The bigger, the better.
"We had a pro forma done two years ago to find out what it would take to become a billion dollar company," Furman says. "It looked possible, so we decided to go after that goal with everything we had."
Gerald J. Reuss, Farm Fresh's executive vice president, adds, "When you can see a milestone like that just over the horizon, all of this hard work seems even more meaningful."
Farm Fresh's main weapons in its assault on the billion dollar mark are super combination stores, which average 29,000 square feet of selling space and Super Savings Centers, which boast an average sales area of more than 52,000 square feet. The behemoth markets contain drugstores with pharmacies, cafeterias, bakeries, fresh fish markets, delicatessens, floral boutiques, electronic centers, bookstores and even leisure wear shops.
The most impressive Farm Fresh Super Savings Center opened in 1983 is the 108,000-square-foor mammoth structure on Midlothian Turnpike in Richmond. The former Woolco discount store opened as a Super Savings Centers in August and is already doing $650,000 in weekly business from its 69,000 square feet of selling space. Management expects an annual volume of $35 million in 1984. Born, Then Reborn
When Furman opened the First Farm Fresh in 1957, he had no idea that he was giving birth to a potential $1 billion firm. "All I knew was that I could make twice as much money as a retailer than as a wholesaler," Furman recalls. Furman previously operated a produce business servicing 900 small stores.
Throughout the 1960s and 1970s, Farm Fresh grew in spurts. By 1978, the company operated three combination stores and 16 conventional supermarkets. Total selling space stood at 373,200 square feet and annual sales were $.108 million, an average of about $5.6 million per store.
"Farm Fresh was reborn with the opening of our first super combination store in December 1976," says Reuss. "The store was immediately successful, and so were the combo stores we subsequently opened (profiled in Progressive Grocer in March 1979). We bit upon the right idea and have been refining it ever since."
With each new store, more footage, departments and products were added. As Furman says, "The bigger, the better." Reuss cites larger selling area, wider product variety, better product and pricing mix, one-stop shopping and higher volume as the reasons for the combination stores' success.
In May 1981, Farm Fresh took a giant leap with the opening of its first Super Savings Center. In its 74,000-square-foot sales area, the store had room for the palletized display of promotional merchandise, a leisure wear shop, a fresh fish market, a nutrition center and more.
"We had wanted a store like this for a long time, so we had a good idea of how to lay it out and merchandise it," Furman says. "I was so excited about the concept that one night after dinner I began drawing out the store at home. I worked until 1 a.m., then woke up at 5 a.m. the next morning to finish it. Planning the first Super Savings Center was not difficult because it was an extension of the combination store concept we had been developing for years."
"The enormous sales area of the Super Savings Centers permits us to go into categories in depth, and that is the real key to a combo stores' success," says Reuss. "If you're going to operate a fish department, you should have a selection as complete as a fish market. If you want to do well with a reading center, you must have as many titles as a bookstore."
Gene Walters, Farm Fresh's president, explains, "Our Super Savings Centers are competing against a lot more than the local supermarket. There are 27 separate and distinct departments in those stores--they are each a store within a store. Our Natural Way nutrition center competes against health food stores; our cafe goes against fast food outlets; Trends competes with clothing boutiques. The Super Savings Centers are actually minimalls. They are not just in the supermarket business." The Assault on Richmond
Inspired by the more than $600,000 weekly volume of the first Super Savings Center, the Farm Fresh triumvirate of Furman, Walters and Reuss decided to cast their lot with these giant stores. To expand as fast as financially feasible, Farm Fresh decided to go public.
"Although we have an excellent bottom line and cash flow, we did not have the resources to expand as fast as we desired," Reuss says. "By selling a piece of the company to the public, we were able to take in a large sum of cash to use in our capital expansion program."
"We have attracted a lot of intelligent, aggressive young people during the past five years, and we wanted to build the company for them," adds Walters. "Nothing motivates people like opportunity, and growth creates opportunity."
Farm Fresh's first public offering was in April 1983. Net proceeds from the sale of one million shares of company-issued stock were $22.4 million. According to the prospectus, $17 million was to have been spent on capital expansion by the end of 1983. Total selling space has increased to 823,600 square feet from 616,400 in 1983, a 33.6% jump. Farm Fresh expected total 1983 sales from its 28 stores to reach $400 million.
Central to the chain's expansion program is a major move into markets beyond the metropolitan Norfolk area. In 1983, Farm Fresh moved into Richmond, a city dominated by Safeway and Ukrop's, a local 14-store group.
"Although we've operated two small stores in Richmond for 20 years, we were not serving that market well until last August," says Reuss. "Richmond was perfect for us to expand into with our Super Savings Centers because it is only 100 miles from Tidewater, is inhabited by 760,000 consumers and has no combination stores. Super Savings Centers could make quite an impact there." During the last two weeks of August, Farm Fresh opened the 108,000-square-footer on Midlothian Turnpike followed by a 70,000-footer in East Richmond.
