Shining Bright in the Golden State

A smart and steady approach to growth not only kept Save Mart in the game through periods of economic turbulence, it positioned the Modesto, Calif.-based chain as a leader in each community it serves. Combined, the chain has earned the title of Grocery Headquarters’ 2012 Independent Retailer of the Year.

It was clear when Save Mart opened its second store less than a year after the first one that company officials were laying a foundation for long-term growth in the land of opportunity.

What began as small family business has grown into a 233-store enterprise operating five different banners throughout central California and northern Nevada. According to chairman and CEO Bob Piccinini, it is about always being prepared for opportunity.

Size and opportunity aside, Save Mart has maintained the family values and open-door policy that was established when the first location opened in 1952. Employees at all levels are invited to share their opinions and concerns and each store’s merchandising and pricing strategies cater to the community it serves.

To be totally clear, Save Mart’s growth has mirrored the growth of California itself. A product of the Baby Boom generation coming of age in the post World War II era, Save Mart’s founders are very aware of the fact that the Golden State’s robust population and economic booms helped spur its own growth in sales and stores.

Yet being mindful of its roots and its commitment to its customers and employees has kept Save Mart strong through 60 years of economic ups and downs and made it a favorite among its shoppers. It is these reasons, among many others, that Grocery Headquarters has selected Save Mart as its 2012 Independent Retailer of the Year.

“I had a vision after my dad passed away in 1971 that if we were going to be in this industry long-term, then we had to have all of the same things that the big boys had, including self-distribution and trucking companies,” says Piccinini, who was 28 at the time of his dad’s passing. “I didn’t want to go to war with a .22 short rifle when the opponent had a tank. We needed the critical mass to be economically feasible and that required a continued growth pattern.”

Today, the company’s executive team views Save Mart as less of a supermarket chain than a conglomerate of independent stores with almost 18,000 full- and part-time employees. They feel fortunate to operate five different banners—Save Mart, S-Mart Foods, Lucky Supermarkets, Maxx Value Foods and FoodMaxx—providing the ability to target each community they enter with an appropriate format.

About 200 of the 233 units were acquired, while the remaining stores were built from the ground up. Each new store brings a new challenge to create a community-focused market.

In 2007, for example, Save Mart acquired 132 Albertsons stores in northern California and northern Nevada that were rebranded—those in the Bay area converted to Lucky Supermarkets and the remainder became Save Mart Supermarkets. “Overnight we went from being in three major marketing areas to seven,” says Steve Junqueiro, the chain’s president and chief operations officer, about the acquisition. “Neighborhood marketing is a necessity for us. Many would view our different banners as an obstacle but it is an opportunity to place our conventional banner and our price banner in the right location for the community. It has really helped us answer our shoppers’ needs, especially during troubling economies.”

Staying relevant

What it boils down to is relevancy; that is what is changing the industry, Junqueiro explains. “The recession has pushed customers to shop around for products, and at the same time, e-commerce has changed the way consumers view shopping. They are now very specialized about what they look for and how much they pay for it.

“This changed how we have to compete. Years ago consumers compared us only to other conventional markets, but now they compare us to every shopping experience they have, whether it be warehouse stores, chain/drugs stores, Hispanic-specialty stores or even online markets.”

Staying relevant guides Save Mart’s merchandising strategy. With $4.6 billion in annual sales, the stores stock a core offering, but it is wide at the base to allow them to fit both the low- and high-end store formats. Then there is figuring out where you belong in a marketplace that is flush with big and small competitors, ranging from Walmart and Target to Winco and Safeway, not to mention the specialty chains such as Whole Foods and the Golden State’s various famous mom and pop operations.

“We are trying to be a little bit of Winco, a little bit of Target and a little bit of Whole Foods, among others,” says Frank Capps, the chain’s executive vice president and chief sales officer. “Our overall goal is to make sure that when consumers come to our stores, they are going to find products or services that may draw them away from these other conventional operations.”

