Cub's little brother mauls competitors.
"Taking risks is the only way to grow in the grocery business," says Angeli, who, with his brother Alfred Jr. or "Bay," operates three supermarkets. But the Angelis really didn't think they were taking a risk. Once they saw Super Valu's County Market concept, they knew it would be a winner in Menominee, Mich.
They were right. After one year of running the County Market, the Angeli brothers still own their houses, and could easily buy summer places if they wished. Angeli's County Market is doing $315,000 a week--in a town with a population of 10,000--and is returning a net profit almost twice the industry average. And despite the threadbare gross margin it operates on, the store has been making money since the 15th week after its August 1983 grand opening. County Market: Cub's Little Brother
The Angeli's original Menominee store, a 12,500 square footer opened in 1967, was bursting at the seams, averaging $120,000 in weekly volume. The store desperately needed to be enlarged or upgraded, but the $1 million price tag was prohibitive. Then, the Tempo discount store at the other end of the supermarket's plaza went belly up.
"We knew the site was good, but there was no way we could do enough business to justify the expense of opening and operating a 48,000 footer," Libero Angeli says. "We had thought about a warehouse-style store, but had never seen one we killed. Most early warehouse stores were dark and dirty with poor perishables departments--exactly the opposite of the way we've operated markets for 50 years."
But Tom Dekko, who heads the County Market program at Super Valu corporate headquarters, told the Angeli brother that the shuttered discount store was tailor-made for a County Market. Dekko told them, "You have 17 years of successful operation in Menominee, plus a good staff of 55 well-trained and experienced employees." Super Valu predicted that the Angeli could do $300,000 in weekly business with County Market.
To convince the brothers that their trade area could support the store, Super Valu conducted a SLASH analysis that showed a large store could be successful because people in surrounding communities would drive to Menominee to save 10% to 20% on their grocery bill.
The store, it was predicted, would attract consumers from throughout Menominee County and from neighboring Marinette County, Wis., which have populations of 26,224 and 40,089, respectively.
The Angelis decided to go ahead with the County Market after they lined up favorable financing. They received a loan of $1.5 million at a fixed rate of 10% over a 15-year period from Michigan Financial Corp. The loan was guaranteed by the National Bank of Detroit and was backed with a bond issued by the city of Menominee.
The store's layout and decor--designed by Plan-Mark Architects & Engineers, a division of Super Valu--is along the lines used in other County Markets. The store is bright and attractive, yet avoids any heavy decor touches that would increase remodeling costs.
Super Valu's man on the scene was Arold Ninneman, regional manager for the Green Bay division. While Red Noble, the division's chief store engineer, worked on the purchasing and installation of equipment, Ninneman and the Angelis planned the product layout, ordered and placed the opening inventory, set up the pricing structure and hired and trained new employees. "The Super Valu people lived in that store as we got it ready to open," says Bay Angeli. School Time
Super Valu recommended that the Angelis send key people to the corporate training program that teaches independents how to operate County Markets. "County Markets are an entirely new concept of operation--it's almost like learning the business over," Nineman says. Since Super Valu charged $6,000 to run the five-day training session, the Angelis used the opportunity to have 16 key management people attend. Libero's sons Fred and Sam, Bay's sons Chris and Rex, and Store Manager Al Visintin attended, along with all departmental managers.
"You have to learn how to buy product in quantity, how to merchandise it in quantity, how to price it to move the proper amount within the allotted time, how to train and schedule workers to keep labor to a minimum and so on," Libero Angeli says. "Since we rely on our department managers to perform all those functions, it was essential for them to attend the training sessions."
All involved in the operation of the store learned the disciplines necessary to keep the store running according to plan. As Libero Angeli says, "Discipline is the key to making these County Markets successful. You must set your goals concerning sales per man-hour, gross margins, net profit and so on, and do everything within your power to meet those goals. There is little margin for error in this type of store."
The three primary areas where discipline is most needed are buying, merchandising and labor control. Buying is different from a conventional store in that huge quantities of product are purchased, allowing the store to receive substantial discounts to pass along to customers. Being able to cut deals with manufacturers due to the truckload quantities of product purchased was a new way of buying for the Angelis.
Produce Manager Steve Pohl buys two direct truckloads of fruits or vegetables every week. During the first week of June, he brought in a truckload of strawberries from California and was featuring them at a low price of 63 cents a pound or $5.98 for a 7-quart container. Pohl had to know how many strawberries he could sell at that price, so he did not order too much or too few. The thin margins of the County Market do not allow for shrinkage due to spoiled product and the importance of keeping every customer who comes into the store does not permit out-of-stocks on featured items.
Low price features are important to the store. Four super specials--called "shockers"--are offered each week, costing the store money on every item sold. For example, in early June, County Market was selling Miracle Whip at $1.29 for the 16-ounce jar when the wholesale cost was $1.65. Only products compensate for these loss leaders.
Whereas grocery operates on a net margin around 9%, other departments in the store work on much better margins. Meat brings in nearly 25%. The perishables departments are essential to the appeal of the County Market because they allow customers to save money on all their food needs.
