Setting a new natural standard

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Setting a new natural standard

By Mike Troy - 06/12/2018
The exterior of the Sacramento, Calif.-based food retailer’s new Market 5-ONE-5 store, a small format focused on affordable natural and organic products and prepared foods.

Raising the bar in the natural and organic retailing world is not an easy task. There are many good specialists beginning with the obvious such as Whole Foods, Sprouts, Natural Grocers, Earth Fare and Fresh Thyme Farmers Market. However, Keith Knopf, President of Sacramento, Calif.-based Raley’s Family of Fine Stores, contends his company has surpassed the competition with a new format called Market 5-ONE-5. The concept is designed to build on the Raley’s mission of infusing life with health and happiness by changing the way people eat one plate at a time.

“That purpose statement is how we are guiding the transformation of the existing Raley’s business,” Knopf said. “Market 5-ONE-5 is the full, bright expression of that purpose. We believe it is like nothing else out there.”

The 11,000-sq.-ft. store on the edge of downtown Sacramento may not appear special at first glance, but Market 5-ONE-5 derives its uniqueness from a merchandising philosophy, senior leadership commitment and set of operating principles underpinning a cryptic name that instantly begs the question what does “5-ONE-5 mean?”

The first five in the name refers to the five senses, ONE is an acronym for organic, nutrition and education and the second five refers to the five essential building blocks of nutrition. The name will take time to resonate with shoppers, but that is okay with Raley’s because even though it wasn’t looking for a catchy name it found one anyway with it alphanumeric approach.

“Market 5-ONE-5, and what it stands for, has been a vision of ours for a long time,” said Raley’s owner and CEO Michael Teel. “Its purpose is to offer our community access to fresh, nutritious and affordable food. Its mission is to help people live healthy, vital lives by taking the guesswork out of understanding nutrition.”

Market 5-ONE-5 is as much a mission statement as it is a banner for a new concept and that too is by design, according to Knopf who believes the name provides clear guardrails toward execution of the value proposition.

“Market 5-ONE-5 is about conviction to a core set of principles. We don’t stock products we don’t believe in, so customers can trust everything on the shelves,” Knopf said. “Our team members know exactly where our products come from, what is in them, and how they were produced.”

The store was developed specifically to meet the needs of people who are overwhelmed trying to decipher food labels and translate ingredient lists. As a result, shelves are stocked with items that meet the highest standards of health and nutrition, are minimally processed, organic and sustainably sourced and free of unrecognizable ingredients not found in nature.

The store’s size and emphasis on fresh and prepared food means the number of center store items (7,000 to 8,000) is far less than found in a typical 50,000-sq.-ft. Raley’s which offers about 27,000 items. In addition, there is minimal overlap of center store items.

Beyond the center store, Market 5-ONE-5 offers in-store eating and socializing, including wine by the glass; beer and kombucha on tap; a coffee, tea and juice bar; and space for indoor and outdoor dining. The store also offers seasonally-prepared cuisine for in-store dining and delivery to local businesses. And one of the best things about being located in Sacramento is that Raley’s and Market 5-ONE-5 are able to offer the freshest produce due to their proximity to California’s prime growing regions. Should shoppers need help, the team members at Market 5-ONE-5 are billed as true food experts committed to providing exceptional service. They include chefs, foodies, urban farmers, nutritionists and a registered dietitian.

The formula is a new one for Raley’s and Knopf concedes the company has a test and learn period ahead of it. However, he is quick to add, “it is our goal to have somewhere between 30 and 40 stores in the next several years.”

Getting to Great

The opening of Market 5-ONE-5 in May 2018 was the culmination of a two-year journey that began shortly after Raley’s President Michael Teel was named CEO of the family owned company in May 2015. Just a few months earlier, Raley’s discontinued the sale of tobacco products as a precursor to a series of moves that would cement the company status as an innovator in the nature and organic world committed to helping shoppers make more informed and better food choices.

One key to executing that strategy was to recruit senior executives from outside the food retailing industry to complement Teel’s vision for Raley’s evolving direction. A month after he was named CEO, Teel hired Knopf as COO. It was an interesting choice considering Knopf was a former Kohl’s executive who had spent the bulk of his retail career with department stores and apparel retailers such as the former May company and Limited Brand’s Victoria’s Secret division. The company made another non-traditional hire in early 2016 when Deirdre Zimmeran joined as Senior Vice President of Marketing. She too had spent most of her retail career with apparel and specialty retailers. Soon after Zimmerman joined Raley’s, Knopf was given added responsibilities as President.

