FRESH STARTS IN FLORIDA

Those who say there's nothing new under the sun probably haven't been to Florida recently."I have a theory that people who move to Florida move here because they want a fresh start," said Tom Hencken, an architect based in Tampa, who is busy designing new grocery stores for a new banner serving newly booming communities along Florida's Gulf Coast. "They've got an outlook on life that says, 'I'm improving

Those who say there's nothing new under the sun probably haven't been to Florida recently.

"I have a theory that people who move to Florida move here because they want a fresh start," said Tom Hencken, an architect based in Tampa, who is busy designing new grocery stores for a new banner serving newly booming communities along Florida's Gulf Coast. "They've got an outlook on life that says, 'I'm improving my life. I want to enjoy myself. And I don't want to feel poor, even if I am."'

Hencken believes that feeling of aspiration, common among migrators to, and residents of, the Sunshine State, is partly behind the ongoing efforts of his client, Delhaize America, to reinvent its Kash N' Karry franchise into a unique new banner known as Sweetbay. He also believes it is part of the reason that so many more conventional supermarkets, ranging from Food Lion in years past to Winn-Dixie today, have struggled to succeed in Florida, despite it having among the strongest trends in population and economic growth in the country.

"People want to feel successful here," Hencken said.

So do its supermarkets. In addition to Kash N' Karry's rebirth on the Gulf Coast, the sun is rising on new concepts from Albertsons, Publix Super Markets and Winn-Dixie Stores, while young chains with sharply defined niches such as The Fresh Market and Whole Foods Market are moving in. The changes are also sparked in part by the growing influence of Wal-Mart Stores, operators of 163 Supercenter, Neighborhood Market or Sam's Club locations in Florida.

NO. 1 WITH A BALLOON

Any discussion of the supermarket business in Florida must begin with Publix, the Lakeland, Fla.-based retailer that operates 629 stores and holds the No. 1 market share in virtually every market statewide. Relying on a history of innovations in store design and merchandising and well-regarded for its customer service, Publix, which is celebrating its 75th anniversary this year, today is as much a part of Florida as the Magic Kingdom. John Crossman, a retail real estate specialist for Trammell Crow in Orlando, offered an example.

"I have a 22-month-old daughter at home. Her first word was 'dada,' her second word was 'mama' and her third word was 'balloon' -- and that's because she goes with her mom to Publix every week, and every week the Publix cashier gives her a balloon," Crossman told SN. "That is a very valuable thing. It makes the store such a positive exper-ience. That's the one thing that Publix has just nailed so well: Being committed to the community."

In the Orlando metro area, which includes Lake, Orange, Osceola and Seminole counties, Publix's 80 stores command a market share of 39.9%, according to the 2005 Grocery Distribution & Analysis Guide from Metro Market Studies, Tucson, Ariz.

Traditional supermarket chains Winn-Dixie (15.6% market share) and Albertsons (10.3%) are losing ground to Wal-Mart, which controls around 15.6% of area food volume through 15 Supercenters, two Neighborhood Markets and six Sam's Club stores in the Orlando market, Metro Market said. Kash N' Karry, the Delhaize banner, exited Orlando early last year as it positioned a comeback on Florida's Gulf Coast.

Crossman said the growth of Wal-Mart (which can dominate price shoppers) and the strength of Publix (which owns customer service) has created a market in Orlando where retailers need to pinpoint a niche and attack it.

"What you see here is, if you're going to focus on price, you really have to focus on price. If you want to compete with Publix, you're going to have to do it on service. You have to do what the other guy does, but do it better," he said. "As the other players figure that out, you're seeing them leave."

Albertsons, which has stated its intention to invest primarily in markets where it can be the No. 1 or a strong No. 2 player, has in recent months converted four of its traditional Albertsons stores in the Orlando area to the limited assortment Super Saver discount concept. "I think that makes sense for them, but we'll have to wait and see," said Crossman, adding that Supervalu's Save-a-Lot chain, with 10 area stores, is succeeding in the discount space.

"Publix, Save-a-Lot and Wal-Mart are not all focused on the same person, but they know who their customer is," Crossman said. "The grocers that have had trouble in Orlando -- Winn-Dixie, Kash N' Karry and Albertsons -- all had the same problem: They didn't know who their customer was and they couldn't service them well."

