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Food Fight

Local grocers battle Mainland chains and big-box outlets for survival

(page 2 of 2)

   Safeway’s Kapahulu “lifestyle” store offers a variety of
   prepared foods designed to make meals easier for
   shoppers on the go.
   Photo: Rae Huo

In with the new

As competition heats up, more markets are upgrading their facilities. For instance, Safeway’s new lifestyle stores feature rich-looking wood floors, decorative lighting and rustic buckets and baskets to create a “warm yet sophisticated ambience,” says Susan Houghton, Safeway’s national director of public and government affairs. The stores are constantly reevaluating their floor space to make every inch as productive as possible.

Most of Safeway’s older stores are about 25,000 square feet – about half the size of a football field. Today, it’s rolling out stores more than double that size. Safeway, which has 19 stores in Hawaii and more than 1,700 stores in the U.S. and Canada, is also diversifying by creating a property-management subsidiary to develop shopping centers with its stores as anchors. The idea is that the longer people stay in the complex – eating lunch, banking and grocery shopping – the more money they’ll spend.

“Safeway’s strategy is to become a landlord so it can get its maximum return on the property,” Sofos says. “The markets that own their land will be at a huge advantage.”

Houghton says Safeway is developing a store in Hilo and recently acquired property in Lihue, Kauai. Safeway is also looking at five additional Hawaii sites and is particularly interested in expanding to the Ewa plain, Central Maui and Central Oahu.

In February, the 60-year-old Foodland store in Aina Haina Shopping Center reopened as Foodland Farms, an upscale format launched in 2007 at Mauna Lani Resort on the Big Island and with Lahaina Farms in 2008. In addition to grocery items, the Aina Haina store features a floral designer, an R. Field Wine Co. outlet, a Mondo Gelato bar and fresh foods prepared by store chefs. Foodland is Hawaii’s largest supermarket chain, with 31 stores and more than 2,500 employees. It also recently opened a new Foodland store in Keaau on the Big Island and is preparing for a Kapolei site next year.

The Sullivan Family of Companies, which operates Foodland, has also diversified. In 2005, it obtained the Hawaii franchise rights for Coffee Bean and Tea Leaf and for Beard Papa Cream Puffs, both of which have become fixtures at their new and renovated stores. The Sullivan Family also operates smaller retail stores in 10 states.

Officials from Times Supermarkets, Hawaii’s third largest chain, and Don Quijote declined to comment for this story.

   The upgraded Foodland store in Aina Haina, called
   Foodland Farms, has an entire R. Field Wine Co. section
   of gourmet food.
   Photo Courtesy of Foodland

Where to shop

Mainland supermarket chains might have deeper pockets and greater resources, but local grocers with deep roots in Hawaii have advantages. For instance, locally owned stores tend to be more flexible and can make faster decisions regarding suppliers, sales or products, because they don’t have to wait for Mainland approval, says Gavin Hakkei, key account manager for JMD Beverages and a former Foodland employee.

Mainland companies can also lose sales if they fail to understand local culture and food preferences. But giving autonomy to local managers helps to overcome that problem, which is what Whole Foods does, says Sullivan, who grew up part-time in Hawaii.

Another advantage that long-time local stores develop is a faithful following. “In a super competitive market, loyal customers are like gold,” Sofos says.

Julie Inouye, assistant vice president and investment officer at First Hawaiian Bank, says she does most of her grocery shopping at Foodland, in Liliha. She says she feels she’s getting the best value at Foodland but she also likes to support a local company. She also patronizes the Fort Street Mall farmers market at least once a week.

Shoppers who emphasize price have no loyalty – they seek the best deals and that often means Costco or Walmart. Convenience is the main draw for other consumers, including economist Paul Brewbaker, who shops at Foodland in Kailua, the closest store to his home. “I find that the search cost of trying to find the cheapest this or that wipes out much of the potential savings,” he explains. “That is, if I go to two or three supermarkets to hunt and gather, I waste time and fuel and I save like $1.03.”

Chef Russell Siu, owner of 3660 On The Rise and Kakaako Kitchen, also values convenience, which is why he shops at Costco in Hawaii Kai or Foodland Farms in Aina Haina, which are both close to home. Siu appreciates Foodland’s fresh produce, salad bar, meat department, poke and friendly service. He also shops at farmers markets and believes that eating local is the best way to support our economy and businesses.

   KTA’s Mountain Apple brand has grown to more than 240
   products–all grown, processed or made in Hawaii.
   Photo Courtesy of KTA

KTA Superstores’ long-term support for the Big Island community and its businesses has, in turn, earned the loyalty of many customers. “It works both ways,” Kurisu says. “We are very loyal to the different companies and industries that have supported us over the years and we don’t take that for granted.”

