Sunflower Could Grow Big for Supervalu
By George Anderson
Sunflower Market, Supervalu’s discount organic food concept, is looking to bloom in Central Ohio by building as many as seven stores in the Columbus area.
The decision to open in Columbus, home of Ohio State University, is part of the company’s plans to open up to 50 stores in Big Ten towns over the next five years.
Supervalu opened its first Sunflower Market last month in Indianapolis.
John Sturm, director of Sunflower Market for Supervalu, told Business First of Columbus, “We opened with no advertising. It’s been unbelievably successful. Our biggest problem in the grand opening was keeping the shelves stocked.”
The stores, which typically run between 12,000 to 15,000 square-feet and carry between 8,000 and 12,000 skus, place a heavy emphasis on private label ala Trader Joe’s.
Supervalu’s specialty produce company, W. Newell & Co., providing most of the banner’s fruit and vegetable needs and the markets also carry over 100 items under the parent company’s “Nature’s Best” brand.
Supervalu plans to operate all Sunflower Markets as corporate stores, providing information technology, merchandising and operations support.
Moderator’s Comment: Has Supervalu got a winner on its hands with Sunflower Markets? Where is the organic foods/natural products business heading?
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George Anderson – Moderator
Organics is going to become a bloody battle soon. Lee Scott announced late last year that Wal-Mart is serious about upping their organic offering, saying that budget-conscious shoppers should not be “denied” organic offerings. Depending on who carries what, there should be room for Sunflower and Wal-Mart to compete in the low-cost segment. It’s “Whole Paycheck” that might have a bit more to worry about. While upscale Whole Foods customers will stick around, those crunchy college kids that have pulled money out of the sofa to make purchases at Whole Foods will soon have another option. To Bernice’s point, Wal-Mart will also have to have their ducks in a row or risk yet another backlash – this time facing accusations that their high-volume ways moved the already-murky organic standards mark south.
The big test will be if Sunflower stores go head to head with Whole Foods. If both companies are smart, they won’t locate near each other. If they do, they’ll just hurt each other. In the meantime, Sunflower will probably take share away from independents.
I see very strong success here. Supervalu’s in the game early enough (can’t imagine why so many conventionals have been so skittish on this, when the success of Whole Foods and Trader Joe’s has been so strong and well publicized), and organics skew heavily to young, educated shoppers. Young, educated shoppers are also generally looking to save money via discount (or at least perceived discount) outlets. The stores seem to be the right size and should find excellent differentiation.
To the above comment about Sunflower interactions with Whole Foods, that idea of a “truce” won’t last very long – WF has already announced building a store about 3 miles away from the prototype Sunflower.
There is clearly the opportunity to be very successful. I think it will depend on how the concept is managed, what TJ’s and other competitors do and ensuring product quality, etc. As a Food Scientist, there are no real benefits (science perspective) for organic products. But as a consultant and consumer researcher/insights person – it does not matter – consumers love organic; they believe in it and that is what matters. So this category will continue to grow and all income levels are looking for organic and natural. If the business is managed smart, they should see good success.
“Crunchy college kids” and other underpaid foodies and organics advocates don’t shop Whole Foods much. We tend to patronize the independent markets, food coops and small chains like Vitamin Cottage in the Rocky Mountain region that have found a discount niche while still maintaining quality. People who care about clean food expect their store to have standards — not just a mission statement but detailed standards for ingredients and practices. Do they sell only organic produce, conventional only when an organic item is not available, or whatever comes off the truck? Do they sell items with high fructose corn syrup, artificial sweetener, genetically modified ingredients? Wild Oats and Whole Foods do this, and so do many independents, but supermarkets tend not to. It costs money but it reflects the values of the core consumer and places the store in the role of trusted editor of its selection. Which direction will Supervalu take Sunflower?
Copying Trader Joe’s is a good idea. They have too much of a good thing and its about time someone else got in on their game. Going to the Big Ten towns is a no-brainer. But imitating Trader Joe’s won’t be easy. Supervalu is a publicly traded company and they will be forced to dance for Wall Street instead of the customers. I was in Trader Joe’s yesterday and the employees were dancing around and having a good time. I can’t see that happening at a Supervalu store. Supervalu certainly has the potential to have a winner. But unless they release the sales per store, how will we know? We are finding Trader Joe’s stores to be some of the highest sales per sq. ft. operators in the USA. It’s very common to see them averaging $30 per sq. ft. per week or higher. Sales per man hour figures are coming in at $215 to $245 at Trader Joe’s — somewhat higher that at Supervalu’s Save-A-Lot but keep in mind, Trader Joe’s has two to three times the number of employees per unit.
On the money, leveritt. Trader Joe’s, Whole Foods, and Wild Oats seem to be almost unanimously considered extremely strong organizations. They seem to have become the new “darlings” maybe because they are growing so fast and show such strong financials. Lesser known, but perhaps more significant data puts them in quite a different light. If Sunflower would take a less-conventional view of the segment and these competitors, they could rocket to a level of strength, profitability, and success that none of the others could touch. I doubt this will happen. The many organizations we have studies seem to see very small improvements over competitors as huge differentiators. There are enormous needs in the health segment not being served, despite a general enthusiasm for Trader Joe’s, Wild Oats, and Whole Foods.
Today’s ever-evolving food and beverage marketplace creates financially-fertile new niches and trends in much the same way as does the fashion industry. It reaches out for the new and different, the unique and “socially better” and it prices its offerings accordingly, which is upward.
Starbucks is currently the icon of this retail movement, which incidentally is now looking to China for its greatest new growth by selling its offerings at $6 (Chinese) a cup – the equivalent of the “locals’” days wages. Other merchants are striving to emulate a success story similar to Starbucks including strategically-savvy Whole Foods and Supervalu.
Thus, does Supervalu have a potential winner in Sunflower? Yes. Where is organic and natural food retailing headed? Upward in those growing environments that support the expanding “Starbucks lifestyle.”
Supervalu has jumped into a game that is both young and growing at amazing rates. I believe that SV will be successful if it maintains the base concept of quality priced fairly with low overhead. As to an earlier comment to staying above board – I don’t know that SV has ever been anything but.
I don’t know what people in general think of this chain but obviously have to wonder if their typical shoppers are likely to want organic. Moreover, as the big manufacturers are cottoning onto consumer interest, they are bastardising the criteria for qualification and, pretty soon, people will begin to wonder who they can really trust. Unless the chain is absolutely aboveboard and transparent, and can convince their customers that they are providing the real thing, then they are wasting everyone’s time and their own money, not to say reputation.