09Sep2009

Harris Teeter, Up Close

Harris Teeter earns high marks from both consumers and vendors, and with good reason. Stores we toured last month, focusing most of our attention on frozen and refrigerated departments, were clean, well-merchandised and in-stock, with hot BOGOs and specials.

As you’ll see in the detailed report of one store we walked, there was even a store brand special on ice cream, offering three packages for free if you bought two. True, everyday prices are not the lowest in the market, but then Matthews, N.C.-based Harris Teeter also caters to a more upscale shopper.

“The key thing Harris Teeter did was recognize the growing affluence and regional diversity of the Charlotte area ahead of anyone else,” says Ben Ball, senior vp at Dechert-Hampe, the Northbrook, Ill.- based consultancy. “You would have thought (banking mogul) Hugh McColl sent someone an e-mail (ok, back then a letter) and said ‘Hey, I’m going to be importing lots of Yankee bankers down here and they are going to want a really good place to shop. I’ll also be building a whole generation of UNC/ Wake Forest/Duke finance graduate yuppies and they will shop there too. Now get busy building!’”

We can almost imagine that actually happening. Harris Teeter stores were certainly more upscale than others we visited in the market, with the higher prices that normally go with that turf. One observer notes that in the tight economy, “The Choice fillets and asparagus on the front page (of store fliers) have been replaced with chicken leg quarters and broccoli.” Hot specials are increasingly part of the mix as the chain goes up against Wal-Mart — a growing presence in Harris Teeter’s markets. So it came as no huge surprise when Ruddick Corp., the chain’s parent, reported that promotional spending contributed to a 3.9% drop in operating profits in the quarter ended June 28. But not to worry: Ruddick’s (and Harris Teeter’s) balance sheet is very healthy, thank you. In fact, it was on the short list as a potential acquirer of Ukrop’s, the Richmond, Va.-based chain of 28 stores.

With Harris Teeter slowly expanding (it has 186 stores in northern Virginia, the District of Columbia, southern Maryland and coastal Delaware, and should top 200 within the next fiscal year). Ukrop’s seemed like a nice fit until negotiations fell apart. We’d have liked to have seen the deal, because we think Harris Teeter is the most likely company to keep Ukrop’s unique magic alive.

But Harris Teeter has plenty of magic of its own. It came in fifth this year in Consumer Reports’ annual rating of supermarkets, behind Wegmans, Trader Joe’s, Publix and Raley’s, in that order. On any given day, any of them could be the best, but we won’t quibble.

The chain ranked above average with the magazine’s readers in service, perishables and cleanliness, but a little below par on price. No big surprises there. Getting ranked favorably on price is always tough when you’re battling Wal-Mart.

“Harris Teeter competes on assortment and service rather than price,” notes Dan Raftery, president of Raftery Resource Network, Antioch, Ill. “They’ve developed the reputation as the neighborhood store that has what you need for your meals. They spend quite a bit of time with new stores, understanding the local demographics and what people want. It’s more than just going through the motions with product assortment. They really understand their customers. I also hear they are really good trading partners — although definitely forceful in their demands.” Vendors with whom we spoke would agree. They describe Harris Teeter as open to new ideas and flexible with its programs, but high on slot ting and charges. They fear this may slow down the flow of new items, particularly from small vendors.

“Harris Teeter tries to establish true partnerships with vendors,” says one. “They reach out to the vendor community to develop plans that drive business. Opportunity exists to allocate more fixed fee trade dollars (ad fees, display fees, TPR fees, etc.) into price to compete with Wal-Mart.”

Although this vendor praises Harris Teeter for top-notch customer service at clean and friendly stores, he adds that improvements could be made in display compliance and speed to shelf.

Most vendors believe the company will continue to gain market share, even facing increasingly stiff competition. Overall, they give Harris Teeter very high marks. And if they could elect a mayor from among all retailers, Travis Hubbard, director of dairy/frozen merchandising, might not even have to campaign. (Full disclosure: We’ve known Travis for years and consider him a friend, although company policy prevented him from commenting for this article.)

He’s seen as a straight shooter with integrity, whose military background comes through with energy and bluntness. “He came back from Iraq with some rough edges — like chewing tobacco and language,” says one vendor. “But that’s understandable, and it’s gone by the wayside now. He admits when he’s wrong, does the right thing and keeps his word. Even his kids are super-polite, with ‘yes, sir,’ and ‘no, ma’am.’ I wish there were more like him.”

Store Tour, August 4

THE GRAND ENTRANCE
As we enter the store at 7852 Rea Road in Charlotte, N.C., there’s a banner-like sign on the outside wall: “Looking for Boar’s Head? We’ve got it!” (And as you’ll see, in our next life we want to come back as the Boar’s Head salesman.)

This store is open 24 hours, and is the one that the Harris Teeter public relations folk recommended that we visit during our stay in Charlotte. But it’s against company policy to give interviews to the trade press, so we’re on a spy mission here, as is increasingly common for us. No problem. To our left, we note a poster announcing the chain’s participation in the Together in Education program. Harris Teeter is involved with a variety of local charities and sports teams, and involves these groups in its promotion. Frozen and dairy vendors we speak with say they do it well and gain competitive differentiation with it.