That commitment motivated Kurisu to create KTA’s Mountain Apple Brand label, which has grown to include more than 240 products from about 80 local suppliers. All Mountain Apple products are grown, processed or manufactured in Hawaii. Among the advantages are, he says, “we can offer more competitive prices when we don’t have to deal with high shipping costs.”

As for store displays, Kurisu gives preference to Mountain Apple vendors and will take a smaller margin to support local producers. KTA has done such a good job getting its message out that most customers are willing to pay a little more for local items. “We try to exercise the plantation mentality from the old days, which means everyone helps take care of each other.

“The enemy is not other local vendors or other supermarkets, because we’re all just trying to make a living here,” he says. “It’s the Mainland sellers that are hurting us.” Buying cheaper goods from the Mainland or overseas put local suppliers out of business, he says.

Most other stores also give back to the community, whether it’s sponsoring an AYSO soccer team, donating a portion of sales to local schools, or writing a check to the Hawaii Foodbank.

Meadow Gold’s Muranaka, who is also deeply committed to supporting the community, believes customers recognize which companies give back and, in turn, will support those companies. “The consumers are the ones who hold the power,” he says. “It’s important to remember, it’s not always about price and it’s not always about location. It’s about doing what feels right.”

 

Market Changes

Hawaii’s supermarket industry has undergone major changes recently:

November 2007: Safeway opens a 64,000-square-foot “lifestyle” store in Kapahulu.

September 2008: Whole Foods Market opens in the Star Market space at Kahala Mall. The chain focuses on upscale organic and natural foods, prompting local grocers to offer similar choices.

September 2009: Times Supermarkets buys Star Markets’ seven remaining stores (three had closed in the previous two years). Star was founded in 1927.

February 2010: Foodland opens Foodland Farms, a major upgrade of its 60-year-old store in Aina Haina.

2011: Scheduled openings for a Safeway complex at the Schuman Carriage site on Beretania Street; Foodland stores in Kapolei and Keaau on the Big Island; and Whole Foods’ third Hawaii store, this one in Kailua, Oahu.

 

Upgrades Benefit Vendors

Gavin Hakkei, key account manager for JMD Beverages, the only locally owned major wine distributor in the state, says that, when supermarkets renovate, increased foot traffic means improved sales. “It’s good for us because a lot of times when stores make physical improvements, they also tend to upgrade their wine selections,” Hakkei says.

Meadow Gold’s Muranaka says vendors also benefit when supermarkets improve their refrigeration and cleanliness, and add visual displays. “Even if improvements happen in a different department that we’re not in, it still benefits us, because people will buy if they’re in the store,” he says. “So maybe they’ll pick up our milk or ice cream even though they specifically came in for the organic lettuce.”

 

Techno-Shopping

Vince Mitchell, president of Pacific Digital Signs, says there are three new technologies already being used or tested elsewhere that could debut in Hawaii in the next few years. Each would push mobile content to customers while they shop. They are:

• SMS Text Messaging: A poster or digital screen would tell customers to text a code to a number to receive a coupon that can be redeemed instantly at the cashier or downloaded for future use.

• 3-D Barcode: Consumers could take a picture of a barcode with their cell phone, which would lead them to a vendor’s Web site, where they could find savings opportunities.

• Bluetooth: Customers with Bluetooth-enabled cell phones would receive messages, for instance, if they walked by a specific display. The message could include a coupon for instant savings.

• Uni-Directional speakers: Customers hear about a discount if they’re standing in front of a specific product display.

“These technologies work because most people make buying decisions on the spot while they’re in the store,” Mitchell says. “We may eventually see small screens on actual shopping carts, which would allow shoppers to upload their shopping lists and do a lot of other cool things.”

Hawaii Business magazine invites you to comment on our articles and the issues they raise. Comments are moderated for offensive language, commercial messages and off-topic posts and may be deleted. Some comments may be chosen for inclusion in the magazine on the Feedback page.

Jul 23, 2010 12:12 am
 Posted by  LiveWellBrandsHawaii

The best method for locally-owned Hawaii stores to combat big-box retailers and other mainland companies is to provide the best local service. It is essential to "get back to basics" by providing excellent customer service with a personal touch and value-based prices. One thing that big-box mainland company's can never do in Hawaii is be local and live aloha. As a local organic food product small business owner, I have learned that the best value Hawaii stores offer is the Spirit of Aloha.

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