Supervalu’s Sunflower

Discussion
Aug 31, 2006
George Anderson

By George Anderson


Glenn Backus, the general manager of Supervalu’s Sunflower Market business, knows it is no longer possible to fly under the radar when it comes to opening a store that sells organic and natural foods.


Mr. Backus’ former employer, Trader Joe’s, as well as Whole Foods, Costco, Wal-Mart and virtually every major supermarket chain, are all selling organic foods, as well, and competition seems to ratchet up on a daily basis.


Even with clear competitive hurdles to overcome, Mr. Backus and Supervalu are convinced Sunflower Market is the right concept at the right time.


Organic foods, proponents believe, are just beginning to realize the full sales potential of the category. Today, organics represent roughly three percent of food sales but annual growth has been stellar. According to the Organic Trade Association, organic food sales have grown from $3.6 billion in 1997 to $13.8 billion last year.


Supervalu is looking to open 50 Sunflower Markets over the next five years. Earlier this year, Sunflower announced it was targeting towns with Big Ten schools to open new locations.


“We like to go where customers are shopping for groceries,” Mr. Backus told Reuters at the grand opening of a new Sunflower Market in Chicago.


The company is counting on it being able to grow its business, positioning itself as a low-priced alternative for consumers seeking organic foods. Stores will measure between 12,000 to 16,000 square-feet and carry between 8,000 and 12,000 skus. A heavy emphasis will be placed on private label, similar to Mr. Backus’ former employer, Trader Joe’s. All Sunflower Markets carry Supervalu’s Nature’s Best organic private label brand.


Mitchell Corwin, a retail analyst with Morningstar, told Reuters, “I don’t look at Sunflower as a huge threat to either Whole Foods or Trader’s Joe’s, but I do think it addresses sort of a niche where you have a consumer who wants to buy natural and organic … but price is a barrier.”  


Discussion Questions: Do you see the niche of consumers who want to buy organic but find price to be a barrier as sizeable enough to provide a reasonable
expectation of success for Sunflower Market? What is your evaluation of the Sunflower Market concept and performance to date?

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11 Comments on "Supervalu’s Sunflower"


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Mark Lilien
Guest
14 years 5 months ago

Nothing Supervalu does should be treated lightly. Their track record shows competent implementation and a profit focus that ranks among the best in the grocery business. It’s likely that Sunflower will not hurt Whole Foods or Trader Joe’s, since they’re run by very competent well-capitalized folks, too. More likely: Sunflower will hurt the mom and pop single-location stores.

David Livingston
Guest
14 years 5 months ago

The concept is a good idea. Watching Trader Joe’s get $20 a sq.ft. per week has to make Supervalu salivate. As for performance, Supervalu has not released sales figures for the stores so it makes it difficult to tell. As for price, this is obviously a problem. Even though sales of organics have grown, they are still priced out of reach for most consumers. Now that Wal-Mart is getting into the game, this should lower prices from everyone. We may someday see a time when organics are price similar to other products. Just as we might see a time when hybrid cars are priced similar to regular cars.

John Lansdale
Guest
John Lansdale
14 years 5 months ago

People want what they’re being sold. Nice. The egg was planted in some smart marketing/PR person’s nest a long time ago. It works because educated, usually wealthy people love to read spin. Organic is a complicated idea, but with it one can change important things such as health and the environment, just by making the correct purchases. Irresistible! And now, a store chain for junior, not-so-wealthy, wanna-be educated people.

Just another cycle, ask again in a couple of years.

Pete Hisey
Guest
Pete Hisey
14 years 5 months ago
One immediate advantage is that Sunflower will become a destination store for a small but significant group of consumers. While in earlier days organic products were essentially identical to non-organic in flavor and appeal, many are now superior to traditional products. They just taste better. And that will lead to growth. The catch is that supply is limited. It takes three years of non-production to certify land as organic-friendly, and that in turn affects the entire industry. For organic meat, you need organic feed. The danger is that the term is going to get dumbed down. If consumers start to feel that it’s a marketing scam, the entire industry could implode. At the moment, USDA certification is pretty strict; given enough time, though, and agribusiness and mass retailers (no names, please) may be able to bring enough pressure to get the rules relaxed. The real measure of success, though, is going to be quality, not just food safety and ecological concerns. Safeway’s O label pastas, for instance, are terrific. I tried the linguini and immediately… Read more »
Mark Barnhouse
Guest
Mark Barnhouse
14 years 5 months ago

Supervalu has a great concept here, and it will work not only in the Midwest but in other parts of the country, because there is a consumer between the “$300 a week at Whole Foods” bunch and the “I might try organics if Wal-Mart carries them at a price I can afford” crowd. This consumer is underserved in most metros because the choice is often between just “very upscale” and “budget/conventional.”

In Denver, the family-owned Vitamin Cottage chain has been doing this for years, undercutting every competitor on organics and naturals. (Due to their name, people are often shocked when they discover they’re actually grocery stores.) If Supervalu can do the same, they’ll enjoy great success among those of us who consider ourselves part of the “vanishing middle class.” We haven’t yet entirely disappeared, and Supervalu understands that.

