Price Chopper, the New York State-based grocery chain, has gone all in on all things fresh. Chicago-based Mariano’s Fresh Market is pushing the envelope of premium in the fresh perimeter and throughout the center store. These players could be the tipping point of a quiet disruption within the upmarket (premium quality) end of the retail continuum that could spill over into the mid- and downmarket (low price-driven) sectors of the supermarket industry.
What disruption are we talking about?
It is the emergence of a next generation, upmarket-leaning, full-service grocery store that integrates both natural and conventional packaged products throughout the store while emphasizing very high-quality fresh perishables and fresh prepared foods as more than 50 percent of its total selling space.
In an evaluation of the American midmarket grocery landscape, we concluded that fresh foods were the one unique driver of the average grocery store in the U.S. Fresh foods have been the categories that have held their own or grown share in the face of relentless onslaught of Walmart, convenience operators, drug chains and hard discounters like Aldi, Bottom Dollar and Winco.
Fresh food is also well insulated from online grocery sales—at least for now. When America’s food shoppers want fresh perishables they have always headed to their local grocery store. But now, they also want to buy prepared foods, baked goods, fresh olives, marinated meats and more. The world of fresh has become broader and skews highly upmarket in American food culture.
Why are Mariano’s and Price Chopper stores percolating disruption? For the better part of the past decade specialty grocers like Whole Foods Market and the broader natural foods channel has defined the “upmarket” retail space, often overshadowing the growth of smaller, upmarket grocery disruptors traditionally lumped together by distributors as the “specialty” channel.
What industry analysts have overlooked to this point is the critical design and experience dichotomy between natural and health foods stores, on the one hand, which screen out legacy brands and processed foods, and specialty stores, on the other hand, which generally sell the entire continuum of quality but strongly emphasize high-end, premium products and staff-intensive, freshly prepared foods.
The specialty format is far less alienating to ordinary middle-class shoppers who might want enhanced access to premium quality, upmarket food experiences.
Because it doesn’t demand that they abandon all their favorite brands to fill their shopping cart. There is simply no hint of ideology to create a barrier to entry. Today, trading up to premium is a sincere, sensory and cultural desire for the highest-quality food experiences possible, but only as far as the shopper wants to take it.
Unlike many specialty chains, Mariano’s is taking over ordinary suburban grocery locations, not exclusively super-affluent, urban zip codes. Its ongoing performance may finally unlock a secret that specialty retailers learned long ago: getting trade-up shoppers in your door is not about eliminating all their prior brand choices for them and imposing your own corporate standards of quality but it is about emphasizing the highest-quality food available in every category and letting local shoppers choose how far they want to trade up within a broadly merchandised quality continuum.
Mariano’s may convince other conventional chains to accelerate their integration of organic and natural foods and to enhance their fresh perimeter departments. While this may seem obvious, many midmarket supermarket chains business models are still tied to the center of store. They just can’t seem to figure out how to convert square footage to expand the super-fresh perimeter where all the growth and action is.
By going big on fresh, like Price Chopper is doing, food-forward retailers are able to focus on making the perimeter of the store the epicenter of their business. A tight focus on fresh enables retailers to upsell local shoppers with food experiences that discount retailers will never attempt to reproduce.
There is something essentially intimate about selling fresh perishables and foods: it’s a theater in which consumers’ highest standards of quality are invoked. And the payoff is increasingly big. Price Chopper and Mariano’s knows this and are betting on it to lead them into the future.