By CP Staff
By Olivia LaVecchia
By Chris Parker
By Jesse Marx
By John Baichtal
By Olivia LaVecchia
By Jesse Marx
By Olivia LaVecchia
Twin Cities residents have a cornucopia of grocery shopping options. There's SuperTarget for the suburban three-car family; Whole Foods for elite urbanistas; Byerly's for wealthy gray-hairs; Lunds for urban singles; Rainbow and Cub for the minivan-and-lunchbox set; Kowalski's for people who mix and match all of the above; and SuperValu for those unwashed enough to care about price.
But it's no longer sufficient to just eat your vegetables; now they have to be organic. Not Wal-Mart organic, either. Real organic, grown by hippies who have thought deeply about the relationships of the Hopi to a particular strain of corn. And delivered to market in a way that consumed no fossil fuels and created no toxic byproducts.
The weekly shopping run has become inextricably bound up with the modern shopper's identity. The choice is about money, certainly, but it's also about tribe. The store tells you who you are—and just as important—who you are not.
When Don Byerly opened his fifth store in 1980, people treated it like a curio, going there to gawk, not to buy. The Midwest was still the land of cube steaks and mashed potatoes (with cream and without peels), and the economy was decidedly lackluster. But while every other supermarket of the era leaned heavily on price, the St. Louis Park store was a study in opulence.
From the entry, shoppers gazed at an enormous chandelier dangling over rows upon rows of freezers. The aisles were carpeted so that footfalls made but a whisper. In an oceanic tank, huge lobsters clambered over one another. There was a gift shop selling crystal decanters, a sit-down restaurant, and an adjoining wine shop. At the cash registers, clerks unloaded customers' carts, then the bags were whisked away via an underground conveyor belt. Patrons drove into a bay on the north side of the store where a porter loaded the groceries into the car.
Don Byerly's timing and instincts were uncanny; the grocery industry was on the cusp of a revolution. The supermarket as institution was then 50 years old. Gone were the neighborhood grocer, the butcher, and the milkman. In their place were supermarket chains, differentiated not by geography but by demographic.
If it's hard to remember the days when coffee came only in cans, consider that Byerly's much-touted chandelier hung over tidy cartons of Häagen-Dazs, then a novelty. The first of the so-called "super-premium" ice creams to be marketed nationwide, Häagen-Dazs had just arrived in Minnesota, where the local population was eager to believe it was imported from Scandinavia, as the packaging implied, rather than being made by a Polish man in New Jersey.
The famous chandeliers were recently replaced. The new ones are round, shallow bowls of imitation alabaster. What was once elegant has become excessive. The cheese display would fill a two-car garage. There are tubes of fresh lemongrass from Australia minced into a paste. In the glass fishmonger's case are four kinds of crab, eight kinds of shrimp, and a kaleidoscopic assortment of finfish. The cooking classes haven't completely disappeared, but now they are taught by "FoodE experts"—a fancy name for the managers of various departments. For $10, student shoppers learn about locally made sheep cheese and the merits of bison steak.
"With tangible luxuries no longer atop the pyramid, intangibles like service and experiences now dominate," the Food Marketing Institute noted in a recent report on industry trends. "The mainstreaming of affluence means big opportunities ahead."
Mackay didn't make it long as a hippie, however, quickly abandoning the communitarian ethos in favor of a New Age blend of libertarianism and capitalism. Mackay's blog gives props to Adam Smith, Ayn Rand, and Milton Friedman for helping him see the light. And see it he did: Whole Foods' revenues grew 19 percent in fiscal year 2006, to $5.6 billion.
Stepping into a Whole Foods feels like entering a temple of sumptuous purity. Huge signs explain the company's commitment not to sell foods containing artificial preservatives, colors, flavors, sweeteners, and hydrogenated fats. Other advertisements offer mini-profiles of the artisans who grew the mushrooms or cultured the cheese. Customers are invited to sample imported, exotic salts.