Crossman said Save-a-Lot has found a niche serving lower-income areas in a manner not dissimilar to the approach Publix takes in Orlando's middle- and upper-income neighborhoods. "It used to be, there were low-income areas served by a convenience store that would charge higher prices. The sad truth is, poor people could only stand to get worse," Crossman explained. "Save-a-Lot is going into those markets with clean stores, good service and a focus on the lower-end customer that's working."

The Orlando area is growing fast even by Florida standards. According to the Florida Research & Economic Database, population in the area grew by 38% between 1994 and 2004 and today is approaching the 2 million population mark.

CAPITAL OF THE OLD SOUTH

There was a time not too long ago when Winn-Dixie Stores ruled the South. Reminders of the era are visible at intersections throughout Miami, which might be described as the capital of a once-great Winn-Dixie empire.

"Winn-Dixie has excellent locations in South Florida, going back to the 1970s and '80s when it was No. 1 and Publix was far behind," Doron Valero, president and chief operating officer of Equity One, a North Miami Beach-based real-estate developer. "Back then, they had the pick of the best corners from every developer. And it is still a good collection of locations."

Industry watchers will focus on Miami to see what becomes of Winn-Dixie, which, after being overtaken in the 1990s by Publix in Miami and struggling most everywhere else, filed for federal bankruptcy protection in February. As Winn-Dixie works toward a plan of reorganization this summer, some speculate Miami could ultimately serve to pay back its new creditor/owners in a manner not unlike Kmart, which after its reorganization amassed a war chest selling off the leases of its top locations. Others speculate that an operator like Wal-Mart could use the Winn-Dixie footprint to ramp up density with Neighborhood Markets.

Peter Lynch, Winn-Dixie's chief executive officer, hopes instead to use those good locations to recast the Winn-Dixie brand as a neighborhood market with friendly service and keen local merchandising.

The retailer spent between $50 million and $60 million to make over 92 Miami-area stores in the year prior to the bankruptcy filing. While officials said the revamped stores were performing better than the Winn-Dixie portfolio as a whole, it is unclear how much more work needs to be done. Winn-Dixie hopes to have a reorganization plan in place this fall.

"You can't put makeup on a store without improving the service, or have a store that looks pretty but with shelves that are not full," said Valero. "I don't think they ever completed the job, which is why a lot of CEOs came and went."

According to Metro Market Studies, Publix rules the Miami metro area (Broward, Dade and Palm Beach counties) gaining 51.8% of the food volume on 204 stores -- "They turned on the jets and shot into space in the 1990s," Valero said. Winn-Dixie is next at 16.1% share and 118 stores. Wal-Mart is not as strong in Miami as elsewhere in Florida -- reflecting tighter and more expensive real estate, sources said -- but its 18 stores (11 Supercenters and 7 Sam's Clubs) account for 5.7% share. Club stores Costco (nine stores, 6.3% share) and BJ's (12 stores, 4.3% share) also perform well in Miami, statistics show.

According to Valero, Publix became a success in Miami behind a simple plan to offer clean stores and good service, and a more complex understanding of local tastes. "Publix did not do magic," Valero stated. "They gave clean stores and friendly service and they adapted to the tastes of the market. They understand that people in South Florida eat differently than North Florida and West Florida."

HISPANIC FORMATS HERE TO STAY

With Albertsons retreating in recent years from the Miami area, family-owned independent chains serving the booming Hispanic population are on the rise, including Sedano's Supermarkets, based in Hialeah, and Presidente/Tropical Supermarkets, based in Miami. "They're here to stay," said Paco Diaz, a senior vice president for commercial real estate broker CB Richard Ellis in Miami.

Sedano's has 28 stores and 4.7% share, according to Metro Market. Presidente/Tropical has added seven new stores in the last 18 months and now operates 17 overall, said Scott Nicholson, president of Southeast Wholesale Foods, the chain's supplier. "They've been flying under the radar, but with their rapid growth they've obviously been taking business from somebody," Nicholson said of Presidente/Tropical.

