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A triumph of Yankee ingenuity.

Larry Kealey is an independent grocer who thinks big. Despite having a 47,000-square-foot store in Salem, N.H., that does $22 million in annual volume, he wanted to build a bigger, better and different new store.

"We wanted to redefine what a supermarket could be," he says. He accomplished that by building an 80,000-square-foot Kealey Farms super warehouse store in Nashua, N.H., that is one of the most revolutionary supermarkets anywhere.

The Nashua unit, which opened in July, is innovative and unusual--a compilation of ideas borrowed from stores as diverse as Cub Food and Byerly's. With the pricing structure and look of a warehouse market, plus groupings of service departments and a selection of perishables that equals any superstore, Kealey Farms offers the best of two formats.

The store features a 20,000-square-foot garden center/floral department/greenhouse. Locally grown fruits and vegetables are merchandised from rear-loading, non-refrigerated cases that sit in the produce cooler. The meat section sells more than a score of institutional packages, and the hot food lineup offers 40 entrees and soups.

"The competition in Nashua was strong and established, so to enter the market as the new kid in town we needed a concept that was radically different," says Kealey. He apparently was right with his approach. As of early October, Kealey Farms was handling 23,000 transactions a week, and weekly volume hovered around $500,000, almost one-third more than projections.

The Silicon Valley of the East

Some of the impetus for the new store came from the ranks of Kealey Farms employees. "We have bright, aggressive young men and women in management who were feeling somewhat limited because we were a single-store operation," says Kealey, who took over the presidency of the company from his father in 1978. "They wanted to see the business expand and started suggesting several years ago that we build a second store."

The company had to move into a market with a sufficient population to support the $20 million in annual sales it was hoped the new store would bring. Kealey looked at potential sites in three New Hampshire cities, Manchester, Ports-mouth and Nashua, and soon decided that Nashua was the place to concentrate his search.

According to Kealey, Nashua has the highest growth rate and income level of any city in the state. Nashua, which is located on the Massachusetts border, has been undergoing an amazing growth spurt in population and business activity. The absence of a state income tax has attracted people to the area, while lower business taxes have done the same for companies. The business activity in this city of 100,000 is concentrated in high tech. helping the 30-mile corridor between Nashua and the western suburbs of Boston get the nickname of "Silicon Valley of the East."

Nashua was served by some excellent supermarket operators, including heavy-weight local chains Purity Supreme and Alexander's. However, market research conducted by Joe Gilchrist & Associates of Densalem, Pa., revealed potential in the northern part of town, where houses and condominiums are being built at a breakneck pace. Since Kealey first looked at the store's location on Highway 101A three years ago, more than four million square feet of living space has been added within a five-mile radius of that site.

But while the 24-acre parcel of land that Kealey acquired for $800,000 was a perfect location geographically, the land quality was highly questionable. "The site had excellent road frontage and visibility, and was large enough for us to grow on it in the future," Kealey says, "but it was a swamp." The property was zoned "airport industrial," but Kealey was able to obtain a variance because the land presented a hardship condition.

Kealey overcame this disadvantage by using extensive landscaping to create a picture postcard setting for a farm market. The water on the land was drained to create two small ponds that sit in front of the store and the building was set almost 500 feet back from the road, where the ground was firm.

Kealey used the excess land at the site to help the image of the store. "Since a lot of our volume is generated by the garden center and produce, an attractive natural setting was important to the image we wished to create," Kealey says. He did this by planting six acres of tomatoes, corn and other crops, thereby enhancing the fresh-from-the-farm image. The result of this effort is a store that looks like it sits in the middle of a farm, even though it is located along one of the main commercial shopping strips in New Hampshire.

A Combination of Parts

Kealey decided to compete on two fronts. His first tactic was to offer a selection--particularly in perishables and specially foods--and service level that is unapproachable by conventional operators. The second front, a low price structure, would be made possible by efficiencies that allow the market to operate on a margin in the low teens.

