LOS ANGELES — The new owner of Smart & Final here is boosting store size, increasing the ad frequency to weekly, adding a wall of values at retail and putting in other new wrinkles to strengthen the appeal of the non-membership warehouse chain, a company spokesman told SN last week.
The efforts are paying off with better sales and increasing customer counts, according to Randall Oliver, Smart & Final's director of corporate communications.
Smart & Final operates 284 stores in a variety of formats, including 198 warehouse stores in California, Oregon, Washington, Arizona, Nevada, Idaho and northern Mexico; 50 Cash & Carry stores in California and the Pacific Northwest; 28 Henry's Markets in Southern California; and eight Sun Harvest locations in Texas.
The company was acquired from Paris-based Casino Groupe last May by investment firm Apollo Management.
Among the initiatives Smart & Final has been taking is to open larger stores.
“We're looking at more sites in the 25,000- to 30,000-square-foot range, which will allow us to carry more product for both business and household customers,” Oliver said.
New stores in recent years had been averaging about 17,000 to 18,000 square feet.
“Larger stores will enable us to try different things,” Oliver explained. “Our goal is to try various ideas in newer stores to see what works.”
One of those new elements is a “wall of values” that Smart & Final has begun adding at new and remodeled stores to convey its lower-priced image, he said.
The chain also recently increased the frequency of its ads to weekly, he said.
“It's been an evolutionary change,” Oliver explained. “Before the company was sold, we had already moved from a new ad every three weeks to a new ad every two weeks, and now we've moved to a new ad every week, and it's been very successful. We've seen a lot of growth in terms of customers, and sales have shown very healthy improvements.”
He declined to provide specific details about sales volumes. SN estimated in its Top 75 report (www.supermarketnews.com) that Smart & Final's 2007 sales at about $2.3 billion.
After adding dry bulk produce over the past several years, Smart & Final is also beginning to add wet racks at some of its newer locations, Oliver said.
“Adding fresh produce made a strong improvement in the stores, and we see that as an area where we can do better, which is why we're looking at wet racks,” he explained.
The company acquired a perishables warehouse in Riverside, Calif., last year as part of a deal with Whole Foods Market, which was selling off Wild Oats properties. Oliver said the warehouse “will be an important part of our ability to improve the overall perishables assortment” at Smart & Final.
According to one trade observer, the addition of wet racks and weekly ads are very positive moves: “This is increasingly becoming a fresh business, and putting in wet racks is consistent with that. And more frequent ads should make Smart & Final more competitive. What they are trying to do with both changes is get more frequent visits from customers.
“In George Golleher they have a very savvy supermarket guy running the show, and Tim Snee, who heads up operations, is also a sharp executive, and they know Southern California and the supermarket industry well,” the observer said.
Both Golleher and Snee were formerly with Ralphs before it was sold to Kroger.
Jonathan Ziegler, a Santa Barbara, Calif.-based analyst with Dutton Associates, El Dorado, Calif. — who used to follow Smart & Final when it was a public company — said he believes the company has a lot of potential, if it is willing to move in new directions.
“But it seems like the new owners are doing a lot of blocking and tackling and fine-tuning what they have, rather than doing anything to make the stores more powerful,” he told SN, adding that the chain “should have been selling produce years ago.”
Oliver said Smart & Final is very satisfied with Henry's Markets in Southern California and Sun Harvest Markets in Texas, the two high-quality, low-priced farmers' market chains it acquired in the deal with Whole Foods.
Although the company boosted the number of Henry's locations by converting one existing Smart & Final store to that banner, there are no plans to convert additional stores, Oliver said, though the company would consider building or acquiring units for additional stores under the two banners.
Another industry observer told SN the decision to leave Henry's alone “is the right thing to do. That's a niche format that's done well over time, and it's good that it now has someone with financial resources supporting them.”
Smart & Final has closed the three experimental Cash & Carry stores it was operating in Southern California, Oliver noted, preferring instead to restrict that format to the Pacific Northwest and Northern California, where it is better established.