business news in context, analysis with attitude

By Kevin Coupe

In addition to writing MorningNewsBeat each day, Content Guy Kevin Coupe also contributes regular columns to a wide number of publications, including Chain Store Age. As a regular MorningNewsBeat feature, the folks at Chain Store Age have graciously agreed to let us reprint some of these columns.

One of the traps that many supermarkets - in fact, many retailers - tend to fall into is what might be called the siren call of the Bentonville Behemoth.

By this, I mean the desire to emulate the approach to the marketplace that has been perfected by Wal-Mart. This is a phenomenon that I addressed in last month's column - the danger that many retailers could collapse into irrelevance because they spend so much time trying to beat Wal-Mart at its own game that they don't develop a differentiated game plan of their own.

Of course, in the food business, there are exceptions to the rule. Companies like Ukrop's, HEB, and Wegmans often are lauded for their ability to come at the business from a different direction, their capacity to surprise and delight the consumer. But one company that doesn't tend to get a lot of attention, and that is operating stores that are on a par with the best in the business, is Price Chopper, based in upstate New York.

I recently had a chance to visit several of the company’s newest stores, which are part of the company’s expansion into Connecticut. One of them is in Bristol, located in the shadow of ESPN headquarters; the other is about a half-dozen miles away, in the town of Southington. These two stores double the company's store count in the Nutmeg State; there are another four on tap for the near future.

These are hardly under-stored areas in which Price Chopper is opening supermarkets. There are a number of familiar food shopping entities nearby such as Shaw's, Stop & Shop, even Aldi. But that doesn’t seem to deter Neil Golub, Price Chopper's CEO, who has developed an aggressive and ambitious master plan for the 107-store, privately held chain.

Price Chopper has an intriguing approach to creating a differential advantage for consumers. On the one hand, it has an outstanding perishables presentation, offering a veritable food hall to entice shoppers; when Price Chopper advertises that it is for "people who love food," it isn’t kidding. On the other, the company has an aggressive, promotion-oriented pricing strategy, challenging the competition with sharp, selective discounts.

That's a strong one-two punch, and requires a kind of balancing act. But it works.

During my visit to the new 95,000-sq.-ft. Price Chopper in Southington, Golub was very much the proud father. Patting his people on the back, both really and figuratively. Chatting up customers, asking if they were having a good time. Picking up the rare scrap of paper off the floor. Clad in a pinstriped suit and two-toned shirt and tie, Golub betrayed his merchant's roots at every turn.

"What we want people to say when they walk in the store is 'wow,'" Golub says. He watches approvingly as a pair of teenaged girls walks by him, and one says into her cell phone, "I'm in the most amazing store." He smiles. Mission accomplished.

"We've come a long way in the last five years, especially in our fresh food offering," Golub says. It was about five years ago, he says, that the company started examining itself and its position in the marketplace, both in terms of consumer trends and competitive pressures. "I think we've very carefully, slowly, taken small steps, but mastered the steps that we've taken in a way that we can handle."

And a key was building fresh foods while remaining true to the chain's high-low pricing tradition. The best reason for this approach is that the big box stores use an EDLP pricing structure; focusing on specials allows price Chopper to differentiate itself. Plus, a high-low offering dovetails better with a strong fresh foods business.

"The offer that we give certainly is a very strongly valued offer," Golub says. "We are still a promotional retailer. When you look at our advertising and our store, they support each other…we're tough on our pricing, we watch it very carefully. There are a lot of new competitors out there, and we, like every other retailer, have to deal with it, and are dealing with it in our pricing structure. Our promotional effort is very sold, very consistent, and it delivers what we want to deliver very regularly."

The balancing act means that Price Chopper maintains three levels of private label: the Always Save value brand, the Price Chopper mainstream brand, and a premium Central Market brand that is growing in both SKUs and sales. It means that to counter-balance a doughnut counter that would put a Krispy Kreme to shame, there has to be a self-checkout lane that keeps the lines moving efficiently. For every extravagantly merchandised seafood and meat department, there has to be pack-'em-high-and-sell-'em-cheap endcaps. And even as people cook less and Price Chopper has plenty of so-called meal solutions in its fresh food departments, it also has a demonstration kitchen staffed by a full-time person who encourages people to sample the pleasures of cooking. Indeed, for every store that approaches 100,000 square feet, there also are smaller stores in the 45,000 square foot range that are customized for their markets.

The balancing act seems to be working. While Price Chopper competes with a number of Wal-Mart Supercenters, it expects that number to grow substantially over the next few years. "But our experience is, with our good stores, after a period of time our sales come back and our profitability comes back. Over the long haul, when you have theater like this, we like to think of ourselves in a different class of business."

One quick word about another Price Chopper advantage, one that stands out in a business where labor strife seems to be everywhere. About 55 percent of Price Chopper's privately held stock is owned by its non-union employees, which creates a sense of empowerment and engagement. "That in and of itself can become very significant," Golub says. "Last year alone, we had a 25 percent increase in our stock." That means that stock people, truck drivers, cashiers - all got to share in the company's growth.

My sense of Price Chopper's achievement is that it succeeds because it engages in highest-common denominator marketing without being overtly upscale, as opposed to the lowest common denominator approach espoused by other retailers. Golub says that one of his goals is to avoid being perceived as a plain vanilla store" and that he wants the store to "exude charisma." That's unusual language from a supermarket CEO…but it seems appropriate for competing in a tough marketplace.

Smart shopping can mean getting the best price. It also can mean getting the best products. Sometimes - and this is surprisingly rare - it means getting the best products for the best prices. This is the Price Chopper pitch.

One of my personal barometers for supermarket excellence is when I walk into a store and wish that the company would open one near me. That's a test that Price Chopper easily passes, with a brio and selection that easily compare to some of the best in the business.

Reprinted with permission Chain Store Age (3/2004). Copyright Lebhar-Friedman Inc., 425 Park Ave., NY, NY 10022.

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