Whole Foods controls its image by controlling its inventory. It's as if one dented orange box of Gain laundry detergent would cause the entire artifice to topple. Instead of Pillsbury and Minute Maid, the lower-end items on the shelves are econo brands, known in the trade as "private labels." Whole Foods' "Whole Paycheck" nickname notwithstanding, these are reasonably priced and targeted at the aspirational segment of the middle class.
But as it turns out, the signs in Whole Foods don't tell the whole story. Many of the organic products on the store's blond wooden shelves are in fact produced by big agribusiness.
In his book The Omnivore's Dilemma: A Natural History of Four Meals, Michael Pollan traced the sources of four very different meals. One, consumed in a car with his son, was from McDonald's. Another consisted of a chicken he'd seen butchered by the small farmer who raised it, and another of a roast cut from a boar Pollan himself had shot.
But the meal that made headlines was from Whole Foods, where Pollan dropped $6 on organic produce. "My jet-setting Argentine asparagus tasted like damp cardboard," he wrote. "After the first spear or two no one touched it." Pollan went on to question whether flying in off-season produce was really true to the ecologically pure aesthetic Whole Foods espouses.
Mackay quickly responded in an open letter he posted to his blog. (He also sent Pollan a $25 gift card to make up for the asparagus.) Pollan wrote back, and following a few weeks of highly publicized debate, Whole Foods announced a number of changes. Chief among them: individual Whole Foods stores will buy more locally produced goods.
While it's a step in the right direction, Pollan says, Whole Foods has a ways to go before its reality lives up to its rhetoric.
"As I take my measure of these guys, I think there is some conviction, but also a good business reason to go in this direction," he says. "Their whole business model is predicated on getting people to spend a lot of money on food because of the notion that it's special."
If Whole Foods is the runaway success story at the high end of the market, Wal-Mart is the trendsetter for everyone else. It's the largest food retailer in the country, with sales at its 1,900 stores topping $155 billion. The second-largest, Kroger, has some 3,300 stores and sales of $57 billion. Following the acquisition last year of Albertson's, Twin Cities-based SuperValu became the third-largest supermarket chain in the nation, with 2,500 stores and $44 billion in revenue annually.
Virtually all retailers now sell food, but the top five food retailers own about a third of the U.S. market. Theoretically, the success of mega-grocers should have made it even easier for consumers to get what they wanted. But Ben Senauer, a professor of applied economics at the University of Minnesota and co-director of its Food Industry Center, discovered the opposite when he polled price-conscious women.
"I was shocked by how burned they felt about the whole thing, how budget-conscious they had to be, how much they disliked buying and preparing food," says Senauer.
Small wonder. The middle-class family's weekend trip to Cub Foods is an exercise in frustration. Despite the fact that the stores are cavernous, they offer surprisingly little in the way of variety. And while it's true that stores stock products that sell, they also have an array of incentives to sell goods popular with the suppliers—consumers be damned.
Grocery store shelves are quite possibly the most valuable real estate in the country. According to the Food Marketing Institute, there are at least 100,000 products available in the United States today, but a conventional supermarket carries about 15,000 items, and a superstore some 50,000. Thousands of new products are introduced each year, and up to 80 percent fail, the think tank reports.
Want to woo the public with a pizza with new toppings? A larger vat of fabric softener? The grocer will have to enter the SKU or "stock keeping unit" into his computers and evict a product that's presumably selling. And if the experiment fails, he'll have to do it all again in reverse.
So if a food company wants to bring something new to market, it must pay for its shelf space, a premium called a "slotting fee." The fees, which have only been in existence for the last 25 years, can range from a few hundred dollars for space in a single market to tens of thousands per store for frontage in a mega-chain like Target. Sometimes it's paid in cash, other times as a discount on the wholesale cost.
