MONTVALE, N.J. — In revamping its portfolio of multiple banners, A&P's turnaround strategy is concentrated on three formats developed to appeal to low-, middle- and high-income segments.
The company's format segmentation consists of Food Basics, a limited-assortment, deep-discount store; a fresh market concept that is being introduced to various banners; and the new-generation Food Emporium, a high-end gourmet store that debuted at the Bridgemarket store in Manhattan last year.
The discount and fresh concepts, which A&P said incorporate “best-of-class” elements from fresh food retailers across the country, have evolved to the point where A&P is confident enough in the formats to start aggressively rolling them out in remodels, conversions and, in some cases, new stores. The vast majority of the 24 fresh stores launched in fiscal 2006 were existing store conversions under the A&P, Waldbaum's and Super Fresh banners in the Northeast.
Food Basics was adjusted from the original A&P Canada discount formula to better appeal to American markets. The company said the price-impact format — which is not designed to feel like one to shoppers in terms of quality and atmosphere — is being rolled out through conversions of existing or closed conventional stores.
The new Food Emporium is described by company officials as a “true destination for fine food lovers, with a distinctly global appeal. Having first elevated its high-end and specialty assortment, we are currently adjusting the Center Store product complement to enhance The Food Emporium's appeal as a true neighborhood market serving basic needs, with an unequaled gourmet flair.” Some of the upscale elements that have been tested at the Bridgemarket Food Emporium prototype in Manhattan are being rolled out to A&P fresh locations in the Northeast, A&P officials told SN.
The majority of A&P's conventional stores have been slated for the fresh format based on their location and demographics. Others will be turned into Food Basics.
A STEP TOWARD SEGMENTATION
While the strategy isn't exactly rocket science, said analysts, it may be the closest large chains like A&P can come to micro-merchandising their stores for the greatest customer appeal and satisfaction.
Matt Casey of Matthew P. Casey & Associates, Clark, N.J., whose firm does real estate market analysis for supermarkets, said that unlike independents, “big chains don't have the luxury to micro-merchandise every store. It's difficult for a big chain with hundreds of stores to veer off the beaten path. But having multiple formats is an attempt at micro-merchandising, since the big chains can't go all the way.”
Jeff Smith, global managing director, Accenture Retail, Chicago, said that retailers are getting “more sophisticated about blunt-instrument location analysis for segmentation.” This goes beyond density of population in a 1.5-mile radius to include geo-demographic and competitive analysis of the primary trading area.
The big challenge for A&P in a hotly contested food retail environment in the Northeast is prime real estate. “The problem is, there are no A or B sites left,” said Casey. “A lot of the stores built over the last decade have been recycled properties — former Caldors, Ames and others that went under. That southwest corner of Main and Main isn't out there,” he added. In such situations it becomes critical to get the right format into the right location.
Smith noted that differentiation also is vital in format segmentation. “You better know enough about the other guys in order to be different. Price, image, assortment and customer experience are the things you need to adjust so what you offer is a complement to the local shopping community, rather than one more ‘me-too’ competitive option.”
Now A&P plans to add a fourth format with the merger of Pathmark Stores, a $1.5 billion deal announced in March. Pathmark has been pursuing a reengineering of its store base. According to Christian Haub, A&P's executive chairman, the Pathmark model is distinct enough from A&P stores to draw different consumers even if Pathmark competes in the same neighborhood. A&P has said it sees Pathmark as a value-focused brand in its portfolio.
As of the close of the fiscal year, ending Feb. 24, 2007, A&P operated 406 stores in nine states and the District of Columbia under A&P, Waldbaum's, The Food Emporium, Super Foodmart, Super Fresh, Farmer Jack, Sav-A-Center and Food Basics banners. A&P said last month it was divesting its 66-store Farmer Jack operation in Michigan after spending several years trying to revive the ailing chain, including converting some of the stores to Food Basics.