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THE SWEET LIFE

Florida supermarket chain goes upscale with new identity

By Joel Groover

The questions on a job application for Sweetbay, a supermarket chain launched in 2004, are unusual enough that some would-be employees simply drop the pen and scurry out of the store. They expect to fill out their names, addresses, social security numbers and past positions, not to be grilled about their relationship with food.

“The second page is all food-oriented questions,” said Steve Smith, vice president of merchandising at the Tampa, Fla.–based chain. “ ‘What is your favorite meal?’ ‘What’s in your fridge?’ ‘Describe a great food experience’ — that kind of thing. Lots of people read that and put the application down.”

That’s fine with Sweetbay. The whole idea of the exercise is to find employees who would be happy to chat up a customer about the merits of fresh-baked Cuban bread, say, or the heavenly taste of a four-layer strawberry torte. Everything about the brand — its exotic name and flowery logo, its emphasis on gourmet signature items and ethnic cuisines, its 800-SKU (stands for stock-keeping unit) produce departments and open-ice displays of locally caught seafood — is meant to convey passion for food.

A shopper strolling through the Nature’s Place organic foods section at Sweetbay’s flagship in Seminole, Fla., might be surprised to learn that Sweetbay is the latest iteration of the chain that began as Big Barn in 1947 and adopted the equally prosaic Kash n’ Karry banner in 1962. Since the Seminole flagship opened in November 2004, Sweetbay Supermarket (owned by Delhaize America, the U.S. division of Brussels, Belgium–based Delhaize Group) has been in the midst of a major push to transform its lagging Kash n’ Karry stores into the Sweetbay concept. The company will convert 42 stores this year and has plans to be operating at least 109 new or converted Sweetbay stores by the end of 2007, mostly in the Greater Tampa Bay area. “There will be no Kash n’ Karry stores this time next year,” said Smith.

Observers give the effort high marks, both for execution and for the cleverness of its approach. The strategy is to focus on fresh and often locally produced food as a niche in a market dominated by Wal-Mart, with its legendary reputation for unbeatable prices, and Publix, which enjoys strong customer loyalty across the Southeast. (In Florida Publix operates 648 stores, and Wal-Mart sells groceries in 12 neighborhood markets and 141 Supercenters.)

“Sweetbay has a great concept and their business plan appears to be working well,” said Michelle Seifert, a retail associate at the Tampa office of Grubb & Ellis who regularly shops at her neighborhood Sweetbay, the very store she avoided when its sign bore the aqua-colored Kash n’ Karry logo. “They needed to do something to remain competitive, and from what I understand, sales have increased by about 40 percent.”

Sweetbay, a private company, declines to provide sales figures. Its parent company’s U.S. operations saw comparable-store sales rise from 2.5 percent to 3 percent for the second quarter. “Customers continued to react positively to the Sweetbay brand, as reflected in major sales uplifts after conversion,” Delhaize Group reported. “Non-converted Kash n’ Karry stores suffered a negative sales trend.”

The transformation of Kash n’ Karry is in some ways a textbook example of a retail rebranding effort. Extensive market research and consumer polling shaped the new name, look and product focus. Nonetheless, the sheer extent of the top-to-bottom makeover also makes it unusual. “No other chain has ever gone through such a metamorphosis,” said Seth B. Layton, Kimco Realty Corp.’s executive vice president for the Florida region.

Delhaize America, which operates some 1,500 stores in 16 states under the Food Lion, Hannaford Bros., Harveys and Kash n’ Karry/Sweetbay banners, bought Kash n’ Karry in 2000. Given Florida’s explosive growth (according to the U.S. Census Bureau, the state population grew 23.5 percent between 1990 and 2000 and is now about 17.8 million), Delhaize naturally was bullish on Florida. But management grew dubious about Kash n’ Karry’s long-term prospects. “Through the 1980s and ’90s, Kash n’ Karry went through one bankruptcy, one leveraged buyout and several different owners,” Smith said. “It had lost its way as to what its overall consumer strategy was and what it meant to customers.”