Private label plays a big role in Save Mart’s strategy, as well. Currently, the company distributes about a dozen private label brands with approximately 24% penetration. The economy has helped the private label brands grow, and Capps hopes that private label can eventually reach 30% penetration. The goal is to drive business with the three-tier private label program—value, national-brand equivalent and high-end—to build the categories, he explains, “but not at the expense of the brands.”

Having a mix of private label and national brands is important to creating relevancy and the team maintains a very positive relationship with their vendors. The approach is a partnership in which they must align their goals for mutual benefit, say Capps. “We understand that if we aim to grow at 3% but the vendor wants to grow at 6%, we have to align with them and grow at 6%.”

After the Albertsons acquisition, Save Mart officials hosted a supplier summit and spent several days with the vendors touring the stores and discussing their merchandising strategy. “We were doubling in size and we wanted to be recognized as a company of this size. We wanted their best people and their best deals, however, I promised them that we would support their business and do our part to earn it,” says Junqueiro.

The company cut third-party costs by creating its own distribution system early on. Actually, it was Piccinini’s first order of business when he took over his father’s executive position more than 30 years ago. He knew that to stay in the business long-term, he had to vertically integrate his distribution system.

“In the early ‘70s I went out to make a deal on a location and another store came along offering $1-per-foot more than I could afford,” he says. “They had more money in their bottom line because they weren’t paying third parties.”

From that moment on, Piccinini’s goal was to grow. The company’s current distribution channels include Yosemite Wholesale, a dry and packaged good warehouse servicing all the company’s stores; Save Mart Distribution Centers, servicing all of the company’s stores; SMART Refrigerated Transport, a trucking firm that transports dry groceries, frozen foods, ice and novelties to all of Save Mart’s stores and contracts service outside the company; and Super Store Industries (SSI), which Save Mart owns in partnership with one other retailer to purchase or produce products at the lowest possible cost without sacrificing quality. SSI produces and packages bottled beverages, cultured dairy products and frozen dairy products for several brands; it also owns and operates two Sunnyside Farms Dairy facilities.

Thriving on value

Cutting expenses ultimately leads to increased value in the store. Capps believes that the role price plays in consumers’ decisions has shifted; shoppers are looking for value, not just a bargain. “We have to make our invitation much hotter than it was before in order to drive customers into the store,” he says. “Points of differentiation will be what separates us from the pack. We have to create a strong value retail environment and the only way we are going to do that is by driving top line sales.”

What develops differentiation varies significantly across the store formats. FoodMaxx and Maxx Value, the company’s pilot format that incorporates a conventional store layout with an aggressive pricing structure, are geared towards a more price-conscious shopper.

Meanwhile Save Mart, S-Mart and Lucky Supermarkets are full-service grocery stores that differentiate themselves with additional services and product variety according to the neighborhood they service.

The long-list of services include in-store pharmacies and service counters for the deli, bakery, meat and seafood departments, among other specialized programs. One of the most recent additions is a Blue Shield of California retail location in the Fulton Street Lucky store in San Francisco. The partnership has benefited both companies in the short time since its opening in November (see sidebar). The Coinstar Automated Coffee, a fully automated fresh coffee grind/brew kiosk, is another popular addition. It debuted in the San Bruno and Redwood City stores in September, and complements the Redbox video rental service and a handful of other automated services.

Value-priced and relevant products and services are not the only thing Save Mart offers the surrounding community. Outside the stores’ doors, Save Mart has introduced two corporate programs that focus on the needs of children and their families. Save Mart CARES (Community, Arts, Recreation, Education and Sports) supports nonprofit charitable groups and programs in California’s Central Valley, including beautification projects, cultural events, classes, scholarships, sports and drug and alcohol awareness programs. The second initiative, Save Mart SHARES, is a card-based program designed to Support the Humanities, Arts, Recreation Education and Sports. Every time a cardholder uses their card, a designated school, church or nonprofit organization receives a donation equal to three percent of the cardholder’s purchase. Other charity organizations that Save Mart partners with include March of Dimes, Juvenile Diabetes Research Foundation, Muscular Dystrophy Association, City of Hope and Children’s Hospitals.