Kealey encouraged his departmental managers to produce ideas that would meet those objectives. "We gave everybody free rein to do whatever they desired within their departments," says Kealey. "After determining what each of the parts should do, we put them together to create the whole." The result was an 80,000-footer that incorporates dozens of merchandising innovations and labor-saving ideas.

The task of combining everybody's thoughts into a coherent layout and decor package was assigned to Gene Hostetler of Archimages, a Minneapolis design firm. A former Super Valu store planner, Hostetler was accustomed to working with independent grocers with innovative approaches.

"We requested an appearance that highlighted the aesthetics of the products, that showed consumers how different the store truly is," says Kealey. "Our plan was to throw people off off their normal expectations of what food shopping should be, to make the store so atypical that it would stick in their minds. Shopping at Kealey Farms is an adventure that should not be forgotten."

The garden center and produce departments comprise almost 30,000 square feet of selling area, and represent 19% of volume. Called the "4 Seasons," the garden center carries almost every conceivable garnde and floral need, including hard-to-find dried flowers. It also has almost every size of wicker baskets or furniture imaginable. A greenhouse is attached to the side of the shop.

The produce department is as large as some whole grocery stores. To save on labor and energy costs and still create a farm market atmosphere, most fruits and vegetables are displayed in packing cartons that are rear-loaded onto cases that sit within the produce cooler, as in many dairy departments. Cold air from the cooler keeps the fruits and vegetables at optimum quality.

"Our produce manager claimed that he could save one-third of his total man-hours if his people did not have to rotate the products. So we developed a system that would eliminate the need for product rotation. We are pleased with the labor savings and shoppers like it because the case merchandising gives fruits and vegetables a fresh appearance," Kealey notes.

Kealey Farms grows much of its own produce. The Salem store was founded in 1944 as a farm stand. Although it was converted into a supermarket in 1978, about 30% of sales are generated by the produce section. The company's 150-acre farm in southern New Hampshire grows most of the vegetables and fruits that can be cultivated in New England.

The Nashua store's service core is an equally important attraction. Together in the core are service meat, seafood, gourmet cheese, cold deli, hot deli, fresh pizza and pasta, storemade ice cream, a candy shop and a bakery. Called "the heart of Kealey Farms," the service departments a week.

"By putting all the service departments together, we made it feasible to keep them always open because it is easy for a single employee to cover several departments overnight," says Kealey. "The grouping of the departments into a core section also saved on construction costs because all electrical equipment is concentrated in one area instead of being scattered around the perimeter.

"The service core projects a dramatic visual image. Consumers who walk around that area continually see a different food product that tempts them to make a purchase. The service core is an excellent merchandising approach for selling high margin products."

One of the most successful sections within the service area is the hot deli, which, including a 100-item salad bar, accounts for 3% of sales, or $15,000 weekly. Kealey hired a banquet chef from Sheraton, and told him that the objective was to get people to think of Kealey Farms for fast food in the same way that they think of McDonald's or Friendly.

"The deli is a hot version of our salad bar," Kealey says. People take dishes out from a shelf underneath the fixture and can take any combination of products they desire. At $2.99 a pound a shopper can purchase some Italian sausage, fillet of fish Florentine, Chinese pepper steak and barbecued chicken. The 10 soups, including lobsteer bisque, are priced at $1.99 a pound.

The hot entrees are prepared in 80-gallon batches, then are wrapped and refrigerated. Quality is maintained for three to four days. The selection is varied slightly each week, so devotees of the hot entrees will always have something new to put on their plates.

Kealey believes that the hot entrees are selling well due to the large number of young professionals who live and work in the vicinity of the store. Instead of popping a TV dinner into the oven, customers can get fresh food prepared by a restaurant chef. Advertising and point-of-sale signs inform consumers that no additives or preservatives are used.

"The number of young people in Nashua makes this somewhat of an unconventional marketplace," says Kealey. "It was an excellent community to try some new ideas that we felt could work in a supermarket. We experimented with a plethora of dangerously innovative ideas and have developed a store that is representative of what the new generation of consumers wants in a supermarket."