Family packs, composed of mixed types and cuts of meat, allow shoppers to save on the meat they needed for main meals for a week. The meat department was recently selling budget packs containing boneless pot roast, roasting chicken and pork butt at $1.27 a pound, or loin end pork chops, beef chuck and chicken legs at $1.56 a pound. Russ Vassar, meat specialist for Super Valu's Green Bay division, says mixed meat packs appeal to shoppers who like to eat a variety of meat, but do not want to spend the money for a family pack of each type. "It helps people stay on a budget," Vassar notes.
The in-store scratch bakery enables people to save while purchasing top-quality baked goods. Since the store opened, the bakers have been packing five loaves of store-baked white bread in large bags, and selling them together for $1. During a recent weekend, the bakery was offering doughnuts fresh from the fryer for a nickel apiece. Sales were so brisk that a person was stationed on the floor to fill bags with plain and powdered doughnuts. Keeping a Lid on Costs
A good training program and discipline among department managers and employees has permitted management to keep labor costs at 5.27% of sales, with fringe benefits costing an additional 1.09% of sales. Sales per men-hour across the entire store stand at $113.67. In comparison, the average independent spends 9.1% of sales on wage expenses and the average sale per man-hour for independents is $77.34, according to Progressive Grocer research.
Despite the small payroll, there is frequent interaction between store employees and shoppers. For example, the tremendous volume done in produce, meat and the other perishables departments means that somebody must always be filling the cases. These employees are always alert to help any shopper.
Customers are also in constant contact with a multitude of demonstrators who encourage them to literally eat their way around the store. As one shopper commented, "Every time I turn around, I get something else to eat."
The County Market program calls for numerous demonstrators to constantly work the store. During a recent visit, shoppers could start off by eating some pineapple in produce, continue through sausage and turkey in meat, nibble on some cheese in dairy, have a bite of pizza or a handful of popcorn at the pizza hut, and finish it off with some hash browns from frozen food.
"People enjoy sampling different products--it adds an element of excitement to the shopping trip," Ninneman says. The demonstrators cost the store little or nothing because the company receives allowances from the manufacturers whose products are being pushed. The sampling goes on every day of the week, not just on weekends as in coventional stores.
Labor-saving measures abound throughout the store. Stock for refilling the grocery shelves is kept on top of the warehouse shelving that runs along the front wall and down the center of the store. In dairy, all milk and eggs are merchandised from roll-in fixtures that go directly from truck to cooler to dairy case. In bakery, the sole service department in the store, employees are stationed behind a work table that looks out on the selling floor so they can see when shoppers need service. When no customers are in sight, the bakery employees wrap products for the self-service racks.
Cost saving measures don't end there. The store's advertising expenses are a mere 0.48% of sales. Utility costs equal 0.64% of sales and annual inventory turns stand at 31.61. The average sale per transaction is $19.19, $8 higher than the Angelis received at their conventional store in Menominee.
By keeping these assorted costs to a minimum, Angeli's County Market is able to keep retail prices approximately 15% below competitors. To make sure they are never beaten on advertised specials, the store uses a foolproof advertising program in which prices are only listed in circulars. (Newspaper ads for County Market project image.)
"We have the circular ads made up with everything but the price," says Libero Angeli. "When our competitors' ads come out on Wednesday, we immediately check them, and meet to determine what our prices should be. We call those prices into Green Bay, where they are printed in our circulars, which are in the store by the next morning."
This system is just one of the many disciplines that makes operating a County Market different, but successful. In fact, the Green Bay Division plans to open nine more County Markets by the end of 1984; there were three in operation as of June. One of those new stores may be in Iron River, replacing the Angelis' conventional store.
1 WALL OF VALUES: Four "shockers," items priced considerably below cost, anchor the Wall of Values. "Selling these products at such a low price goes against everything I've ever learned in the grocery business, but it works in the overall sales mix," says Libero Angeli. About 84 different manufacturers' deal products are stacked in cartons along the front wall of the store, with the hottest items positioned at the end. At the start of the section customers can pick up a circular listing the featured specials. At the end of the Wall of Values they can search through a coupon exchange station.
