By Carolyn Shapiro The Virginian-Pilot April 30, 2012 Gaelo de la Fuente stopped to admire the expanded salad bar at FarmFresh on Fox Hill Road in Hampton. During a tour of the store last week, the president of the regionalsupermarket chain pointed out that the salad bar and the nearbyfried-chicken case are two of Farm Fresh's most popular features.It recently spruced up those areas in many of its 43 stores, addingoptions such as healthier baked birds, as part of upgrades toenhance its appeal with shoppers. De la Fuente took the helm of Virginia Beach-based Farm Fresh justover two years ago. Coming from the headquarters of parent companySupervalu Inc., in Eden Prairie, Minn., he not only had to learn anew geographic market and the nuances of a retailer with along-entrenched local history.
He also had to steer Farm Fresh andits 4,100 employees through a national economic storm and itsparent company's own financial turmoil. Farm Fresh had annual sales of $796.8 million as of June 2011, whensupermarket industry publication Food World, based in Maryland,released its most recent market share analysis for Hampton Roads.That was down 7.4 percent from $860.5 million a year earlier,according to Food World. Farm Fresh has remained the region's No. 2supermarket chain in terms of sales, after Food Lion, for severalyears. Supervalu has struggled to combat sagging sales and fierce pricecompetition in many markets where its chains, or"banners," operate.
In a report this month, analysts atJefferies & Co. Inc. wrote that Supervalu continues to risk"sales and traffic weakness" and declines in marketshare. De la Fuente, however, remained optimistic about Farm Fresh as heshowed off changes in Hampton. The store's fresh-baked cakes boastvibrant hues of pink, turquoise and orange - aimed at catchingbread shoppers' eyes. Emergency Warning Triangle
Aisles have grown wider and brighter. Storemanagers carry iPads to track top-selling products in real time. De la Fuente discussed these details among other subjects in asit-down interview with The Pilot after the tour. How is Farm Fresh doing? You closed the downtown Norfolk store, theMarket at Harbor Heights, since taking over. Road Safety Kits Manufacturer
What would you tellcustomers about the health of the chain? The way I measure my performance is: Am I seeing our top line(sales) heading in the right direction? The answer to that is yes.Is the bottom line (profit) following that? The answer in the lasttwo years is yes. We are more financially solid. The other thing is customer feedback. ... We've always had thesurvey. China Reflective Safety Vest
We've always had the 800 number. We've always had thecomment cards. Now we've had Facebook for a year-and-a-half, and Ilook at it a couple times a day. We get feedback there.
Customersatisfaction has gotten better. What has it been like in the context of the economy, what'shappened in the industry and with Supervalu? The situation with the economy continues to be challenging foreverybody. That has been a constant since I've been here, withinflation and ongoing pressures with the cost of food and cost offuel. That Supervalu has been going, and continues to go, through amajor transformation ..
hasn't been easy. But the good news isthat, less than a year into me being in this role, Supervalu andour leadership team solidified what our game plan was going to be. We need to have reasonable prices, meaningful promotions, andenough services, quality, variety elsewhere in the store to makesure there's value to our customers. Has Farm Fresh cut employees? We have less people today than we had two years ago (at the mainoffice).
But at the store level, we have added positions to ensurethat we can deliver a consistent experience for our customers. Amajor focus since I got here was redefining the role of the storedirector - training them and developing them to be moreself-sufficient, and being able to manage multimillion-dollarstores. I am very encouraged and pleased by the growth anddevelopment that I have seen. But I recognized that I was still seeing large variations of thecustomer experience in many stores. I dug deeper and realized thatwe didn't have an assistant store director position.
When the storedirector worked, we performed much better and provided much bettercustomer service than when they weren't there. So we made aninvestment, adding another management role to the store. That canensure that we provide that consistent experience day in, day out,in the morning, middle of the day, in the evening, weekday orweekend. (It was) a major undertaking to staff positions with verycompetent and capable managers at 43 stores. That has been aninvestment that, in my mind, absolutely makes sense.
