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MATCHING THE MIX

Retailers have to place special attention on specialty foods.Even for mainstream supermarkets, the category is a growing business: They represent 67% of U.S. sales, according to the National Association for the Specialty Food Trade, New York. Sales in all retail stores except Wal-Mart Stores totaled $22.8 billion in 2003, up 11.5% from the prior year, when sales topped nearly $20.5 billion. Sauces

Retailers have to place special attention on specialty foods.

Even for mainstream supermarkets, the category is a growing business: They represent 67% of U.S. sales, according to the National Association for the Specialty Food Trade, New York. Sales in all retail stores except Wal-Mart Stores totaled $22.8 billion in 2003, up 11.5% from the prior year, when sales topped nearly $20.5 billion. Sauces and seasonings continue to dominate new-product introductions, followed by bakery, confectionary and beverages. The bulk of merchandise is sourced from distributors, followed by brokers, importers and manufacturers, respectively.

Price Chopper, the 106-store chain based in Schenectady, N.Y., regularly imports products for virtually every category throughout its stores, said Mona Golub, the retailer's spokeswoman.

"[Importing] enables us to carry seasonal items year-round, but we also carry major commodities in imported canned products like tuna fish, tomatoes, mandarin oranges and pineapple," she said, adding that the chain's imported goods run the gamut from ethnic foods to gourmet items. "We go through a number of different specialty distributors that have experience bringing in various products. But we sometimes pursue direct relationships, too."

For example, Price Chopper buys its own store-brand tuna direct from an overseas manufacturer. The tuna is the top-selling item in the category, and Price Chopper's direct sourcing helps protect quality and maintain private-label price points, said Golub.

Each of Price Chopper's categories is managed using a hands-on approach, giving category managers free reign to fill shelves with domestic and imported goods.

"Our category managers are able to focus on an in-depth analysis. So the person who handles olive oil knows exactly where the best olive oils are coming from, whether its Greece, Italy or another country," said Golub. "They'll even know who's pressing the finest extra-virgin olive oil on the market at the time, and they're not limited by price or geography, just quality."

Price Chopper promotes all this investment by running advertisements and hosting frequent, in-store sampling events to give shoppers a taste of what the world has to offer. Such practices help fix a point of differentiation in the consumers' mind, said Golub.

"We'll promote our imported products at key points throughout the year when it's appropriate, like Columbus Day when we promoted imported Italian foods, as an opportunity to refresh the memories of customers through taste," she said. "We use sampling events in conjunction with holidays to highlight imported products we've carried for a while, but it's also a great way to introduce consumers to new imports that have just arrived."

Findlay, Ohio-based Fresh Encounter also carries imported goods, but not in every category. Instead, selection of imported products is based on consumer demand, said Eric Anderson, vice president of marketing for the chain.

"Some products must be imported," he said. "A true Champagne can only be imported from France."

Fresh Encounter does not buy its imported goods direct from overseas manufacturers, rather through a specialty foods wholesaler, Minneapolis-based Nash Finch. The supermarket chain carries a number of imported cheeses, meats and wines, as these foods are among the most commonly requested international products.

For supermarkets that need assistance selecting imported goods, many import brokers have tools in place to help determine what products and which categories lend themselves to international goods. Even chains that previously carried only the essentials are starting to answer the U.S. consumer's demand for a better-rounded product offering, said Izzy Hoppenfeld, vice president of Eve Sales Corp., a Bronx, N.Y., importer.

Penn Traffic, the 216-store chain based in Syracuse, N.Y., relies on help from outside vendors to determine which of its stores should carry imports and what items should be purchased for each location, said Joe Ramirez, spokesman.

"We have an outside vendor help with this [import] analysis. We first look at the demographics around each store to determine the likelihood of purchase of products in different categories," said Ramirez.

The chain's larger stores -- such as its P&C Fresh Market banner -- typically have larger selections. Here, an extensive selection of imported productions in specialty food categories range from Asian, Indian, Mexican, Italian and Caribbean. In some stores, various European countries are also represented.

"Supermarkets are starting to build up more international aisles as the manufacturers improve packaging and the variety of foods they have to offer," said Hoppenfeld. "Because of this expansion, retailers are usually looking for products that move well in their stores, but they're usually selective about what they bring in first."

Many of Eve Sales Corp.'s supermarket clients ask for help when it comes to introducing imported products to their stores, said Hoppenfeld. His usual advice? Start with the most common products for each ethnic category, adding more "layers" as those products begin moving off the shelf.

On the other hand, layers of dust mean it's time to remove the item from the shelf, said Hoppenfeld.

Securing the sale at store level is one thing, but getting the product to shelves is quite another. Post-Sept. 11 laws requiring prior notice of import arrivals have had an effect on the flow of goods.

Penn Traffic has had to adjust to longer lead times to procure certain items that are imported directly by the chain.

"We import some items directly, like mushrooms, mandarin oranges and artichoke hearts, which are sometimes brought into the country by container," said Ramirez. "[We] have experienced a longer lead time to procure these products. [Now], about 12 weeks is the normal lead time."

Penn Traffic's experience is common among supermarkets, said Jack Foti, president of Rosa Foods, a food import and distribution company based in Philadelphia.

"Everything has slowed down since Sept. 11," said Foti. "Supermarkets have come up with the idea of charging us fines if we're late for an appointment, but if the pier can't move cargo quickly enough, we shouldn't be blamed. So, in the past year, we've started buying everything door-to-door, duty-paid, so the shipper assumes the responsibility."

Amanda Eamich, spokeswoman for FSIS, argued that while heightened security measures since Sept. 11 mean additional inspections, most shipments have moved through customs in a timely manner.

"We re-inspect every shipment that enters the country to make sure that imports are eligible, meaning that there's proof that the food-making and handling processes arrive at the same level of safety as product produced in the U.S.," she said. "But this doesn't slow down the process at all since we're there on a daily basis."

One consumer-direct impact is that the more meticulous inspections often result in price hikes, said Hoppenfeld.

"In some cases, checking out factories and bioterrorism numbers has helped us because parallel importers were directly affected more than we were. But everything has become more costly because so many containers coming in are X-rayed or strip-searched, and more product is being sampled and tested today than in the past," said Hoppenfeld. "Of course, we have to pay for the testing, so the cost of goods has gone up."

The higher prices are being passed on from importers to food distributors, onto supermarkets and, ultimately, to the consumer. This, coupled with fuel surcharges due to the current oil situation, makes imported goods a lot more expensive, he added.

"Other factors like the drug situation in Caribbean countries have caused a lot of extra checking and stripping of containers over the years, but Sept. 11 became a pivotal point for a lot of the changes in recent years," said Hoppenfeld. "Security was increasing on a gradual basis before then, but the [terrorist attacks] spurred on more regulations that have really had a big impact."

While additional inspection procedures may not hold up the shipping process, the on-going concern for food contamination does in some instances, said Veronica Castro, spokeswoman for the Food and Drug Administration.

"Retailers may be impacted if there is credible evidence that a serious, adverse health effect may ensue from consumption of a food product at their facility," said Castro. "FDA may require administrative detention, hold in secured storage, while taking action to remove the product from the food supply."