Sedano's stores, which according to a Food Marketing Institute study is one of two markets shopped most frequently by first-generation Hispanic shoppers in Miami, puts ethnic products -- particularly those appealing to Cuban Americans such as crackers, black beans, yucca and mojo -- front and center in its merchandising efforts. Sedano's stores have grown slowly but steadily, sources said, going from 5,000-square-foot stores to productive locations of 40,000 square feet or more.

Sources said Sedano's prefers to set up a shell corporation for each of its locations and pay percentage rent, which makes their real estate deals riskier for landlords than traditional supermarkets. So while it is unlikely that Sedano's would compete with Publix for locations, customers are another story. The best testament to this may be the fact that Publix is now devoting resources to a Hispanic model in Sedano's home base.

Publix Sabor, the Hispanic-themed Publix store featuring amenities such as a Cuban coffee bar, debuted this spring in Hialeah. "They're going to go head-with-head with Sedano's," said Diaz. (Upstate in Kissimmeee, the other Publix Sabor "is blowing the doors off," said Crossman, adding he believes the Sabor concept could be rolled out at many additional sites).

Similarly, Publix appears to be taking aim at natural chains Whole Foods Market, Austin, Texas, and The Fresh Market, Greensboro, N.C., with its intention to open stores themed around its Greenwise natural/organic offering in Boca Raton and Palm Beach next year. Whole Foods operates five stores in Miami and Fresh Market has four locations there, Metro Market said. "Whole Foods is doing gangbusters," in Miami, one source said.

Dwindling land availability and an ever-growing population in Miami are creating higher density and resulting in some of the most productive supermarkets in the state, with some locations routinely ringing up $700 in sales per square foot, said Valero. Population in the Miami metro area grew by 16.2% to 2.4 million between 1994 and 2004, according to figures from the Florida Research and Economic Database.

"Miami is the best retail market in the nation," Valero said. "It's been a secret for a long time, but people are realizing these three counties are the economic engine of a company like Publix."

ABOUT DELICIOUS

On Florida's Gulf Coast, Kash N' Karry's new iteration seeks to leave behind a damaged brand of the past and build a new one all about the food inside.

"Some chains are about price, some are about service, and there are some very confused chains in the muddy middle -- Kash N' Karry was one," Shelly Broader, president and chief operating officer of Kash N' Karry, said in an interview with SN late last year. "But nobody was really about 'delicious.' That's Sweetbay's position."

Sweetbay, owned by Belgium-based Delhaize Group, opened its first converted location in Seminole late last year and as of last week had opened 17 stores. By year-end, 26 Sweetbay stores will be opened or converted, the company said.

According to Hencken, whose firm Architecture Plus International designed Sweetbay -- as well as many of the Kash N' Karry locations the redesigned stores will replace -- the change speaks to a need to rebuild a brand long associated with price but no longer able or necessarily willing to deliver that promise. This was due to a number of reasons ranging from company debt to the growing influence of Wal-Mart.

"With a name like Kash N' Karry, spelled with a 'K,' trying to upscale in the past was limited by the name, and by the fact that Kash N' Karry had historically been a dollar-based competitor dating back to their old slogan, 'So much more to pay less for.' That was the entire brand statement," Hencken said. "So they focused on convenience and being an alternative to upscale. We had vibrant presentations but still with a price element."

The new name -- which combined with an emphasis on service, and a wider assortment of prepared foods and perishables in a colorful setting -- allows the chain to re-cast itself and target many of the same shoppers of Publix, which holds a market-leading 38.9% volume share in the four-county Tampa-St. Petersburg metro area.

"In execution, the offering and environment are a bit more exciting and vibrant than a Publix," Hencken said. "The Publix environment tends to be more tonic and reserved as compared to the flamboyant and passionate environment we've created at Sweetbay."

Early returns from Sweetbay conversions are largely positive. Delhaize officials last month reported that sales of converted Sweetbay stores in the Fort Myers and Naples markets have increased by 40% on average, though they acknowledged the benefit to the company is lagging the expenses associated with the launch.

Mark Husson, an analyst for HSBC Securities, New York, told SN the Sweetbay rebirth figures to make things difficult for Winn-Dixie when it addresses its Gulf Coast stores. "Just when you thought things couldn't worse for Winn-Dixie, Kash N' Karry has stopped laying over and dying and is bouncing to life," he said. "The relaunch is going quite well."