The company’s hallmark event, however, is the Toyota/Save Mart 350. Taking place in June at  Infineon Raceway in Sonoma, the annual NASCAR Spring Cup Series attracts nearly 110,000 spectators to raise money for the company’s charities and Save Mart CARES. The company has sponsored it since 1989 and it has been ranked as one of the top 10 annual NASCAR races by Maxim magazine, say Save Mart officials.

The event receives a lot of attention from suppliers and shoppers alike, resulting in more product movement during that window and more involvement from the suppliers that participate. The executive team believes 2011 signified their best execution of the race promotion. “It shows us that we are getting closer to excellence. We are not going to be perfect; but we can be excellent,” Junqueiro notes.

Striving for excellence

Excellence is what the Save Mart team strives for in every aspect of the business—and it is exactly what they get from their employees. Company officials describe the environment as a team ego—giving up your own agenda for the betterment of the team. “Often there is a separation between the merchandising and marketing departments, but in our company there is not. Working together creates a win-win-win situation for everyone involved—the vendors, the customers and us,” says Capps.

Contrary to many companies of this size, every employee has the chance to meet the executive team. Every year Piccinini, Junqueiro and Capps, along with others, travel to each store in between Thanksgiving and Christmas to wish the team a happy holiday season, thank them for their efforts and to present the President’s Awards (see sidebar). In addition, Junqueiro hosts team huddles with all employees annually providing an opportunity for them to share their thoughts and learn more about the strategy for the company. It is important to the company’s management that everyone has a voice—just like the family business Save Mart started 60 years ago.

The Save Mart employees are one of the company’s biggest advantages to staying relevant. Some of their most recent executive hires are young and on top of the industry’s trends and ideas. “We need to stay on the leading edge of technology to stay relevant. Baby Boomers definitely make up a large portion of our customer base, but that Generation X/Y demographic is growing and we need team members who will understand how to market to them,” says Capps. Information moves at a fast speed and the company is doing all it can to keep up, using every touchpoint feasible, including in-store communication, online and social media.

Looking forward

Between the company’s solid business strategies and the employees’ commitment, Save Mart is maintaining its footing on the road to growth. In the mind of the executives, however, there is still a long way to go. Capps and Junqueiro are very humble about their success, constantly looking forward to where they want to take the business. In order to continue to capture market share, the team has set their sights high: “Within five years, when you walk into one of our stores, you will know exactly what our strategy is and what customer we are after,” Capps says.

The team is consistently focused on establishing the brand in newer markets, not just through the store’s product offering but through its contribution to the community and relationship with its employees. And they are having fun doing it. “We’ve always strived to be the best and we’ve always played to win; it’s just part of our culture. And if you do that, you have fun,” Junqueiro says.

Capps agrees. “I look forward to coming to work every day as much as I did my very first day.” And that’s a long time for both of them. Capps began as a clerk in a Save Mart store 20 years ago, while Junqueiro also began as a clerk almost 40 years ago.

Save Mart’s plans are to continue to grow but for now Piccinini doesn’t see the company expanding too far from its current home. “One of my philosophies has always been that you grow like you blow up a balloon, from the middle. You don’t create islands. So if that holds true, we won’t be jumping into Oregon or Washington anytime soon,” he says.

Piccinini prides himself on the fact that Save Mart has acted financially conservative over the years and that strategy has done the chain well, positioning it for acquisitions when the time was ripe and the deal was good. “We stored up our dry powder so when the opportunity did arise, we were in the position to move on it,” he says.

When asked what the future holds, he responds, “I would probably be willing to do anything that makes good business sense. We will be opportunistic and if something raises its head, hopefully we’ll have enough dry powder to make it work.” 

Health first

Consumers are finding more than well-stocked shelves at Save Mart’s Lucky Supermarket on Fulton Street in the heart of San Francisco. With the recent addition of Blue Shield of California’s first retail location, shoppers are stopping in for health evaluations and coverage advice before stocking up on groceries.

