Andronico's Undergoes Second Adolescence

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Andronico's Undergoes Second Adolescence

By Pan Demetrakakes - 07/19/2016

Andronico's Community Markets is what CEO Suzy Monford calls "an 88-year-old teenager."

The chain of five grocery stores in the San Francisco Bay Area was founded in 1929 when Greek immigrant Frank Andronico opened a store on Solano Avenue in Berkeley. Andronicos still operates that location and despite the company's age it is undergoing growing pains in an intensely competitive market.

"We are existentially iconic to the San Francisco Bay Area," Monford says. "We are the original natural, artisanal grocer. We were local and artisanal before it was a thing, before it was hip, before it was cool."

That legacy wasn't enough to help Andronicos avoid financial difficulties, and in 2011 it filed bankruptcy. Shortly thereafter it was acquired by a private investment group, and then in April 2015 Monford joined as CEO. She was tasked with restoring growth and profitability; all key performance indicators were negative when she joined the company.

"As we were fighting for new customers every day, without current relevant marketing tactics, we were falling behind," she says. Gross margins were acceptable, but same-store sales were flat or negative, basket size was down, and so was the customer count—that last being, to Monford's mind, the most important KPI. "I have only one point of reference, and that's customer count—how many folks marched through my doors today versus yesterday?" she says. The KPIs have been showing improvement, Monford says: year-to-date same-store sales are up an average of 6 percent and customer count is up 3 percent at the stores, which average 22,000 sq. ft.

COMPETITION IN THE BAY

The biggest problem is that the Bay Area had become intensively competitive. Whole Foods opened a Berkeley store about four months before she joined Andronico's; other relatively new competition now includes Sprouts and New Seasons in the natural/artisanal niche, and Safeway and others among conventional grocers.

The Bay Area also has particularly demanding clientele, Monford says. "San Francisco, I've got to tell you, they want it all," she says. "Local, artisanal, no carbon footprint. They don't even want local, actually, they want hyper-local. They want to make sure it was made across the street and just brought next door, with no packaging at all, in somebody's bare hands. They want it all, but oh by the way, don't expect me to pay for it."

Bringing Andronico's back meant building on its long-standing assets and advantages by adding some new ones.

"Andronico's had, and has, exceptional DNA," Monford says. "What it needed was to be made relevant again today and to compete in a whole new way, and that's what we've done." Doing so required appealing to younger shoppers: "You've got to keep the customers you have. You don't want to fire them. But we've got to hire new customers, especially [because], literally, without any cheeky attitude here, our customers are dying off. We're an 88-year-old company. So how do we get new customers?"

Monford is trying to do that with a "massive reshaping" of Andronico's marketing and branding, building on what the franchise has always stood for. She brought in Lisa Smith, a product development chef with whom she had worked at Central Market, the upscale banner of Texas chain H-E-B, where she had been director of foodservice. Smith was now working in the United Kingdom, but she agreed to come over and help for a couple of weeks of intensive development of recipes for new in-store prepared meals. Some of the top sellers include sumac pomegranate salmon, moroccan lamb, chimichurri beef, and chickpea and spinach curry. In addition, a new store department sign package was developed by CakeWalk, a San Francisco-based design company. It unveiled in the stores in Los Altos and San Anselmo, and will eventually be rolled out to the remaining stores.

HEALTHY STRATEGY

One of the most important ways to expand Andronico's reach, especially among younger consumers, has been building on the brand's association with health and fitness. Digital initiatives for fitness have been something of a constant throughout Monford's career. When she was president of Cheers Inc., a Texas-based restaurant company, she created a corporate fitness program called FitBank, whereby employees could earn bonuses or days off with workouts that were recorded in an app. When she worked in Australia for leading grocer Woolworths, she expanded this concept into FitShop, a marketing initiative that included a way for customers to get discounts by logging their workouts.

Now the concept has come to Andronico's. Monford introduced FitMarket as the American incarnation of FitStop. FitMarket is a way to reach consumers with various healthy living resources, including recipes, "food tips" and deals targeted to healthy foods. "I worked to synthesize a clear voice, a clear message, to all of our marketing and point of sale," she says. FitMarket includes a FitBank for Andronico's shoppers, which works in conjunction with SweatWorks, a GPS-based app that guides users to nearby gyms and lets them log their workouts. FitMarket also is the brand for Andronico's prepared meals, which is one of Andronico's limited ventures into private label (the others are bulk foods/nuts and seafood bag-and-bake packages).

Another digital initiative came in conjunction with Instacart, the delivery service. Andronico's started partnering with Instacart in August 2015, and Instacart now delivers groceries from all five Andronico's stores. Monford credits Instacart with spreading Andronico's reach throughout the Bay Area.

"We used to sell to customers within a three-mile radius," she says. "We're now selling to customers inside the city and now all over the peninsula." In addition, the Andronico's store in San Anselmo is the staging ground for an Instacart pilot program in which Andronico's employees, instead of Instacart workers, pick the order, and Instacart's role is strictly limited to delivery.

COMPLEMENTARY INITIATIVES

Monford's long term goal is to incorporate digital initiatives with brick-and-mortar operations in a way that complements both.

Suzy Monford was tasked with reinvigorating Andronico's, a five-store chain in the San Francisco Bay Area.

"Business is tech, tech is business," she says. "Yes, you've got to be a brilliant brick-and-mortar merchant every day—dance with the one that brung ya, know what the hell you're doing and do it very well, do it better than anybody else—but [also] offer convenience to folks where they need it."

Establishing new Andronico's stores was one of Monford's earliest priorities: "When I was approached about Andronico's, I said right, how can I leverage five stores and make them into six and seven and ten?" She says the ideal scenario would be acquiring another local chain, "but those opportunities seldom arise."

Instead, Andronico's has been looking at shuttered grocery stores. It hasn't gone smoothly. Whole Foods beat them to a closed Fresh & Easy in East Bay, and they had their eye on a former Fresh Market in Palo Alto but couldn't come to terms. One of the problems is that some of their trade areas are saturated with stores: "In a way, that's terrific, you want to jump on that momentum and take advantage of it, but it's making it even more competitive looking for real estate." But, she says, they're still "out looking for the right store sites in areas that appreciate and need an Andronico's."

Her biggest ongoing priority, Monford says, is trying to reinvigorate Andronico's operations by inspiring its people.

"Andronico's always had a reputation for best in fresh and variety, and we just redoubled our efforts on fresh and variety and customer service," she says. "We began to innovate. Things don't happen overnight, but we worked to invigorate the company and all of our folks with a new sense of energy and purpose, and began to turn things."