New A&P Fresh prototype has tasty ambitions

SADDLE RIVER, N.J. —A&P has been busy lately, developing new specialty prototypes to address affluent Northeastern consumers who have a passion for food. With what it learned from that effort, and a review of European food retailers, it now has launched a new generation of Fresh stores that focus even more attention on service counters, meal-replacement and international edibles.

The Fresh concept itself is only a few years old and represented A&P’s decision to become a more food perishables-oriented supermarket chain. It made sense.

On the one hand, Wal-Mart was poised to enter its core mid-Atlantic market, all three warehouse clubs were in operation and Ahold USA, a major competitor, was shifting to a limited-assortment merchandising strategy. Competing on price would have been tough. At the same time, Wegmans and Whole Foods started moving in, making food quality a bigger issue in the marketplace. In response, A&P leveraged its real estate advantages, both in number of stores and location, remodeling stores to bring the better food Northeasterners were demanding closer to home.

Yet, even as A&P was rolling out Fresh, supermarkets—such as the aforementioned Wegmans—and alternative food retailers—such as FreshDirect—were upping the ante, in part by introducing gourmet, convenient meal replacement products aimed at the restaurant takeout business. The quality level they introduced was typically superior to what was available at better supermarkets.

A&P recognized that it would have to do something pretty spectacular to stay in the game. Last year, it introduced a new prototype for its urban-oriented Food Emporium stores in Manhattan’s Upper East Side, which included an upscale bakery, gourmet chocolate counter, expanded produce and a centralized selection of international groceries that pushed traditional dry goods into a corner of the store, among other changes.

Next, A&P took the ideas it had mined for Food Emporium and developed a new store concept specifically designed for the multi-unit residential building developments that are cropping up in and around major urban centers. The first was near Baltimore’s Inner Harbor, and the next was in West New York, N.J., on the other side of the Hudson River from Manhattan. The new concept includes a slightly scaled back, but still robust, home meal replacement and perishables operation—the chocolate counter is gone, but artisan bread and the cake and pastry counter remains—and it dedicates a high proportion of space to produce, while offering a grocery section where traditional and international groceries are almost equally touted.

The newest version of A&P’s Fresh store concept, which debuted in Saddle River, N.J., last month, retains a heavy service/HMR orientation; a big, produce-heavy perishables operation, featuring additional organics selections in produce and elsewhere; and a gourmet grocery section with a strong international flavor. In this concept, traditional grocery is located in the center of the store, but pushed to the back. Near the checkout stands, non-foods, including cleaning products and paper goods, almost call out to consumers: “You don’t have to buy me at Costco.”

The store decor is largely derived from A&P-conducted studies of European retailers. After all, The Tengelmann Group, a German company, owns A&P, and its leadership includes folks who have experience in European retailing. Racks, printing used in department designations, earthy colors and even the wood slat ceiling decoration that designates perishables and service departments, have a European influence. Even counters are lowered so it becomes easier for the service personnel to establish an interactive environment in which to work with shoppers. “It becomes more customer friendly,” noted Charles McCutchan, regional vp of store operations for North region at A&P.

Also, fixture profiles were lowered so that consumers can “get a visual at a glance” across the sales floor, but, ironically enough, McCutchan said that the Saddle River remodel where it was first installed isn’t the ideal facility to show off the package at best advantage. The store only has about 25,000 square feet of selling area, and that includes a pharmacy and an over-the-counter drug and health and beauty aids section accessed through a doorway from the produce section, which had been a separate business that A&P acquired as it prepared to remodel. Future stores, where more space is available, will be airier.

Throughout the store, shelf and case signage alerts consumers to product qualities, including new and natural. In addition, particularly conspicuous See Red and Save signage was designed to remind shoppers that, despite the emphasis on gourmet food, A&P intends to remain competitive on price, McCutchan said.

The new A&P Fresh prototype should take fresh food revenues to between 45% and 50% of overall store sales, up from a range that is typically in the high 20% to the low 30% vicinity, said McCutchan.

Robert Plaza, a Zacks analyst, said he backs the kind of upscale initiatives A&P is instituting as a way for supermarkets to differentiate their operations. The strategy can bring high returns with relatively low risk as it can be tested and tweaked in relatively few stores before full rollout. Also, the high-margin operations included can, when they succeed, help pay for merchandising experiments that don’t work.

“Any time retailers—and I’m throwing grocers into that business—can get creative and get the foot traffic in there and keep customers in the store and coming back, they’ll start get them purchasing the high-margin products,” said Plaza. “When those things hit, it really falls through to profits and earnings.”