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?