1 BANK: Positioned immediately inside the entrance is a full service office of the New Hampshire Savings Bank. Kealey jokes, "Since they loaned us the

money to build this store, we decided to give them a prime position." The high ceiling and skylights gave the bank enough room to build an office large enough to be a freestanding unit in a parking lot. An automated teller machine provides cash when the bank is closed.

2 FLORAL/GARDEN CENTER: The 20,000-square-foot area on the side of the food store is a massive floral department, garden center and gift shop. Now a greenhouse is being constructed to grow plants and flowers. This section accounts for an amazing $45,000 in weekly sales, 9% of total. To encourage impulse sales, potted and cut flowers are displayed in the vestibule that houses the bank. Dried flowers, floral accessories and wicker products are sold at extremely low prices. Kealey says, "Many owners of small floral and gift shops buy some of their inventory here. Our prices are as low as at their wholesalers'."

3 PRODUCE: Accounting for 10% of sales, or $50,000 weekly, produce is the department upon which Kealey Farms has built its reputation. While the bestselling fruits and vegetables are displayed on racks that sit within the coolers, more specialized products are merchandised from the single-check cases that run along the left side of the department. Fruit specialties merchandised within the first section include unusual products such as red Bartlett pears, Italian prune plums and Spartan apples. During early October, the store was sampling kiwi fruit. Kealey notes, "We sell 10 times more kiwi than most stores." The second section is filled with vegetable specialties, such as cocktail zucchini and lemon drop squash. A sign says, "For produce case lots and wholesale prices, please see manager."

4 MEAT: The first grouping of meat products that shoppers see is an incredible selection of institutional packages, such as whole pork loins at $1.59 a pound and sirloin butt flapmeat at $1.89. The institutional products are merchandised in cut cases and stocked by the rear-feed method. Across from the institutional section is a three-deck case filled almost exclusively with poultry. (Perdue oven stuffer roasters were priced at 59 cents a pound during early October.) The remainder of the meat department consists of a single-deck case filled with beef, pork, lamb, veal and Kealey Farm's homemade sausage, including Italian cheese and garlic sausage and knockwurst. The case is separated from the meat prep room by sliding windows that allow meatcutters to stock the case without blocking shoppers. Meat, which represents 15% of sales, is totally scannable.

5 SERVICE MEAT/SEAFOOD: "All the beef in our service case is Certified Angus," says Karl Kuceris, meat buyer and merchandiser. "It is better quality than the choice in the self-service case, so we charge a little more for it." The steaks, lamb chops, pork chops and other meat products in the service case are cut at least 2 inches thick, but can be sliced thinner by the ever-present butcher. The service seafood case, which accounts for 2% of sales, is next to the custom cut meats. More than 25 types of fish and seafood are laid out in narrow rows, like in an old-fashioned fish market. Plastic strips hang down between the fish and shoppers, protecting the fish from wandering hands (and germs) and keeping the coldness of the ice away from shoppers. Bags of clams, mussels and oysters are merchandised toward the front of the case, so customers can buy these without requiring service. A gigantic blue plastic tub holds hundreds of lobsters. Prices start as low as $2.99 a pound for a chicken lobster. The barrels beside seafood are filled with seafood stuffing, shrimp cleaner and salted codfish.

6 SPECIALTY/NATURAL FOOD: Accounting for 3% of sales, approximately $15,000 per week, specialty and natural foods are used as a price attraction to pull in cooks who enjoy being creative. "We do not try to get the margins that most stores do on specialty foods," says Kealey. The international products are grouped by brand and by country of origin. Unusual natural food products include herbal anise toothpaste.

7 DELI: One of the most successful innovations is the hot deli, which offers 40 different hot foods that customers can mix and match. Customers serve themselves from the steam tables, reducing the labor costs that make a hot foods section so difficult to operate in the black. Hot foods and salad bar together account for 3% of sales, with the cold deli chipping in another 3%. Meat products prepared and smoked in the store, such as bologna and hot dogs, are the big draws in cold deli. Beef and turkey breast roasted in the store have also been good sellers, even though they are more expensive than commercial products.