One of the reasons we can reduce the amount of support positionsis, we are now giving responsibility, tools and ownership to peoplewho maybe didn't have that before at the store level. We havechanged the expectations we have of them. The need for multiplepeople overseeing and checking and deciding above them is notneeded anymore. It also supports the big push - our CEO calls it being hyperlocal.Even though we are a relatively small regional chain and know ourcustomer base, know our market pretty well, it's still difficult toknow what makes sense for our store in Portsmouth versus our storein Virginia Beach.
I am relying on our store directors to be theeyes, ears and advocates for the customers in their neighborhood,to ensure that we are opening and closing the store when it mattersto them, that we are staffing our departments when it matters tothem. A store across from a hospital, like the one we have onBattlefield Boulevard (in Chesapeake), has different customer flowsthan a store where we might not have that dynamic. So there arethings that I might not know, or I might not be able to manage asclosely as I would want, but our store directors can. Historically, we just had mandates: Everybody opens at the sametime; everybody needs to have their salad bar set by this time;everybody needs to have their chicken case set up by then. We havebecome a lot more flexible, all in the service of being right foreach one of the neighborhoods.Talk a little bit about the storerenovations.
Historically, I think we have done a good job investing in thestores here in Hampton Roads. The first year I was here, I think weremodeled six stores. The second year, about the same. In additionto those remodels, we also did a refresh in 32 stores.
That was aneffort to standardize the look and feel of many of our stores.Declutter. Clean up. Look for some efficiencies along the way. In the process, we also looked at unmet customer needs to enhancethe shopping experience.
We have done a very good job with cakes.But ... we had people go to our sister banners and found that theywere just dedicating a lot more space, refrigerated space. They hadmore variety. So we stole the ideas, and we are now investing in, Ithink it's 28 of our stores, adding refrigerated space andremerchandising our bakery, because cakes mean a celebration.
Andwhen you're celebrating, you're likely to buy more than just oneitem. What changes have you made in pricing? We have been and will continue to be a promotional retailer. Whatwe look at is not just everyday pricing on the shelf. That'simportant, and we try to do a good job there. But we also look atwhat promotions we are running.
When you buy from the shelf andwhen you buy items that are promoted, how does the whole basketcompare to our primary competitors here? I would tell you we have been pretty consistent. But we can alwaysimprove. In the past year, we did make a meaningful investment inproduce. There are different seasons. Product comes from all overthe world.
Weather has a lot to do with it. Putting that aside, wehave set a lower margin expectation for ourselves in produce.Independent of all the ups and downs, we are investing to havelower prices in produce. We have been doing this for maybe the lasteight or nine months. When you do something like that, you begin to see more units, morepounds being sold. It's obviously not the same level of sales,because you've lowered prices.
But we are encouraged to see thatdynamic is happening. Produce is extremely important to ourcustomers. It's extremely important to customers forming an opinionon a grocery store. How has Farm Fresh performed historically on produce? The feedback that we were getting was pretty clear: Thesatisfaction from the total shopping experience from our customerswas higher than the satisfaction that they had in our producedepartment. And our name is Farm Fresh.
That's a call to action forus to do something different. We historically focused a lot more on the presentation and not somuch on the ultimate quality of the product and how it would holdup once you took it home. The size of our departments, thefixtures, the merchandising expectations we had were creatingsituations where it might have looked good in the store, but whenyou took it home, you might have been disappointed. We have done alot of work to, in some cases, make departments smaller, usedifferent fixtures, set reasonable expectations for how muchproduct should be on the cases to ensure that we turn it fast andhave the freshest product available. When we do remodels, we createa more open and inviting environment.What about products that mightdiffer from store to store? What other ways might customers seehyperlocal? We have customers who love to cook.
They are more creative. Theymight have more time and talent. So we have stores where weabsolutely have a broader assortment of specialty foods and organicitems. What if I live near a store that doesn't carry it? All weneed is to have dialogue. Request it, and we will bring it.
We talkto our customers, and we make assortment decisions like that. What I have learned in the last two years about being hyperlocal isthat it has a little less to do with variety and assortment. It'simportant. But it has more to do with knowing who your customersare, when they shop, what's important to them. And at some point,also reaching out to the community, not to just be a part of it,but shaping the community.
We have stores that have begun taking a part in solving problemsthat the community deals with. One example would be Smithfield.Isle of Wight, my understanding is it's one of the top two or threemost-challenged areas with diabetes in Virginia. Our storedirector, our pharmacist became aware of that. They partnered withthe American Diabetes Association to support fundraising effortsbut also do health clinics and health education in the store,dedicate an end-cap (display) to sugar-free items.
