A trip to my local grocery store is an almost-daily ritual, as I hate to plan dinner ahead of time. The store is also a lovely 15-minute walk from my La Jolla home, making last minute dinner decisions doable without driving. The checkout staff contains familiar faces.
When I recently forgot to bring my wallet to the store, I asked Bob if he would let me sign an IOU. He’s the round-faced 35-ish-year-old clerk who always looks like he is thinking of songs rather than codes as he rings up my produce prices. “After all, I’ll be here tomorrow … just like I was here yesterday.”
“No way! It’s not our policy,” Bob replied, with a tone implying I was trying to pull a fast one over him. Did his response make sense in an era when Amazon acquired Whole Foods, and two-hour delivery is part of Amazon’s San Diego offering?
Amazon’s acquisition of Whole Foods – marrying a great food brand (365) and Whole Foods’ fresh, cold, and frozen food supply chain with Amazon’s delivery assets – is industry shaping, not just industry shaking. (No wonder stock prices of Kroger and other chains dropped suddenly on the takeover news.)
If my local grocer (part of Safeway’s Vons brand) and independents don’t adjust their strategies and policies, their businesses will suffer. Being able to offer personalized service to returning customers would, I think, be a differentiator. Apparently, my local Vons doesn’t agree, yet.
It’s already too late for some stores to try to adapt to the changing grocery store marketplace. Brennan’s, a Madison institution that recently announced it is closing its doors, is an example of what not to do. It’s strategy never changed. But staying the same was the riskiest decision Brennan’s could have made with Whole Foods and Target entering nearby, and Metcalf’s upping its variety and “buy local” differentiators. Yes, Brennan’s peaches are still finger lickin’ juicy, but not the bottom line.
Could Brennan’s have saved itself? The core business model problem I observed was Brennan’s reliance on its store brand – from bread to cheese, nuts to fruit, and wine to pretzels.
First, the strategy was not sound, even without the intensifying competition. Companies offering their branded products almost exclusively – like Trader Joe’s grocery chain and IKEA furniture – usually provide more value. It’s accomplished through lower prices because they don’t need to use a middleman. Not so at Brennan’s. Its prices were always high with the implied promise of premium quality products. That may have been true for fruit and Wisconsin cheese, but not much else.
Some other store-brand companies, like Duluth Trading, have talent behind the brand that benefits all categories: Duluth’s design-for-function expertise is equally useful for all of its women’s and men’s clothing. Again, this was not true for Brennan’s. A merchandiser/buyer who is a talented selector of superior fruit or cheese cannot necessarily pick winning wines or bread.
Years ago, Brennan’s smartly added Jacobson seafood and meat, at least at the Middleton store I frequented. The move brought authority to that category. In my opinion, it also planted a seed for a winning strategy.
Suppose, for example, that Brennan’s built a business model of renting space to companies with strong brand images in their category. Steve’s for its wine, Madison Sourdough for its bread, RPI Pasta for its pasta, etc. Local farmers’ organic meat might have displaced Jacobson’s. Brennan’s could have become The Public Market before the notion of a Public Market was in Madisonians’ minds.
As for revenue growth, Brennan’s could have gone on to be the incubator and investor for new food companies as well as a go-to site for tasting experiences. With an informed, foodie demographic in Greater Madison, Brennan’s might have even gotten its name on the national map – doing for grocery products what Madison’s L’Etoile did for “local food” restaurants.
Instead, Brennan’s started and ended as Brennan’s Farm Market. A farm market makes sense in the middle of nowhere, close to the fields, and selling its produce alongside homemade jams. Not so when consumers have lots of other choices: On the near west side of Madison, residents who might shop at Brennan’s can go to Copps (now Pick ‘n Save), Whole Foods, Trader Joe’s, Target, and Metcalf’s, and a handful of authentic farmers markets. All are a short bike ride away.
Brennan’s will not be the only grocer to learn business model lessons in the years ahead. I hope Vons figures its future out, lest I have to make a weekly grocery list once again.
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