Prior to opening these two units, Farm Fresh mounted an innovative and aggressive advertising campaign designed to arouse the curiosity of Richmond consumers. Walters, who has served as the company's advertising spokesman for many years, delivered 10-second radio spots telling people why they should shop at Farm Fresh. Each commercial offered a reason why consumers should shop at Farm Fresh.
"Our biggest challenge was to get people to travel past more conveniently located supermarkets to come into our stores," says Reuss. "To generate the volume we needed, it was imperative to draw from a large trade area. If we attracted people to the stores initially, our people, prices and merchandising would convince them to come back."
The approach brought people in; the Super Savings Center concept brought them back. More than 35,000 transactions per week are now being recorded at the Midlothian Turnpike store. Approximately 40,000 consumers have applied for check cashing cards since the grand opening. Power to the People
While opening a more than 100,000-square-footer in a new market would tax the resources of even the largest chains, it was not difficult for Farm Fresh due to its decentralized management structure. Almost all decisions are made at store level by the general manager or department managers. Headquarters people deal only with the broadest issues.
"Our ability to select bright young people to join the company and our policy of promoting people from wthin is more important to our success than anything we plan here at headquarters," Walters says. "Our people feel each Farm Fresh is their store and that pride is evident to customers."
"The best people want to work at Farm Fresh--they find us," Reuss says. "Take the woman in charge of our reading centers. She was visiting here, stopped in a store and was horrified at how we operated the reading centers. She called and made an appointment to come in and tell me what we were doing wrong.
"After talking to this woman for about five minutes, I could tell she was sharp as a whip and could turn our reading centers around. I shut the door and wouldn't let her out of my office until she agreed to work for Farm Fresh."
According to the executives, the most important person in the corporate hierarchy is the general manager (Farm Fresh's title for store manager). He is responsible for providing directions to the various department managers, who operate their departments like independent businesses.
"Our department managers have more decision-making authority than I had as a store manager with A&P," says Elwood Everington, general manager of the Midlothian Turnpike store. "They are totally responsible for the operation of their departments. They buy the product, merchandise it, schedule the people, meet sales and profit projections and so on. I just guide and advise them. They do all the difficult work."
Although all Farm Fresh department managers have wide-ranging responsibilities, those at the Richmond Super Savings Centers have even more authority than most. Due to the high store volumes and the units' distance from the warehouse, a lot of product is bought directly.
"By bypassing the normal distribution centers, we minimize the wholesale cost we pay for a lot of our merchandise," says Jim Jansen, store coordinator for the two Super Savings Centers in Richmond. "This entire store concept is backed by our ability to buy truckload quantities, in meat, produce and other categories, not just in things like paper goods. That represents a whole different way of thinking for all department managers."
To ascertain how consumers regard Farm Fresh, the company has created one of the most extensive consumer affairs departments in the grocery industry. Consumer Affairs Director Susan Mayo and her two full-time assistants are constantly analyzing customer attidues, preparing educational programs or giving store tours. Fifty consumer advisors also provide feedback to Farm Fresh through a monthly meeting with Mayo and her staff.
"We think of our company as being like the Washington Redskins," Walters says. "As coaches, the executives call the plays, but the department managers and store employees cary them out and make sure they are successful. And the coaches and players would be nothing without the support of the fans--our customers."
1 FLORAL: "We always position a fountain at the start of the traffic pattern to show shoppers we are a different style of store," says David Furman, Farm Fresh's founder and chairman of the board. Along with establishing store ambiance, the fountain also serves as a focal point for merchandising plants and flowers. The floral department has a wedding section complete with a table where future newlyweds can discuss their nuptiual plans with the floral designer. A wooden fixture displays seasonal floral products.
2 PRODUCE: With the name Farm Fresh and a founder who began as a produce wholesaler, it is no surprise that fruits and vegetables are stressed. Says Furman, "We may have added a lot of non-traditional departments and products over the years, but we've never forgotten the fruits and vegetables that gave us our start." Produce accounts for 7% of sales, or approximately $45,000 per week, at the Midlothian store. While conventional refrigerated cases sit along the produce perimeter, dump tables in the center are innovative, consisting of wooden bins in which massive amounts of fruits and vegetables are stacked. Along with standard-size plastic bags for shoppers to fill, produce has large bags for consumers buying in quantity.
3 BAKERY: The Oven Fresh Bake Shoppe is open so customers can see breads, pies and cakes being freshly baked. To project an old-fashioned bakery look, breads and other products are sold directly from the racks. According to bakery staffers, salt-free bread is becoming quite popular; salt-free white bread is priced at three loaves for $1.25; whole wheat at three loaves for $1.70. Due to heavy demand for special order cakes, the bakery has a double station so two cake decorators can work at once.
4 DELI: Bakery and deli together represent 3% of sales, or almost $10,000 a week each. "Our department managers are really running their own stores," says Elwood Everington, general manager. "The bakery and deli managers do more volume than would the owner of a corner deli or a neighborhood bakery." The delicatessen stresses salads and sandwich meats in its 32 feet of service cases. Point-of-sale signs on top of the case highlight price specials.