They are not just saying, "We're a part of the communitybecause we're here." They're saying, "We could be a partof the solution on this." Carolyn Shapiro, (757) 446-2270, carolyn.shapiro@pilotonline.com.
He also had to steer Farm Fresh andits 4,100 employees through a national economic storm and itsparent company's own financial turmoil. Farm Fresh had annual sales of $796.8 million as of June 2011, whensupermarket industry publication Food World, based in Maryland,released its most recent market share analysis for Hampton Roads.That was down 7.4 percent from $860.5 million a year earlier,according to Food World. Farm Fresh has remained the region's No. 2supermarket chain in terms of sales, after Food Lion, for severalyears. Supervalu has struggled to combat sagging sales and fierce pricecompetition in many markets where its chains, or"banners," operate.
In a report this month, analysts atJefferies & Co. Inc. wrote that Supervalu continues to risk"sales and traffic weakness" and declines in marketshare. De la Fuente, however, remained optimistic about Farm Fresh as heshowed off changes in Hampton. The store's fresh-baked cakes boastvibrant hues of pink, turquoise and orange - aimed at catchingbread shoppers' eyes. Emergency Warning Triangle
Aisles have grown wider and brighter. Storemanagers carry iPads to track top-selling products in real time. De la Fuente discussed these details among other subjects in asit-down interview with The Pilot after the tour. How is Farm Fresh doing? You closed the downtown Norfolk store, theMarket at Harbor Heights, since taking over. Road Safety Kits Manufacturer
What would you tellcustomers about the health of the chain? The way I measure my performance is: Am I seeing our top line(sales) heading in the right direction? The answer to that is yes.Is the bottom line (profit) following that? The answer in the lasttwo years is yes. We are more financially solid. The other thing is customer feedback. ... We've always had thesurvey. China Reflective Safety Vest
We've always had the 800 number. We've always had thecomment cards. Now we've had Facebook for a year-and-a-half, and Ilook at it a couple times a day. We get feedback there.
Customersatisfaction has gotten better. What has it been like in the context of the economy, what'shappened in the industry and with Supervalu? The situation with the economy continues to be challenging foreverybody. That has been a constant since I've been here, withinflation and ongoing pressures with the cost of food and cost offuel. That Supervalu has been going, and continues to go, through amajor transformation ..
hasn't been easy. But the good news isthat, less than a year into me being in this role, Supervalu andour leadership team solidified what our game plan was going to be. We need to have reasonable prices, meaningful promotions, andenough services, quality, variety elsewhere in the store to makesure there's value to our customers. Has Farm Fresh cut employees? We have less people today than we had two years ago (at the mainoffice).
But at the store level, we have added positions to ensurethat we can deliver a consistent experience for our customers. Amajor focus since I got here was redefining the role of the storedirector - training them and developing them to be moreself-sufficient, and being able to manage multimillion-dollarstores. I am very encouraged and pleased by the growth anddevelopment that I have seen. But I recognized that I was still seeing large variations of thecustomer experience in many stores. I dug deeper and realized thatwe didn't have an assistant store director position.
When the storedirector worked, we performed much better and provided much bettercustomer service than when they weren't there. So we made aninvestment, adding another management role to the store. That canensure that we provide that consistent experience day in, day out,in the morning, middle of the day, in the evening, weekday orweekend. (It was) a major undertaking to staff positions with verycompetent and capable managers at 43 stores. That has been aninvestment that, in my mind, absolutely makes sense.
One of the reasons we can reduce the amount of support positionsis, we are now giving responsibility, tools and ownership to peoplewho maybe didn't have that before at the store level. We havechanged the expectations we have of them. The need for multiplepeople overseeing and checking and deciding above them is notneeded anymore. It also supports the big push - our CEO calls it being hyperlocal.Even though we are a relatively small regional chain and know ourcustomer base, know our market pretty well, it's still difficult toknow what makes sense for our store in Portsmouth versus our storein Virginia Beach.
