SUNFLOWER SEEKS TO LOWER THE ORGANIC PRICE BARRIER

INDIANAPOLIS - Supervalu here this month opened its first Sunflower Market, a compact new store format that it hopes will attract more mainstream shoppers into the growing natural and organic category.Offering natural and organic products exclusively, the store is one of the first attempts by a traditional supermarket operator to enter the retail arena currently dominated by Whole Foods, Wild Oats,

INDIANAPOLIS - Supervalu here this month opened its first Sunflower Market, a compact new store format that it hopes will attract more mainstream shoppers into the growing natural and organic category.

Offering natural and organic products exclusively, the store is one of the first attempts by a traditional supermarket operator to enter the retail arena currently dominated by Whole Foods, Wild Oats, regional chains such as EarthFare, and independent natural food co-ops. However, during a ribbon-cutting ceremony hosted prior to the store's grand opening last week, Supervalu executives emphasized that Sunflower's value pricing would be a key point of difference with these competitors.

"Natural and organic products are going more mainstream," said Jeff Noddle, chairman and chief executive officer of Supervalu, Minneapolis, during a speech. "But any research that you do very clearly says that the barrier to [mainstream consumers] buying natural and organic is that traditionally, these products have been very, very high priced."

Noddle was joined at the event by John Hooley, president and CEO of Supervalu's retail food companies; John Sturm, director, Sunflower Markets; and category manager/natural foods specialist Ed Ambrose, as well as several natural food suppliers, store staff and local dignitaries.

Sunflower appeared to be making good on the promise of lower prices on many of its roughly 10,000 stockkeeping units, with staples such as organic produce and dairy, as well as products such as all-natural health and beauty care items, natural and organic packaged foods, and supplements priced well below what one would expect. Organic bananas were 49 cents per pound, one brand of organic milk was $3.25 per half gallon, and throughout the store, "Real Deal" shelf tags highlighted items on special, such as Avalon Organics shampoos and conditioners for $3.99 each, about $2.50 less than typical at a major natural food retailer.

Supervalu's size, distribution network and its recent acquisition of specialty produce distributor W. Newell & Co., Champaign, Ill. - which Supervalu plans to use to keep this and future Sunflower produce departments stocked with 80% organic items - have all been important factors assisting Sunflower's ability to offer these lower price points. A deliberate reduction of service departments has also lowered labor costs, while allowing the store to fit more comfortably into its compact 12,000 square feet of selling space. For example, the store's selection of antibiotic- and hormone-free meats are all case ready, and the small bakery, prepared foods and fresh coffee department is operated through a partnership with Minneapolis-based French Meadow Bakery.

Noting that this particular location was housed in a former A&P, Hooley said that Supervalu planned to locate future Sunflower Markets in existing structures as well, further reducing development costs while more efficiently incorporating the stores into their surrounding neighborhoods. He added that everything from the store's merchandising and design to its IT infrastructure had been developed internally at Supervalu, and that the company's experience with its Save-A-Lot division had been particularly helpful.

"I remember talking to Jeff [Noddle] more than a year ago, discussing how great it would be if we could take the Save-A-Lot expertise and apply it to this [natural and organics] category," Hooley told SN. "We really leveraged the expertise of the entire company to get this done."

With bright yellow walls offsetting the rust brown tones of the store's poured concrete floors and exposed barrel roof, the interior featured the warm, earthy ambiance characteristic of many independent natural food retailers. The simple layout, supermarket-sized aisles and uncluttered appearance are reminiscent of many of EarthFare's early locations - communicating an authentic feel without overwhelming shoppers new to the organic category.

Store design was a critical part of the format's development, Ambrose told SN, noting that if the store's appearance had been too upscale, it could have given an impression of gourmet pricing.

"We didn't want to be intimidating; this store is about being inclusive, not exclusive, for new shoppers," he said.

Located in Indianapolis' eclectic Broad Ripple Village district, Supervalu has said that the store will serve as a prototype for an expansion plan that includes opening 50 Sunflower Markets over the next five years.

"Our box size could be as small as this store, or as large as about 18,000 square feet," Sturm told SN. "We wanted to be flexible with the design to ensure that we could fit [the concept] into existing spaces."

Although executives present at last week's ceremony were careful to downplay expectations, the store appeared to have generated a solid local buzz. Undeterred by heavy rain, camera crews, and the fact that the store was not yet officially open, several curious locals began wandering the aisles during the recent media tour.

"This store really has a great neighborhood feel," said Mel Coleman Jr., chairman, Coleman Natural Meats, who was present for the event.