2 PRODUCE: Accounting for 10.3% of sales, or $32,445 a week, produce is an image builder for the store. Arold Ninneman of Super Valu says, "Presenting a fresh image with farm-market prices is important to the overall concept of the County Market." To put the firm's best foot forward, the fruit and vegetable lineup begins with oversized products displayed in waterfall style, giving an appearance of quality and abundance. The three dump tables in the center of the section create a price impression and are usually stocked with seasonal items at an ultra-low price. During the first week of June, strawberries at 63 cents a pound and bing cherries at 95 cents a pound were merchandised on the tables. To encourage purchases, County Market was giving away a free bunch of parsley, a 39-cent value, with any produce purchase. Displays of dried fruit, salad dressings and other produce-related products boost margin in the department. 3 FLORAL/NATURAL FOODS: Although a bulk food operation was originally planned for the right rear corner, the Angelis vetoed the idea because they think bulk food is unsanitary and will eventually be regulated by either state or federal agencies. Instead, the brothers opted for a natural foods department and a small floral fixture. "With our shelving for natural foods along the wall, we can carry all of that type of product that people in this community want," Libero Angeli says. The floral fixture features houseplants, mostly displaying hanging baskets of sturdy plants such as Swedish ivy. "We want plants that will survive in the store until they are sold," says Angeli. 4 MEAT: Butchers by trade, the Angeli brothers have always stressed meat in their markets. Says Bay Angeli, "Meat is a significant portion of people's food bills, so it's essential to sell it at a lower price if people are going to save on their total food bill." To help budget-conscious consumers, County Market stresses family packs, priced below the smaller packages. The store a also merchandises subprimal cuts, such as whole beef tenderloins at $3.99 a pound, in the well-type meat case, and sells variety packs at extra special savings. The variety beef pack offers, for $24.99, 4 pounds of sirloin tip steak, 4 pounds of stew meat, 4 pounds of ground chuck and 4 pounds of boneless chuck steak. To save money on the cost of equipping the new store, meat cases from Angeli's old store were used in the meat section. Smoked and frozen meats are displayed in cases across from fresh meat so shoppers can purchase all the meat they need at one time. Meat represents 17.3% of sales, or $55,000 a week.
5 GROCERY: "County Markets are different from most warehouse stores in countless ways, but one of the most obvious is that we do not stock everything in cut cases on warehouse racks," says Ninneman. "Some products can be merchandised better on regular shelving." Grocery gondolas run parallel to the front end rather than perpendicular to it, and are broken with an aisle down the middle to make them more spacious. To avoid the cramped feeling common in warehouse stores the aisles are wide and the ceiling was raised to 18 feet. The store recently embarked on a program to display more general merchandise on ends. Grocery accounts for approximately $150,000 in weekly volume, 47.5% of total. Warehouse shelving along the left wall carries paper products at hot prices.
6 DAIRY: Accounting for 10.8% of sales, dairy receives a lot of attention. The excitement begins when shoppers leave meat and are greeted by a woman offering samples of medium cheddar cheese cut from a more than 500 pound wheel. ("Medium cheddar is the best cheese to sample because people who like sharp enjoy it, whereas a chunk of sharp cheddar will not please shoppers who eat the mild product," Bay Angeli says.) A sign next to the wheel says, "Who's the big cheese in the Twin Cities--it's Angeli's County Market." To encourage impulse sales, dump bins with 12 different types of cheese surround a truckload of Ritz crackers on display. Milk and eggs are sold from roll-in metal racks behind glass doors, reducing the labor cost. In June, large eggs sold at 69 cents a dozen and a gallon of skim milk for $1.47.
7 FROZEN FOOD: The selection available at County Market is represented by frozen foods, where customers can choose from 46 different brands and types of frozen juices and more than 20 frozen pizzas. The store was recently selling a 12-ounce can of Vita-Gold frozen orange juice for 59 cents. Most of the frozen food cases were taken from the old store to save on equipment costs. Frozen food accounts for 6.6% of sales, or $20,800 a week.
8 PIZZA HUT: The 64-square-foot pizza hut sells more than $1,500 in pizza and popcorn every week. The pizza makers create a dozen types of pizza, including unusual pies such as tunafish, shrimp, taco and even a Reuben pizza. Prices range from $2.89 for a 9-inch cheese pizza to $9.69 for a 12-inch chef's delight. A slip built onto the side of the wooden pizza hut merchandises "better baking screens," which sell for 99 cents apiece. Bags of popcorn are priced at 89 cents. Popcorn is always available for customers to munch on and during busy periods, small pieces of pizza are also offered for sampling. A sign says, "Buy a fresh pizza today--you'll never buy frozen again."
9 BAKERY: Ever since the Angelis opened an in-store bakery in 1959, this department has been central to the appeal of their stores. The partners had no desire to change that in the County Market unit. Although most of the baked goods are prepared from scratch in full view of shoppers, the majority of the items are packaged and sold self-service to minimize labor expense. Only pastries--doughnuts, pies and some cakes--are sold from the service case. Fancier products include chocolate honey-mooners, blueberry cake slices, Persians and cheese croissants. Bakery racks along the front wall are filled entirely with different styles of breads, buns and rolls. The bread selection includes buttercrust, sunflower seed and seven-grain bread, as well as foot-long hot dog buns. Bakery accounts for 3.0% of sales.
10 FRONT END: A sign above the front end says, "Compare the bottom line at County Market." Another sign gives bagging instructions, to help customers bag their groceries properly. Although most shoppers do bag their own, a small group receives help from front-end personnel. "When we first opened, everybody baged their own because that is how the County Markets are supposed to run," says Libero Angeli. "But it's difficult to stand by and watch an older woman, or a mother with several young children, struggle to get their purchases into a bag. So now we bag groceries for some customers." The double checkstands allow one person to bag while another is checked out.
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|Title Annotation:||County Market|
|Date:||Aug 1, 1984|
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