I am relying on our store directors to be theeyes, ears and advocates for the customers in their neighborhood,to ensure that we are opening and closing the store when it mattersto them, that we are staffing our departments when it matters tothem. A store across from a hospital, like the one we have onBattlefield Boulevard (in Chesapeake), has different customer flowsthan a store where we might not have that dynamic. So there arethings that I might not know, or I might not be able to manage asclosely as I would want, but our store directors can. Historically, we just had mandates: Everybody opens at the sametime; everybody needs to have their salad bar set by this time;everybody needs to have their chicken case set up by then. We havebecome a lot more flexible, all in the service of being right foreach one of the neighborhoods.Talk a little bit about the storerenovations.
Historically, I think we have done a good job investing in thestores here in Hampton Roads. The first year I was here, I think weremodeled six stores. The second year, about the same. In additionto those remodels, we also did a refresh in 32 stores.
That was aneffort to standardize the look and feel of many of our stores.Declutter. Clean up. Look for some efficiencies along the way. In the process, we also looked at unmet customer needs to enhancethe shopping experience.
We have done a very good job with cakes.But ... we had people go to our sister banners and found that theywere just dedicating a lot more space, refrigerated space. They hadmore variety. So we stole the ideas, and we are now investing in, Ithink it's 28 of our stores, adding refrigerated space andremerchandising our bakery, because cakes mean a celebration.
Andwhen you're celebrating, you're likely to buy more than just oneitem. What changes have you made in pricing? We have been and will continue to be a promotional retailer. Whatwe look at is not just everyday pricing on the shelf. That'simportant, and we try to do a good job there. But we also look atwhat promotions we are running.
When you buy from the shelf andwhen you buy items that are promoted, how does the whole basketcompare to our primary competitors here? I would tell you we have been pretty consistent. But we can alwaysimprove. In the past year, we did make a meaningful investment inproduce. There are different seasons. Product comes from all overthe world.
Weather has a lot to do with it. Putting that aside, wehave set a lower margin expectation for ourselves in produce.Independent of all the ups and downs, we are investing to havelower prices in produce. We have been doing this for maybe the lasteight or nine months. When you do something like that, you begin to see more units, morepounds being sold. It's obviously not the same level of sales,because you've lowered prices.
But we are encouraged to see thatdynamic is happening. Produce is extremely important to ourcustomers. It's extremely important to customers forming an opinionon a grocery store. How has Farm Fresh performed historically on produce? The feedback that we were getting was pretty clear: Thesatisfaction from the total shopping experience from our customerswas higher than the satisfaction that they had in our producedepartment. And our name is Farm Fresh.
That's a call to action forus to do something different. We historically focused a lot more on the presentation and not somuch on the ultimate quality of the product and how it would holdup once you took it home. The size of our departments, thefixtures, the merchandising expectations we had were creatingsituations where it might have looked good in the store, but whenyou took it home, you might have been disappointed. We have done alot of work to, in some cases, make departments smaller, usedifferent fixtures, set reasonable expectations for how muchproduct should be on the cases to ensure that we turn it fast andhave the freshest product available. When we do remodels, we createa more open and inviting environment.What about products that mightdiffer from store to store? What other ways might customers seehyperlocal? We have customers who love to cook.
They are more creative. Theymight have more time and talent. So we have stores where weabsolutely have a broader assortment of specialty foods and organicitems. What if I live near a store that doesn't carry it? All weneed is to have dialogue. Request it, and we will bring it.
We talkto our customers, and we make assortment decisions like that. What I have learned in the last two years about being hyperlocal isthat it has a little less to do with variety and assortment. It'simportant. But it has more to do with knowing who your customersare, when they shop, what's important to them. And at some point,also reaching out to the community, not to just be a part of it,but shaping the community.
We have stores that have begun taking a part in solving problemsthat the community deals with. One example would be Smithfield.Isle of Wight, my understanding is it's one of the top two or threemost-challenged areas with diabetes in Virginia. Our storedirector, our pharmacist became aware of that. They partnered withthe American Diabetes Association to support fundraising effortsbut also do health clinics and health education in the store,dedicate an end-cap (display) to sugar-free items.
They are not just saying, "We're a part of the communitybecause we're here." They're saying, "We could be a partof the solution on this." Carolyn Shapiro, (757) 446-2270, carolyn.shapiro@pilotonline.com.