Launched in November, the on-site location is the first of its kind for the San Francisco-based health insurance provider. Doug Biehn, vice president for corporate marketing at Blue Shield, says it is about offering an option to members who are dissatisfied with call centers and websites, and an option for non-members to receive health advice. The in-store health evaluations—only $45 for non-members; free for members—include a measurement of their blood pressure, total cholesterol, body mass index and blood-glucose levels, followed by an explanation and advice from a certified nurse. According to officials, more than 70% of visitors are not current Blue Shield members.

“It is about offering peace of mind,” says Biehn. “By providing patrons with an educated representative to help them understand their choices, how to control their costs and feel like they are getting quality care, we believe we are offering consumers peace of mind at the highest level.”

It was the high level of foot traffic in Lucky and Blue Shield’s dense inner-city client base that attracted the health plan to the urban grocery store location. That, combined with Save Mart’s focus on customer service to the local consumer, made it a decision easy for officials at both companies.

“It presented an opportunity to reach a large portion of our 80,000 San Francisco-based membership and attract new members passing by,” says Biehn. “There is empirical evidence that the grocery store is the number one place consumers think about their health and this store happens to have the highest level of foot traffic, including repeat traffic.”

The physical location was designed to contradict what Biehn calls the “typical bureaucratic and closed-off image of a health insurance company” with a contemporary, open and welcoming look. The result has welcomed hundreds of customers, and according to preliminary surveys, customers are getting “clear, complete and helpful answers,” he adds.
And that is without any marketing. “We wanted to make sure we were offering and delivering a compelling customer experience first. In January we added some wellness services to our offerings, including weight and stress management and healthy-aging for seniors, among others, in response to consumer request. Along with this we started doing some deliberate advertising,” says Biehn.

Both Save Mart and Blue Shield officials are pleased with the response so early in the game. It seems to be just what Lucky’s local customers want. And for Save Mart, that is what it is all about.

A Christmas tour story

The Christmas season brings excitement to Save Mart’s 233 store locations. It is not the arrival of Santa that the employees are anticipating, but that of Save Mart’s owner, Bob Piccinini, and other top-level executives. Visiting each of the company’s stores to wish employees “Happy Holidays” and present the President’s Awards is a tradition as old as Save Mart itself.

“It started when the company had two stores and my dad and uncle would get in the car and drive from one store, where their office was located, to the other store to wish everyone a Merry Christmas,” says Bob Piccinini, chairman and CEO, of the Modesto, Calif.-based company. Last year’s tour, which ended on Dec. 20 with visits to the two corporate headquarters, took six weeks to complete. “It’s a lot of work, but I can tell you, when it’s all said and done, it’s a very rewarding thing,” he says.

Frank Capps, executive vice president and chief sales officer, says it is just as rewarding for the executives to visit the store as it is for the employees. “We get to see the forward momentum we’ve achieved when we are in the stores. We can see that our message is getting out there and they believe in what we are doing.”

The tour isn’t the only time the executives meet with store employees. Steve Junqueiro, president and chief operations officer, hosts employee share meetings in every market area, what he calls, huddles. The intimate meetings, involving only 20 to 30 employees, provide the staff with a chance to voice their concerns and learn news about the company.

“I have always contended and have said in every huddle that no one job in this company is more important than another,” says Junqueiro. “We just do different things and have different responsibilities. It takes all of us to make this happen and once we align and work to the best of our abilities, we win.”

Junqueiro and Capps can vouch for the excitement the Christmas tour instills in the store teams first hand. Both started as clerks and remember the excitement learning about the Christmas tour months into what has become a long-term relationship with the company.

In the end, says Piccinini, the most critical point is being a team. “There isn’t a store I go into that a team member doesn’t shake my hand, violently, and say, ‘Thank you so much for my job and for what you do for all of us,’” he says. “My response? ‘It’s a two-way street. I can’t do what I do if you don’t do what you do.’”

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