Justin Time
Guest
14 years 5 months ago
The house brand organics such as Master Choice, O, Bloom and others are great, and thrifty ways to be introduced to organic products. Fresh stores such as A&P Fresh Market, Bloom and now Sunflower are leading the way to entice and perhaps coddle their customers with fresh and organic lines which would make any foodie happy. I think this organic movement is more than a fad. So I think it has long legs. It reminds me of when I read a history of the Great Atlantic and Pacific Tea Company, where it introduced combination stores with fresh meat, produce, canned goods, a sit down eating section, candy and baked goods — unheard of at the time. Now it is a reminder of what fresh markets are all about. The only thing I feel hurting Sunflower is its smaller blueprint. I know Supervalu has experience with the smaller footprint with its Save-A-Lot stores, but they are limited stores. I hope Supervalu doesn’t mess with success with Sunflower and try to squeeze too much merchandise in too… Read more »
Ed Dennis
Guest
Ed Dennis
14 years 5 months ago

I think it’s wonderful that Supervalu thinks enough of the American public to attempt to wrestle Organic from the Super Crunchy crowd and let the peons in the door. For too long Organic has been the darling of those who see themselves as the elite and grocers like Whole Foods have been happy to seperate these educated, elite [customers] from their money. I welcome the thought that many will now (because of Supervalu’s efforts) be able to live forever and be there to serve the Whole Food’s customer base in their old age.

Kai Clarke
Guest
14 years 5 months ago

This is clearly a smart move. Differentiating their retail strategy by segmenting their target markets is the right thing for the accounts to do to ensure that they are maximizing a specific message for each market. However, none of these retailers should forget the focused customer service that this segment demands, and the other successful retailers (Trader Joe’s, Whole Foods, Wild Oats) provide. It is this combination, along with the right selection of products and pricing, that will deliver a home run for Supervalu. Perhaps most importantly, it is not setting this selection of products and services up; it is ensuring that they are implemented, every day, in a customer friendly environment which is the capstone for success in this very demanding market.

Stephan Kouzomis
Guest
Stephan Kouzomis
14 years 5 months ago
Sunflower has the potential to position itself in markets not served by the too national, major, and proven organic supermarket operations. Interestingly, if it becomes enamored with selling groceries, as stated by the general manager of Supervalu’s Sunflower efforts, it is in trouble. THE Loyal Organic and Natural Foods CONSUMER IS LOOKING FOR SUPERIOR QUALITY ORGANIC AND NATURAL FOODS…. NOT A LOWER GRADE for a price discount. It appears the organic and natural foods departments of regular supermarkets have the lower price image. To this point, the LOYAL organic and natural foods shopper continues to question these products’ quality level, and such supermarkets’ interest. We could say, the regular supermarkets are appealing to the occasional shopper, or non organic consumer, still questioning the benefits of these products. With this in mind, Trader Joe’s sells specialty foods, first and, maybe, then some organic and/or natural foods. If the new General Manager of Supervalu’s Sunflower operation has the wherewithal to integrate the superior shopper service and image, like Trader Joe’s, with a true organic and natural foods… Read more »
M. Jericho Banks PhD
Guest
M. Jericho Banks PhD
14 years 5 months ago
Organic schmorganic. The term means nothing at all, unless it defines the ugly, shrunken fruits and veggies sold in supermarkets at twice the price of their non-organic counterparts. Are so-called “organic” products better for us than other choices? No one knows because no long-term human studies have been completed on the subject. How does the FDA regard organics? They don’t, except to say that there’s no acceptable definition yet. How about the American Medical Association? Again, nothing substantive. Are organic products better for the environment? Again, no one knows because no long-term studies have been completed on the subject. The trendy popularity of food products labeled as “organic” can mostly be attributed to emotional decision making by consumers rather than rational decision making. Somehow, the weak-minded among us have decided that purchasing organics is a good idea because, well, it’s a good idea, right? I mean, everyone in pilates class is talking about it, right? Meanwhile, even the most organically sensitive among us allows the schools their children attend to host vending machines selling full-bore… Read more »
Phillip Gotto
Guest
Phillip Gotto
14 years 5 months ago
I have to question some of the assumptions that Michael Banks has made in judging the value of “organic” fruits and vegetables. It’s sad that his experience has exposed him only to what he considers ugly and shrunken fruits and vegetables that are “organically” grown. It is true that in many instances organic produce may not rival its conventionally grown counterpart in cosmetic beauty, however it quite often, though not always, taste much better. It is true that organic foods may be a fad and, yes, we have seen many fads come and go. However, I believe that if Sunflower is truly committed to the organic business and works closely with their suppliers to develop their products, they will have a very solid foundation to build their business on. Many people have begun to wake up to the fact that if you are waiting around for the FDA and AMA to figure out whether or not organic products are better for you or not, it may be a long wait. A little common sense is… Read more »
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