8 CHEESE/PIZZA/PASTA/ICE CREAM: The front of the service core is stocked with high profit products that appeal to people who have a lot of discretionary income and enjoy high-quality food. One of the most accepted of these products has been the store-made pizza. People can call in and order hot pizza that is ready for pickup within 20 minutes. These pizza are also wrapped and sold cold, so consumers can freeze them. Cheese is displayed in a single-deck case that permits self-service, yet is always watched over by service employees eager to offer help and advice. The selection includes unusual products such as cambozola from Bavaria and le biguou Lingot from France. When not waiting on shoppers, deli employees make pasta, which is sold in eight different shapes and several flavors. Kealey Farms also manufacturers its own gourmet ice cream. The all-natural ice cream contains 16% butterfat and is priced at $4.99 for a half gallon. Shoppers can see both the ice cream machine and pasta maker. Cheese accounts for 1% of sales.

9 BULK FOOD: Representing 2% of sales, bulk food is positioned opposite the front of the service core. The section consists of 350 items, with the majority being nuts, candy and other snack items. The 100 bulk spices include hard-to-find products such as ground fennel seed, five-spice powder, sweet Hungarian paprika and French moreel mushrooms, which are priced at $4.99 an ounce.

10 BAKERY/CANDY: "the person that we hired to run our candy department was so skilled that we had to expand the scope of the operation to take advantage of his talents," Kealey says. Along with four varieties of fudge and some plain chocolate products, the store also sells more complex confections, such as chocolate chip bark and maple ice creams. While cookies, Danishes, pastries and other small items are sold from the service cases, muffins, rolls, doughnuts, and bread are merchandised on wire racks that allow shoppers to pick the items themselves. Popular regional breads include white mountain bread with sugar sprinkled on top and corn top bread. Bakery and candy bring in $12,500 in weekly sales, 2.5% of total.

11 DAIRY: Positioned in the rear to draw people past the profit-producing core, dairy accounts for 9.5% of sales, or $47,500 weekly. All milk, orange juice and eggs are sold from rolling racks, reducing labor costs and keeping retail prices exceptionally low. For example, low-fat milk was selling at $1.29 a gallon during early October. Signs hanging in front of dairy say, "Check our low warehouse prices, the change will do you good."

12 GROCERY: The grocery aisles are divided into two distinct sections. All food products are displayed in the area behind frozen food, and all snacks, beverages and non-food products are sold from the section in front of frozens. All grocery products are displayed on warehouse shelving in cut cases, with the exception of paper products, merchandised in gigantic dump bins that hold hundreds of cases apiece. Grocery accounts for 36% of sales, or $180,000 a week. Under the direction of Norman Charity, beer and wine are doing remarkably well, bringing $20,000 in revenues every week, 4% of sales. Kealey Farms carries 56 imported beers in case lots and another dozen are available by the bottle. Says Charity, "We probably sell more imported beer than any store in New Hampshire." The wine selection ranges from inexpensive domestic wines priced as low as $2 a bottle to imports from the best regions of France that sell for as much as $50.

13 FROZEN FOOD: Consisting of two well-type cases that are flanked by two lines of doored cases, frozen food is one of the last departments that shoppers come to. To create excitement and give the section some eye appeal, gray, green and blue banners hang from the roof over the well-type cases. Styrofoam coolers are merchandised from the top of the doored cases.

14 FRONT END: The 16 scanners beep like crazy during the late afternoon and early evening, and on weekends. To keep the lines moving during busy times, Kealey opted for double capacity checkstands that allow two orders to be packed at the same time. Unlike most super warehouse stores. Kealey Farms does bag groceries for shoppers, although it does not offer carryout service. All groceries are packed in plastic bags to make it easier for shoppers to carry them. The front end is managed by David Riccio.
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Title Annotation:Store of the Month: Kealey Farms in Nashua, New Hampshire
Author:Tanner, Ronald
Publication:Progressive Grocer
Date:Dec 1, 1984
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