From The Spring 2004 Issue of Natural Grocery Buyer

Bashas’ Does More With Store-Within-a-Store

Store demographics determine natural format for Arizona chain

Nancy Nachman-Hunt

Observers agree that to survive in the Wal-Mart era, nimbleness—the ability to quickly capitalize on trends—will save the day for smaller, independent supermarket chains.

Deep in the Southwest, one family-owned supermarket chain could act as the poster child for nimbleness. Bashas’, a 154-store chain based in suburban Phoenix, with additional operations in New Mexico and California, has grown by responding quickly to new market realities.

For example, in 1993 Bashas’ acquired Food City, a chain that caters primarily to Hispanic shoppers. Food City has grown to 57 stores and is the highest-traffic format in the Bashas’ chain, says spokeswoman Alison Bendler. Also in 1993, Bashas’ bought AJ’s Fine Foods, an upscale specialty-foods format that has grown to nine stores. Bashas’ was the first supermarket chain to open a store on Arizona’s Navajo reservation. Now it operates 10 Dine Market stores on native lands.

Another trend to which Bashas’ has paid close attention is the one toward natural and organic foods. Healthy living, especially, is a trend that fits well with Chairman Eddie Basha’s philosophy. “He likes to do things that are good for people,” says Paul Howland, buyer-merchandiser for Bashas’ Natural Choice departments.

Toward that end, Bashas’ Healthstyles program offers nutritional tours of its supermarkets; on-site blood, hearing and vision testing, and flu shots; and visits by mobile mammography units. The chain also features an increasing number of natural and organic foods in what Howland calls a relatively immature market for such offerings. “Phoenix is a market area of 3 million people, and there are only two Whole Foods Markets here,” he says.

That lack of penetration makes the Phoenix market ripe for the taking. The category, according to Howland, is growing there just as rapidly as it is in most other areas of the country. “Last year, same-store sales were in the double digits for natural and organic,” he says.

Bashas’ started stocking natural and organic foods about 10 years ago, mostly integrating them into the conventional mix. About five years ago, the chain switched tactics and made a commitment to merchandise natural products as a store-within-a-store. Forty-two of Bashas’ 77 namesake stores have store-within-a-store Natural Choice sections now, and the objective is to take the concept to more stores over time.

Organic produce is the only natural category that isn’t incorporated into the Natural Choice department. At Bashas’ it remains in the conventional produce section.

The move away from integration has to do mostly with socioeconomics. Bashas’ namesake markets cater to a wide range of consumers. Since shoppers with limited discretionary income generally base buying decisions on price, Howland says, natural products tend to sell poorly if they are integrated into the conventional mix.

“It’s our belief that integration only works in stores that appeal to a high socioeconomic demographic,” Howland says. “It’s a gut feel, but it’s been proven out by sales.”

That said, Bashas’ does integrate a select few natural and organic products. “We do a hybrid thing called Reaching Out,” Howland says. The program examines one natural category at a time and integrates the best seller in that category. So far Bashas’ has integrated Horizon Organic milk and Silk soy beverage into the conventional dairy case and Kashi dry cereal into the conventional cereal aisle. These integrated items also maintain their space in the Natural Choice section, however, so shoppers can find them in either place.

Howland says sales of integrated items increase because the traffic through the conventional section of the store is greater. The key is to introduce them to consumers in the Natural Choice section first. “We had a natural salad dressing product on the conventional side of the store because the management of that company wanted it there, and it ended up getting discontinued. We switched it to the Natural Choice section, and it’s doing quite well. To me, you need to prove yourself first and then move over,” Howland says.

Bashas’ Natural Choice departments are about 1,400 square feet and stock all categories, from groceries and refrigerated items to supplements and health and beauty aids. Books and brochures about healthy living also can be found within the section.

The departments have a distinct look that separates them from the rest of the store, Howland says. “All our product is stocked on 54-inch lowboy gondolas, and many of the sections have wood-grain-style flooring.” The signage is different. So is the lighting; Natural Choice departments incorporate spotlights, Howland says. Tag rail tape in the section is, not surprisingly, green.

The department also trains its staff more intensely than other personnel. “Focus groups have told us that people want information [about natural and organic foods],” Howland says. Last year, for example, the Natural Choice department staff went through at least 10 trainings, says Howland. Staff who work in the department wear different-colored shirts from the rest of the Bashas’ store staff.

Whether they are located in a store-within-a-store or in the conventional aisles, Howland says, some naturals products aren’t going to sell particularly well in conventional stores. The price difference is too large to overcome between the natural and conventional versions of products like canned tuna and jarred pasta sauce, largely because conventional category managers promote these items by discounting. “For natural to sell [in conventional supermarkets], it’s got to be within arm’s reach,” Howland says. “As soon as you leave arm’s reach and go to shouting distance, you start running into issues.”

The lesson here, he says, is that while natural and organic will, for the foreseeable future, likely be the fastest-growing category in food, don’t expect it to be one of the biggest departments in a conventional supermarket. “Natural foods will always be a niche,” he says. And clearly one that Bashas’ will continue to successfully capitalize upon.

Nancy Nachman-Hunt is a Boulder, Colo.-based free-lance writer and editor.