In 2003 Delhaize sent Shelley Broader, then the senior vice president in charge of business strategy at Scarborough, Maine–based Hannaford Bros., to take the helm at Kash n’ Karry. In an earlier role as Hannaford’s vice president of perishable merchandising, Broader had helped the chain build a reputation for high-quality food. She thought a similar approach might reinvigorate Kash n’ Karry and hired a management team to tackle the challenge. The turnaround, however, would need to go well beyond a new ad campaign or a logo redesign. “There was a muddy middle where Winn-Dixie, Albertsons and Kash n’ Karry all sat, and where they all had relatively indistinguishable brand positions,” Smith said. “An extraordinary measure was needed.”

The effort, jokingly dubbed the Acme Project in the beginning, included finding just the right name for the rebooted chain. The initial list contained some 2,000 possibilities, according to Smith. During the process of winnowing that list down to 19 contenders, one name, derived from the local sweetbay magnolia tree, emerged as the unequivocal front-runner. “Sweetbay rose to the top very clearly,” Smith said. “From a consumer-testing perspective, it was far and away number one, with incredible likability and persuasive ability.”

The name hints of aromatic bay leaves, tempting confections and a slow-growing tree synonymous with sleepy Southern plantations. Sweetbay is not an upscale grocer in the manner of Fresh Market or Whole Foods, however, partly because the need to convert Kash n’ Karry stores in a variety of markets has made it impossible for the company to cherry-pick a single target demographic. Instead, it tailors its merchandising, marketing, hiring and community relations to fit the needs of different demographic groups in the markets it serves, says Smith. Its fresh, local and ethnic product offerings, meanwhile, appeal to food aficionados of all stripes. “There is a psychographic around food that crosses all demographic cuts,” Smith said. “There are lots of ethnicities and income levels where a Sunday night dinner with a large extended family is the most important meal of the week.”

This approach may make Sweetbay a good fit for lifestyle-focused baby boomers with varying levels of disposable income, precisely the kind of consumers who are now moving into Florida’s fast-growing residential communities for seniors. An example is The Villages, which spans parts of central Florida’s Lake, Sumter and Marion counties. According to the University of Florida’s Center for Real Estate Studies, the 20,256-acre, master-planned community is now home to some 61,000 residents and may house more than 100,000 by 2010. In October Sweetbay signed a lease to anchor one of two town centers being built as part of the property’s 2 million-square-foot retail component, says John Crossman, managing director of Crossman & Co., the Orlando, Fla.–based commercial real estate firm that is handling the leasing. “We’re very excited about how Sweetbay matches up with our consumer,” he said. “It brings a new style of service … and our growth is so strong that we have room for multiple grocers.”

Many of those residents may load up on nonperishable staples offered at cut rates at The Village’s Wal-Mart Supercenter, which is slated to open in 2007. On the way home, they might also stop at Sweetbay to pick up some locally grown produce, fresh seafood or a prepared meal. “The days of one size fits all, where you bought all of your groceries at one grocery store, are really past us,” said Jim Hertel, a food industry specialist at Willard Bishop, a Barrington, Ill.–based retail consulting firm. Fresh-format strategies like Sweetbay’s smartly take advantage of this reality by focusing on perimeter departments that drive customer loyalty, Hertel says.

In the near term, Sweetbay plans to home in on retiring the Kash n’ Karry brand while periodically reappraising and improving its existing Sweetbay stores. It has no immediate plans to expand outside Florida.

The chain certainly has its cheerleaders. “My sense is, they will succeed,” said Kevin Coupe, founder of the retail news Web site MorningNewsBeat.com and a close observer of the chain. “I think so much of management. Delhaize America is a really terrific company, and they’ve got some of the smartest people as their CEOs.”

And yet, Lakeland, Fla.–based Publix, which also specializes in fresh-format perimeter departments, clearly reigns supreme in the Sunshine State. Should Sweetbay emerge as a real threat, Publix might start gunning for the upstart by ramping up its presence in Sweetbay’s key markets, analysts say. For now, however, an unusual new dish is spicing up Florida’s largely bland grocery store menu.