US: Supermarket perimeters take centre stage
“You can pretty much be in Anywhere, USA, in centre store, but the perimeter is the fashion side of the grocery business,” says Sharon Lessard, chief designer at Supervalu, which operates Cub Foods stores as well as chains like Jewel-Osco, Shaw’s and Albertsons in some markets.
“The perimeter is where we can best distinguish ourselves from everyone else.”
By centre store, Lessard means those long, soldier-straight rows of shelves that have long been the heart of the American grocery store but are now showing signs of the grocery equivalent of atherosclerosis. Shopping and eating patterns are changing, and those changes have threatening implications for the food companies whose shelf-stable products have long filled the centre store.
Analysts have been surprised by the volume of sales declines over the last two quarters. Heinz reported a drop of 2.4 percent in its second quarter. Kraft unit sales were down 2.8 percent in its first quarter, and Kellogg said its North American volumes fell 1.7 percent in its second quarter.
With centre store sales down, the most forward-looking supermarkets are rethinking the allocation of space — shrinking the staid centre and expanding the sexy perimeter. In Cub Foods, for example, the produce, bakery, deli, meat, seafood and other perimeter areas occupy roughly 40 percent of the store, Lessard says, compared with 20 to 25 percent of Supervalu stores that have yet to be remodeled.
“There’s been some stagnation in centre-of-the-store sales,” says Jeffrey Ettinger, chief executive of Hormel Foods. “Frankly, I think those of us who sell products there have been a little slow to innovate, and in the meantime, sales around the store perimeter have been strong.”
Most major food companies have a presence in both the centre and perimeter of the grocery store. Hormel, for instance, is firmly ensconced in one of the hottest areas, the deli section, with its Di Lusso line of cold cuts, while General Mills, maker of Yoplait, is engaged in the yoghurt wars raging in the refrigerated cases, another sizzling perimeter section.
But food companies are nonetheless concerned at the softening of their business in the centre of the store, and they are responding with a variety of tactics, like attempts to add pizazz and flair to the products they sell in the centre of the store and making acquisitions that give them a better toehold on the perimeter.....