Carving Out Midwestern Value
Conventional grocers face one more new threat with the arrival of Fresh Thyme Farmers Market, which unveiled its first store in April and is led by the former CEO of Sunflower Farmers Markets.
Fresh Thyme might represent a new concept for the Midwest, but the store's layout is old hat to CEO Chris Sherrell, who launched the company in September 2012 after 20 years in the grocery business, including a decade at Sunflower Farmers Markets and previous experience at Wild Oats Markets.
Fresh Thyme puts produce in the center of the store, with frozen foods, health and beauty and dry goods stocked along the perimeters, much the way Sunflower did.
"The core concept of this business is very similar [to Sunflower]," Sherrell says, describing the company's strategy as "healthy options at great prices." Sherrell is stressing the foodservice offerings at Fresh Thyme with a pizza kitchen, specialty sandwich options, a juice bar and a wide selection of organic produce. Perishable items will account for 40 percent to 50 percent of the company's sales, Sherrell said in exclusive interviews with Retail Leader. He is targeting close up sales of $15 million to $20 million annually.
Fresh Thyme also offers more than 400 bins of natural and organic bulk items and small batch locally roasted premium coffee beans, a butcher shop with more than a dozen types of sausage made in the store, a full salad bar and artisan bakery, and an expansive selection of wine and local craft beers.
Even with the enhancements, Sherrell acknowledges that Fresh Thyme resembles Sunflower. "Don't fix what's not broken," he says. "The concept is doing fabulous."
Fresh Thyme's executive team is comprised largely of transplants from Sunflower, who left the company following its merger with Sprouts Farmers Market in May 2012. Sprouts subsequently went public in August 2013. "They wanted to get their biggest competitor out of their way before they went public." They made the team an offer to sell Sunflower, he says.
Sherrell has brought to Fresh Thyme about 10 key personnel from Sunflower, including CFO Jim McCloskey; senior vice president Sage Horner; vice president and general counsel Fran Windsor; vice president of human resources Danielle Boyd; and six department directors.
"I brought the team back together, raised capital and put a business plan together," he says. Executives at Grand Rapids, Mich.-based Meijer Cos. have provided investment capital to Fresh Thyme. "We're very well financed," he says.
Targeting the Midwest
Rather than compete directly with Sprouts, which has locations in the Southwest, Sherrell saw opportunity in the Midwest, where the farmers market grocery concept has been scarce. The middle- to upper-income, well-educated demographics of the area also fit Fresh Thyme's target, and Sherrell determined the area would support a new entrant, particularly after Safeway shuttered the Dominick's banner.
The first Fresh Thyme store opened April 23 in a former Sports Authority location in Mount Prospect, a suburb of Chicago, and the company has four additional Chicago-area stores slated to open this year and next as well as four locations in Indiana and two in Ohio this year. It plans to open a total of 60 or more stores over the next five years and has announced 27 locations in Illinois, Michigan, Minnesota, Missouri, Ohio and Wisconsin. "There's enough geography and enough population [where] we can open 60 to 70 stores in a short period of time," Sherrell says.
While most items in the new 40,000-square-foot store with 21,000-square-feet of selling space are branded products, Fresh Thyme will be adding more house brand and local products, Sherrell says. "We'll start jumping into local produce. We'll carry as much local produce as we can," he says. Stocking local merchandise helps the company support local farmers, while also reducing the costs associated with shipping product from across the country.
In-store signage in the new location highlights local merchandise, such as Wisconsin Mammoth Cheddar Cheese made by Henning's in Kiel, Wis.
Fresh Thyme is joining a growing cadre of smaller-format markets that can thrive in strip malls in areas of dense population. (Fresh Thyme's typical prototype layout is about 30,000 square feet.) The smaller formats are able to coexist with stock-up stores such as Costco and Walmart, while attracting a middle-market consumer that doesn't typically shop at Whole Foods and other high-end fresh markets but does want to buy produce and local products, says Bruce Cohen, senior partner at management consulting firm Kurt Salmon in San Francisco. "No one wants to shop at a 150,000-square-foot store twice a week; you're overwhelmed," he says.
Reimagining the Shopping Trip
The new farmers market formats have emerged from a rethinking of the conventional store layout, which typically has produce and perishables on the perimeter, Cohen says. "That is a fundamental shift from 60 to 70 years of grocery retailing. It's the reimagining of a shopping trip that these new competitors have come into the market [with], and one of the reasons they are being so successful against the conventional retailer."
Consumers are gravitating to the new formats. "For a long time, consumers have been looking for affordable options in high-quality produce where there is visibility into where and how it's grown. That transparency is really driving this kind of heightened consumer awareness," Cohen says.