As the development for Market 5-ONE-5 was getting underway, Raley’s was making other moves consistent with the vision developed under Teel’s leadership to infuse life with health and happiness by changing the way people eat one plate at a time. The company started offering free fruit for kids to snack on when they came to stores and parents could also opt for a temptation free checkout experience by using a lane stocked with better-for-you items.

In one of the boldest moves, Raley’s introduced its own “Shelf Guide,” system for helping shoppers identify products with attributes such as minimally processed, nutrient dense, gluten free, non-GMO, organic, vegan, kosher and no added sugar. Such product attributes are increasingly important to shoppers so Raley’s leadership in conjunction with Label Insight undertook the massive science-based initiative to create a Shelf Guide solution touted as, “like having an expert with you every time you shop.”

While these customer facing initiatives were hitting the market, behind the scenes Raley’s had tasked one of its top district managers, Levi Wingo, to lead development of a new format that would reimagine what a natural and organic food retailing concept could be and potentially serve as a new growth vehicle for the regional supermarket chain. Wingo was pulled from his day-to-day responsibilities stores to focus exclusively on a new concept, which didn’t yet have a name.

“Levis is a unique and agile thinker so it was fun to basically turn him loose. We wanted to unleash pure innovation and not be anchored by incremental thinking,” Knopf said.

“Mike definitely encouraged thinking on the fringe,” Wingo said of Raley’s owner and CEO Michael Teel. “Market 5-ONE-5 is a completely health centric version of grocery. A highly curated assortment focused on the fresh and perishable areas with a high concentration of prepared foods that are better for you. If you want to eat healthy and live in Sacramento this is the place to be. Our products are unadulterated. You don’t have to look at anything and wonder what is in it.”

Overcoming Obstacles

Developing a new retail format is always a challenging process but it was made even more so by Raley’s choice of real estate. The company opted for a building adjacent to historic area of downtown Sacramento that originally served as a tire warehouse and then a carpet warehouse.

“I grew up coming to the building because my dad was an upholsterer,” Wingo said.

A rail line running in front of the building made it easy to offload tires and carpet to an elevated loading dock. The structure also had an elevated floor which 100 years ago may have simplified the manual process of unloading heavy and bulky materials but meant the space was ill-suited for life as a retail store. Converting the space to a shopper friendly food retail operation involved the removal of the existing six inch concrete floor, excavating four feet of dirt to get down to street level and then pouring a new slab.

The building’s warehouse origins also meant insulation had to be added so the space could work as a food retail store. And the arched wooden trusses supporting the roof, well they were beautiful and lend an earthy feel to the space, but bringing the building up to code meant adding four large steel I-beams for structural support. From an operational standpoint, there is no loading dock at the rear of the building so deliveries come in through the same front entrance that shoppers use.

“It does add to the theater of an urban grocery concept,” Wingo said of the process to receive daily deliveries of merchandise.

Raley’s could have taken a simpler path to develop Market 5-ONE-% in an expanding suburb, but by shunning the easy course the company stayed true to one of its key objectives.

“We want people from all walks of life to have access to the quality and healthy food we provide. It is why in part we picked an inner-city location. We don’t want to be elitist. This is about inclusion,” Knopf said. “We have priced it so it is approachable and affordable which means we are going to accept lower margins.”

The location does have many redeeming qualities. For starters the location at 915 R Street means the store and its food service and catering capabilities are within roughly 100,000 employees. Many of the state’s government office buildings and the Capital and the headquarters of the California Public Employees Retirement System (CalPERS) are within walking distance. The store offers seating for 60 as well as free delivery of food prepared, picked and delivered by Market 5-ONE-5 employees.

Raley’s newest concept must still prove itself, but if successful Market 5-ONE-5 will help the regional chain grow at an even faster pace. The operator of 129 stores under banners such as Raley’s, Bel Air Markets, Nob Hill Foods and Food Source has seven stores under design and construction and in June re-opened six recently acquired stores. RL