In Tampa, Wal-Mart continues to make gains at the expense of Albertsons and Winn-Dixie, Tim Kleman, a Tampa-based retail specialist for CB Richard Ellis, told SN. The market overall remains attractive for retailers, he added, with new home building very active north, east and southeast of Tampa, which has seen population growth of 18.6% in the last decade. Shopping center developers there covet Publix as an anchor tenant, Kleman added, saying its presence attracts the best rents from co-tenants, and the highest price when the property is sold.

FLORIDA MARKET SNAPSHOT

ORLANDO

(Lake, Orange, Osceola, Seminole counties)

1994 Population: 1,373,546

2004 Population: 1,894,992

Percent Change: 38%

MARKET SHARE

Company (banners): Stores in area; % of Volume

Publix Super Markets, Lakeland, Fla. (Publix, Publix Sabor): 80; 39.9%

Winn-Dixie Stores, Jacksonville, Fla. (Winn-Dixie, Winn-Dixie Marketplace, SaveRite): 58; 15.6%

Wal-Mart Stores, Bentonville, Ark. (Wal-Mart Supercenter, Neighborhood Market, Sam's Club): 23; 15.6%

Albertsons, Boise, Idaho (Albertsons, Super Saver): 25; 10.3%

Costco, Issaquah, Wash.: 3; 4.3%

BJ's Wholesale Club, Natick, Mass.: 4; 2.9%

Target, Minneapolis (Target Super Center): 6; 2.8%

7-Eleven, Dallas: 139; 2.5%

Gooding's Supermarkets, Orlando: 3; 1.5%

Save-a-Lot, St. Louis: 13; 1.4%

Sources: Florida Research & Economic Database and Metro Market Studies Grocery Distribution Analysis & Guide, Tucson, Ariz.

FLORIDA MARKET SNAPSHOT

MIAMI

(Broward, Dade, Palm Beach counties)

1994 Population: 2,048,718

2004 Population: 2,379,818

Percent Change: 16.2%

MARKET SHARE

Company (banners): Stores in area; % of Volume

Publix Super Markets, Lakeland, Fla. (Publix, Publix Sabor): 204; 51.8%

Winn-Dixie Stores, Jacksonville, Fla. (Winn-Dixie, Winn-Dixie Marketplace): 118; 16.1%

Costco, Issaquah, Wash.: 9; 6.3%

Wal-Mart Stores, Bentonville, Ark. (Wal-Mart Supercenter, Sam's Club): 18; 5.7%

Sedano's Supermarkets, Hialeah, Fla.: 28; 4.7%

BJ's Wholesale Club, Natick, Mass.: 12; 4.3%

Albertsons, Boise, Idaho: 20; 3.8%

Associated Grocers of Florida Co-Op, Miami: 184; 1.9%

Whole Foods Market, Austin, Texas: 5; 1.4%

Sources: Florida Research & Economic Database and Metro Market Studies Grocery Distribution Analysis & Guide, Tucson, Ariz.

FLORIDA MARKET SNAPSHOT

TAMPA-ST. PETERSBURG

(Hernando, Hillsboro, Pasco, Pinellas counties)

1994 Population: 2,181,037

2004 Population: 2,587,058

Percent Change: 18.6%

MARKET SHARE

Company (banners): Stores in area; % of Volume

Publix Super Markets, Lakeland, Fla.: 90; 38.9%

Delhaize America, Salisbury, N.C. (Kash N' Karry, Sweetbay Supermarkets): 67; 14.6%

Wal-Mart Stores, Bentonville, Ark. (Wal-Mart Supercenter, Wal-Mart Neighborhood Markets, Sam's Club): 23; 13.6%

Winn-Dixie Stores, Jacksonville, Fla. (Winn-Dixie, Winn-Dixie Marketplace, SaveRite): 50; 11.0%

Costco, Issaquah, Wash.: 2; 2.4%

Save-a-Lot, St. Louis: 20; 1.9%

Associated Grocers of Florida Co-Op, Miami: 38; 1.7%

7-Eleven, Dallas: 100; 1.5%

Couche-Tard, Laval, Quebec (Circle K): 79; 1.4%

Sources: Florida Research & Economic Database and Metro Market Studies Grocery Distribution Analysis & Guide, Tucson, Ariz.