In the Midwest, despite competition from independent fruit markets, Milwaukee-based Roundy's has sized up the new dynamics of the grocery business and launched Mariano's to better compete with the new smaller format and fresh market entrants, Cohen says. "You have to pay attention to what's going to happen in three to five years," he says. "Does Mariano's take over Roundy's [conventional stores]? There's a lot that can go on in terms of the evolution of the marketplace."
Fresh Thyme is well positioned to compete, Sherrell says. With an emphasis on value, the company plans to increase the number of Fresh Thyme house brand products to about 2,000 in the next 12 to 18 months and will eventually stock 5,000 to 7,000 items under the Fresh Thyme label. "We will always be the best quality and the cheapest price in that category on our own label. We work very hard on the quality and putting the best price on it," he says. "Every piece of product that goes out here with the Fresh Thyme label, we hope someone sees it, someone goes back, talks about it, brags about it."
"We will always be the best quality and the cheapest price in that category on our own label.... Every piece of product that goes out here with the Fresh Thyme label, we hope someone sees it, someone goes back, talks about it, brags about it."
Fresh Thyme Farmers Market,
According to Sherrell's experience at Sunflower, he is expecting Fresh Thyme to appeal to the middle to upper-income segment of household demographics, but skirt direct competition with Whole Foods or Walmart. "It's interesting. This is a lifestyle. People come here to shop because they want to maintain and learn and continue to kind of master their eating habits and their dietary needs," he says. "Education is a huge part. They're interested in health and wellness."
While Trader Joe's might have a similar target audience, Sherrell isn't worried about that chain's recent expansion in the Midwest. "In my prior life, we shared a wall with Trader Joe's in some locations. I think we can coexist... The conventional space is the customer we're targeting."
A Passion for People
Sherrell is confident Fresh Thyme can win over consumers accustomed to shopping elsewhere with outstanding customer service. "One of the reasons I didn't join the combined company [Sprouts] is one of my passions is people," he says. "There's a very simple rule: If you take care of employees, employees are going to take care of the customer."
Sherrell became CEO at Sunflower after the company's founder Mike Gilliland ran into legal trouble. Sherrell hasn't forgotten when the news broke: "It was the scariest day of our life, and nothing really happened. He was not really involved in the business at that point," Sherrell says. "We certainly got comments on it, but basically our story was one person doesn't represent 3,000 team members' hard work and the quality of product we put out there."
At Fresh Thyme, Sherrell strives to hire "good and genuine people" who want to help people. "I always ask people, what comes first: customer service, sales, employee satisfaction? They always say customer service. "
But that in turn "always starts with employee satisfaction, which creates customer satisfaction, which creates sales, profit and bottom line [results]."
Starting a new chain with ambitions of growth presents a path of opportunity for new hires. "If you give that whole palate to an employee in today's age where a lot of companies aren't growing the way we are growing, in three to five years they can be a store manager," he says.
Sherrell relies on a four- to 12-week training program, as well as a focus on "great pay, a safe work environment and the opportunity to grow with the company." The closing of the Dominick's banner in the Chicago area in December allowed Fresh Thyme to pick up about 20 seasoned grocery workers for its first store.
Sherrell has a similar philosophy when working with suppliers. "We refer to them as partners, not suppliers. Along with our employees, we take a lot of pride in selecting the right partners," Sherrell says. "We treat them very well, and they treat us very well."
Fresh Thyme was able to draw on existing relationships to stock its new stores. "We did a great job for 10 years at Sunflower creating a lot of great relationships. We look forward to continuing down that path."
Developing the new banner also involved creating a new brand identity, including the Fresh Thyme name and a rustic atmosphere.
"It was really a collaborative effort from the leadership team that kind of started Fresh Thyme two years ago," Sherrell says. Now he has big plans for the chain. "We've got a very, very clear path. We've got a budget for progressive goals," he says. But he knows the challenges of the grocery industry. "The grocery business is one of the toughest markets out there," he says. "Anyone who is selling a gallon of milk is a competitor. Certainly someone selling an organic gallon of milk is a competitor."
Still, Sherrell is confident he has a winning formula. Sunflower grew from one store to 44 stores and more than 3,000 team members under Sherrell's leadership, and he sees even more opportunity with Fresh Thyme. "We build these stores for much less than a traditional natural or organic store would or even a conventional store would," he says, allowing the company to keep prices lower than conventional supermarkets while being more selective in the items it offers. "It's the model itself. I'd like to believe it's because I'm brilliant."