This ante isn't the last time the manufacturer is asked to chip in. There are fees to secure a prime position on the shelves, and ongoing payments referred to in the industry as "pay-to-stay." No one knows how much is spent on the fees, but Akshay Rao, professor of marketing and logistics management at the University of Minnesota's Carlson School of Management, says the most believable figure he's heard is $19 billion a year—three times the revenue generated by Hollywood.
A large producer can take advantage of the fee structure to keep its competitors out. To accomplish this, the company will offer a constant stream of variations to crowd out other products. A manufacturer of yogurt will offer not just vanilla, but low-fat vanilla, fat-free vanilla, French vanilla, and enough vanilla crèmes, custards, and swirls to fill the Metrodome.
"I have an incentive to keep introducing new products to get more and more shelf space," says Rao. "I'm expanding choices, but within my own umbrella."
Officials in several federal and state agencies have launched probes into the practice over the years, to little avail. When Congress asked its investigators to study the issue in 2000, industry representatives refused to answer questions—a move more audacious than anything airlines, banks, or military contractors ever tried. Two small-business owners who testified before the Senate were so afraid of retaliation that they appeared shrouded in black hoods, speaking with electronically disguised voices.
Most histories of the grocery industry agree that the first self-service market was a Piggly Wiggly that opened in Memphis in 1916, but the first so-called "supermarket" was King Kullen Grocery Co., which opened in New York in 1930.
The new store, the first where shoppers walked around and chose their own goods, was very controversial at the time. With no clerk checking off a shopper's list, grocers feared that their customers would end up buying the wrong products.
"The first supermarkets and chain grocery stores had cooking classes and demonstrations, advice about how to prepare foods," says University of Minnesota history professor Tracey Deutsch. "That's what Betty Crocker was all about."
There were even worries that social anarchy might break out—after all, the neighborhood grocer was the one who knew when a household was overextended and needed credit.
Fast-forward to today. One of the most popular features in most grocery stores is the half-made meal: marinated chicken breasts, trimmed vegetables with some kind of seasoning or garnish, bagged salads.
"Women still have the feeling that they are the ones who are doing this," explains Senauer. "They still feel a need to be engaged emotionally with the meal and to do some preparation. They may want to buy a rotisserie chicken but prepare the salad, so there's something of themselves in it."
Perhaps this explains some of the phenomenal popularity of Trader Joe's: Forget takeout, now you can fill your basement freezer with shrimp tempura, hand-tossed pizza Margherita, dim sum, carne asada, and hundreds of other restaurant goodies packaged for the family dinner table.
Two hours after the doors of Minnesota's first Trader Joe's were unlocked last spring, the store's shelves were picked half-clean. In front of the cheese case, shoppers stood three-deep, awaiting a turn at the marinated mozzarella and logs of goat cheese that looked more like firewood.
People snagged whatever they could maneuver close to—dried blueberries, Marcona almonds, chocolate-covered espresso beans, wasabi peas—grabbing in quantities that would stock a bomb shelter. Outside there were TV cameras and reporters, and orange-vested police officers waving a steady stream of cars away from the parking lot.
In the checkout line, a woman with a sweatshirt and a blond perm clutched three pounds of cashews to her chest. Across the hall in the discount wine shop, a middle-aged woman paused while her husband rebalanced a case of bargain red wine, popularly dubbed "Two-Buck Chuck."
Whole Foods' Mackay has complained that the same people who are so critical of his corporate supply chain have little to say about the way the gourmet goods get to Trader Joe's. The reason, according to Pollan: "Whole Foods wears its virtue on its sleeves, and Trader Joe's doesn't."
In contrast to the sleek purity of Whole Foods, the groaning opulence of Byerly's, and the dingy warehouse feel of Cub, the decor at Trader Joe's has a playful tiki theme. No one is dressed up, and no one seems to care whether the organics here come from China, which many do, or from a local farmer. And really, does it matter that the quality of the food is uneven if the buy-in is so low?
"It's an entry point for many people," says Pollan. "You don't have to sign onto the whole foodie identity to go there."
This, then, is the future: a 10-inch log of chèvre in every refrigerator.