”; and Gen Z and Millennials are willing to replace meals with snacks more than the other generations.
Dealing With Deep Discounters: Kevin Proctor, EVP and COO at Save-A-Lot Food Stores, spent 16 years learning how to be a great discounter at Lidl, which is why he’s now spearheading a transformation at his current post. But his panel at the NGA Show focused on strategies for how grocers can compete with discounters. As ecommerce keeps expanding in the grocery retail space, Proctor says, success requires a new point of differentiation. Those include variety (big-box retailers), experience (high-end grocers) or value (discount grocers). And discount grocers are winning the differentiation battle by not just providing great value but also delivering on variety and experience. Many deep discounters, including Aldi, Lidl and Dollar General, offer value through extensive private label, experience through a smaller store that is easier to shop, and variety through exclusive brands.
Selling Produce Online: “Yes, consumers are very OK with ordering bananas, avocados and other produce online,” declared Ashley Nickle, editor of Produce Retailer, presenting exclusive research showing that more than 60% of consumers include produce in their online grocery orders. Top items ordered: apples, bananas, potatoes, strawberries, packaged salad, onions, carrots, tomatoes, oranges, grapes and avocados. Albertsons and Raleys are among the retailers for whom produce is a popular ecommerce category, Nickle noted, suggesting that grocers “looking to do produce right” online should be listening to customer feedback from grocery orders and allow customers to include comments in online orders such as “green banana, please” or “ripe avocado only.”
For live show coverage, visit PG at Progressivegrocer.com and on Twitter at @pgrocer, @jimdudlicek and @acostag