For a start, Savage tells FoodNavigator-USA, many traditional grocery retailers still generate a large chunk of their revenues from low velocity packaged foods or high velocity 'center of store' categories experiencing declining volumes (canned soup, cereal, frozen meals), from stores that are too big and no longer meet shoppers' needs.
In other words, the stores are designed to cater to pantry re-stockers, not to busy shoppers trying to eat fresh, but lacking the time, energy or inclination to spend hours preparing meals.
He adds: “The industry is in flux right now and I think all of us are trying to find that secret sauce to try and unleash. How do I become a destination store for people that are heading home and looking for delicious food at a good price?
“People are time-starved, they want convenience, grab & go, but they also want to eat healthier, so they are buying fresher foods more often, and you can’t pantry load this stuff.”
People are time-starved, they want convenience, grab & go, but they also want to eat healthier
The most successful smaller store formats, he argues, have dispensed with the idea that they can be-all-things-to-all-people, and are instead trying to focus on what they do best.
And in the case of Fresh Thyme Farmers Market – a fast-growing new retail chain originating in the Midwest– that is fresh (40-50% of sales from the 30,000 sq ft stores are from perishable products).
“My background is actually in the traditional grocery stores,” he says. “I grew up with Coca-Cola, Frito-Lay, and Kellogg’s, so I’ve been on a learning curve. But the core of our business here is fresh. When you walk in the door you’ll a disproportionate amount of space dedicated to produce, deli, bakery and foodservice, and bulk.
“So you’ve got fresh, foodservice and then bulk, which leaves you with not too much room for packaged goods, whereas you walk into a regular store and you see aisle after aisle of them. We’ve kind of flipped that whole model on its head."
There is potentially more profit to be made on fresh, he says, "but you’ve got to get the offer right, manage waste, and manage your labor.
“I admire the work Whole Foods is doing on its new 365 format, for example [the new format is apparently less labor intensive]. Foodservice really is trial and error, so we have to win out customers over. We’re patient and we’re learning.”
Name: Fresh Thyme Farmers Market
Launched in: April 2014
Headquarters: Chicago, IL
Store numbers: 35 in Ohio, Indiana, Illinois, Iowa, Kentucky and Nebraska
Store size: c. 30,000sq ft. Each store devotes a lot of space to fresh produce, salads, artisanal bakery, hormone-free meat and dairy, seafood, made-to-order sandwiches and other fresh-prepared products such as pizza, grab & go fresh deli items, bins of natural and organic bulk goods, specialty gluten-free and dairy-free products, and supplements.
CEO: Chris Sherrell (former CEO of Sunflower Farmers Market, which merged with Sprouts in May 2012)
Concept: ‘We’ve combined the spirit of a weekend farmers market, and the convenience of a neighborhood store, with the nutritious offerings of a natural food marketplace to create a NEW and healthy shopping experience.’
We’ve been amazed by how many people come into our stores and say thank goodness you are here
“You think about the Midwest, and you don’t think about natural and organic,” says Savage.
“You think of these as big trends on the east and west coast and you have this view of the Midwest as a place where people like meat and potatoes and a good solid dinner. But we’ve been amazed by how many people come into our stores and say thank goodness you are here; we’ve been waiting for you.”
We offer an alternative to a conventional grocery store
But would the concept work anywhere?
As with any grocery store, says Savage - who won’t share details of the demographics the chain is targeting - you need to have a certain amount of potential traffic within a given radius and the right footprint, but Fresh Thyme has proved that if you build a natural and organic chain in the Midwest, the people will come.
"The industry is in flux right now and I think all of us are trying to find that secret sauce to try and unleash. How do I become a destination store for people that are heading home and looking for delicious food at a good price?"
(Thrive Market, for example, which sells natural and organic brands online, says it is capturing a new consumer in Middle America: “Not the Whole Foods shopper, but middle-class, middle America… a lot of Moms that have historically shopped at Kroger, Target and Old Navy and even Walmart.”)
According to Savage: “I think we had the notion of where we thought we would be successful, but when you open a store you learn, you open a second store you learn more. Now we have 35 stores, we’re definitely beginning to get a sense of where we get the best results, but we’re still surprised. We’ve gone into some markets where we’re not really sure they are going to get who we are, but they do.
“We offer an alternative to a conventional grocery store and we’re really pleased with the traffic we’re seeing so far.”
ON RANGING: “In the early days, we were building the fundamentals; now we’re saying, we’ve got the basics covered, where’s my point of differentiation, where’s the exclusivity, where’s the fun? So we’re going to trade shows and talking to companies and we have the license to say I’m going to go and find a brand and make it the next big thing. It’s liberating.”
So how hard has it been to secure real estate that fits the brand’s needs (a 30,000sq ft footprint)?
Fresh Thyme has met all of its targets on this front, says Savage, but it’s still a challenge to find real estate that isn’t either too big or too small to meet its needs: “So you see for example that Sears is closing all these locations [Sears Holdings recently announced that 10 Sears stores and 68 Kmart stores will close this summer], but that footprint – 100,000 sq ft stores – is no good for us.”
As for pricing and promotions, says Savage, Fresh Thyme is “competitive day in day out, but we’re becoming known for our exceptional ads. Our ads drop once a week and on Wednesdays our ads overlap, so if you shop on Wednesday, twice as many things are on sale, we call it wonderful Wednesday.”
Fresh Thyme also has a competitively priced private label range with 300 SKUs focused on products with the highest household penetration, he says.
But he’s not keen on loyalty cards, which can exclude people, he argues. “You don’t have to be a member of a club to get the best prices day in, day out. There are other ways to build more intimate relationships with customers."
Buying is centralized, but every store has a local assortment, which right now is defined as within that state, he says, although this may change in future.
“The company has a fairly flat structure, so just the other day I was in Lincoln Nebraska at our new store there and a store associate said there is this brand that we don’t carry that everyone else is carrying, and I spoke to the category manager that day and they called the company the next day to find out what it would take to get that brand into distribution.
“Sowe don’t have regional buyers, but if store managers say we’re missing the boat with this trend and we need to bring this SKU in, we listen."
On ranging more generally, he says, Fresh Thyme is at the very start of a journey.
“In the early days, we were building the fundamentals; now we’re saying, we’ve got the basics covered, where’s my point of differentiation, where’s the exclusivity, where’s the fun?
“So we’re going to trade shows and talking to companies and we have the license to say I’m going to go and find a brand and make it the next big thing. It’s liberating.”
Mike Savage will be speaking on a panel at the Healthy & Natural Show in Chicago on Thursday May 5. The session, entitled, Innovate or Die: Navigating the evolving food retail landscape, also features Joel Warady from Enjoy Life Foods, Gerry Hays from DinnerCall, and Jon Fiume from Mustard Seed Market.
Click HERE for full details on the education program, which features a keynote from Dr Joseph Mercola.