5 MEATS: Meats begin with The Butcher Shoppe, a 24-foot service meat case featuring everything from ground beef and bulk hot sausage to Delmonico steaks and veal cutlets. An unusual merchandising approach is used in self-service meat; all red meat is sold from a three-decker case along the wall while poultry is displayed in a walk-around well-type case. "Customers seem to like to buy chicken from a coffin and red meat from an upright. Our meat mix is exactly where I want it," Meat Manager Hank Reid says. Family packs and subprimals are stressed, with almost all beef and pork merchandised in multi-pound packages. Meat takes in $117,000 weekly.
6 SEAFOOD: "Although all departments have done well, The Fish House has been our star performer," says Jim Jansen, store coordinator. The section accounts for almost 2% of sales. Instead of sitting along the perimeter, The Fish House is virtually a separate room. This approach eliminates fish odor from the selling floor. Fish is merchandised in two diverse ways for maximum impact: Fillets and shellfish are sold from an enclosed service case and whole fish is displayed on ice in an open case. Non-filleted fish is inexpensive, with blue fish priced at 89 cents a pound and lake trout at 99 cents. Bushels of oysters and clams sit on the floor, and a special iced spot display highlights backfin crabmeat.
7 GROCERY: Moving $260,000 of merchandise every week, grocery represents 40% of total store sales. Yet even the standard aisles are different. "Some of our groceries are displayed on standard shelving, others on pallets," says Everington. "We do a lot of direct buying for this store, bringing in whole truckloads." The entire back wall is stacked to the ceiling with promotional buys. Since its opening, the store has been selling several national brand four-roll packages of toilet tissue for 89 cents and other promotional products are equally good buys.
8 HEALTH FOODS/READING CENTER: Positioned in the front to attract attention, The Natural Way sells 1,000 different health foods and nutritional supplements. Along the left side sit crocks filled with nuts, dried fruits and natural candy. The remainder of products, such as bee pollen, are merchandised from wood shelving used to complement the naturalness of the products. Across from The Natural Way is a reading center which contains more periodicals and books than many bookstores.
9 HBA/GENERAL MERCHANDISE: With 69,000 square feet of selling space, the store devotes a large portion of the non-perimeter selling area to non-foods and general merchandise. Twenty-four-foot gondolas between the checkouts and the main sales area are stocked exclusively with general merchandise. "There's no reason why we can't sell toasters and dish rags just as well as K-Mart," Jansen says. Cosmetics, health and beauty aids and the pharmacy form a distinct "drugstore within a store." Farm Fresh carries a cosmetic and perfume line as extensive as many department stores.
10 TRENDS: Highlighted by an arched ceiling that allows natural light, the Trends section sells mostly jeans, blouses, sweaters and other young women's sportswear. The department even has window displays and mannequins similar to a mall boutique. "We did well with clothes in our smaller stores, so we decided to try a jeans and tops shop in our Super Savings Centers. So far, it's been moderately successful. The real test will be the holiday season," says Gerry Reuss, executive vice president.
11 DAIRY: Accounting for slightly more than 7% of sales, dairy does more than $47,000 in weekly sales. The most innovative aspect of the department is the bulk egg fixture. All eggs are displayed in 30-count cases. Customers take a carton for a dozen eggs and fill it with the eggs they select from the bulk display, just like they would pick bulk produce. As part of a holiday wine and cheese promotion, white wine is merchandised next to cheese in the multi-deck dairy case.
12 FROZENS: A striking arched blue ceiling reflected by blue floor tile sets the tone for frozen foods, which represent 5% of sales. A chandelier-style fixture with rounded lights furthers the stylish tone. Frozens are merchandised in two 72-foot back-to-back well-type cases and in one facing multi-deck.
13 CHEESE SHOP: Located next to Farm Fresh's extensive selection of wine and beer is The Cheese Shop, a staffed self-service department that sells fancy cheese, pate and pizza. "Selling fancy cheeses and other gourmet-type items requires different expertise than a traditional deli, so we decided to make it a separate department," Reuss says. The selection varies from low-sodium, low-cholesterol American cheese to Belgian pate. Thin crust, thick crust and pan pizza are made in the department.
14 RESTAURANT: "When you look at the increasing percentage of the food dollar spent away from home, you realize that the competition is fast food establishments and restaurants as well as supers," Jansen says. The snack bar combats them with quality cafeteria-style food at low prices. For example, recently two pieces of chicken with two vegetables and a roll sold for 99 cents. Farm Fresh has also been running breakfast specials featuring two eggs, bacon or sausage, toast and coffee at 99 cents. The restaurant can seat as many as 160 and accounts for slightly more than 1% of sales.
15 FRONT END: To ring up the $650,000 in weekly sales, Farm Fresh has 25 scanning registers. According to Everington, all lanes are open at selected times on Thursday, Friday and Saturday. Although the store does not offer carryout service, a parcel pickup system is provided. "Our parcel pickup system gives service to the shoppers without tying up our bagboys in the parking lot," Everington notes.
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|Title Annotation:||Farm Fresh Inc., store of the month|
|Date:||Jan 1, 1984|
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