The first things we notice on entering the store are the bright white floors and warehousey ceiling with exposed beams. The pharmacy is to the left (making prescription drop-off convenient) and off to our right is a “Look What’s New!” display of new products. We notice the first of several signs saying there is closed circuit television monitoring everything, which makes us a little paranoid in our note-taking, but nobody stops us.

PRODUCE & SUCH
We walk to the right, past the registers, to get to the produce department by the entrance at the other side. Already it’s clear that we’re in an upscale store: There’s an elaborate floral department, a freestanding display of Ghiradelli chocolates, and lots of organic produce. Looking back into the store a little, we see an extensive wine selection.

But the shopper’s pocketbook and need for meal solutions hasn’t been forgotten. Still upfront near the checkstands — close enough for impulse purchases — there’s a display of rotisserie chickens, and signage touting “Check out these tasty weekend specials,” including “Fried Fridays” with chicken meals at $4.99, “Supreme Saturdays,” with baby back ribs at $7.99 each or a two-pack for $13.99.

As we make our way past produce, along the perimeter, we come across the Farmer’s Market case along the wall, with sliced fruits, salad dressings, fresh juices and such. This leads into a Juice & Melons bar, a bump-out service area with more of these items — along with dips and spreads — in the refrigerated well that surrounds it. The nearby Farmer’s Market salad bar, open daily from 10 a.m. to 8 p.m., features 76 fresh items daily, at $5.99 a pound. A sign above the bar touts the inclusion of products from DeLallo, the company that is well-known for its olives, antipasti and sauces.

By now we’ve noticed that Harris Teeter is busy branding itself (Farmer’s Market) and promoting vendor brands as well. DeLallo and Boar’s Head are just the first two that have caught our attention, but there are plenty more to come in our tour. In fairness, we should add here that Boar’s Head was recently added because a competitor had it and customers complained they couldn’t get it at Harris Teeter. Or so a friend tells us. But we’re going to continue joking about it anyway.

Back along the perimeter, we come across refrigerated displays of soups, chili and such. For a photo you’ll see on these pages, we buy a 16-ounce container of Harris Teeter Fresh Foods Market Summer Fresh Tomato Basil. We like the relaxed, whimsical copy on the product lid: “Heat ‘n Eat. Very Cool! Eat Fresh.” The item is all-natural with no preservatives, and seems nicely on trend.

Next in line are refrigerated baked goods in an open multi-deck along the perimeter, followed by service bakery with gourmet-looking items on the back wall (We’re turning the corner now). In displays throughout the store, we’re noticing lots of signage and fliers with consumer information. Present, but not obtrusive, and they give the feel of being the shopper advocate instead of hard-sell.

DELI/SEAFOOD/MEAT
The Boar’s Head logo is enormously displayed above the deli, which is next in the traffic pattern. Signage notes that items are “Chef Prepared” and sandwiches are made to order. It’s what you’d expect in a good service deli — sliced meats, salad platters, and all that.

In the well in front of the service cases are “Heat & Eat Chef Prepared Meals.” There’s good selection, and it strikes us that putting the meal solutions grab-and-go stuff here, instead of in a separate location, might help convert some shoppers into service deli customers if they don’t normally visit the department. There are Boar’s Head pickles sold here (99 cents) and there’s fresh-made sushi (including brown rice sushi), displayed with sauces and go-withs.

Service seafood is next, with its signs saying “freshness guaranteed” and “quality verified.” We aren’t sure what that means, but perhaps regular shoppers do. We don’t readily find explanatory language, which might help make the sale to cynics.

There’s good variety in the fresh case, with grilling planks and sauces mingled in at the top of the case. In the open frozen case nearby, there are lots of HT Trader’s items, such as Wild Caught Yellowfin Tuna Steaks mixed in with the Phillips and Margaritaville products.

Signage notes that the service meat department cuts to order, and there are beaucoup recipes and sauces around the cases, which feature Harris Teeter Reserve items, Premium Angus and USDA Choice cuts.

For holders of the VIC (Very Important Customer) loyalty card, there are BOGOs for Pork Baby Back Ribs, London Broil and Fresh Boneless Chicken Breast. In fact, BOGOs are a pretty common tactic store-wide. (And, speaking of the VIC program, Harris Teeter really does some cool things with this, especially with its new interactive online program. Go to www.harristeeter.com and click on “Promotions” to check it out.)

Displays in the meat area include Reynold’s wrap for grillers, and convenient open rolls of paper towels for shoppers with sticky fingers. Signage in the sliced meats section promotes Boar’s Head, and we find Boar’s Head mustards nearby. In the frozen coffins in the meat department, our favorite item is the Harris Teeter Popcorn Chicken, in resealable bags.

SAY CHEESE!
As we face the deli, behind us there’s a cheese section, featuring fresh-cut wedges. Once again, literature is abundant. Cheese recipes are on a spinner atop the open cases, with signage for “Harris Teeter Fresh Foods Market.” There are crackers, toasts and party items on top of the cases.

“Looking for a tangy party pleasing appetizer or the main ingredient for a creamy gourmet dish?” asks a sign. “We have what you want in our fresh cut cheese section. Every day you will find over 75 varieties of cut fresh cheeses. If you have any questions or can’t find what you want, ask one of our Specialty Cheese Experts.” Little Italian flags and maps help romance the section, which includes a bright green sign with white lettering noting that there is “an incredible array of cheeses… from home and around the world… Flavor is locked in… fresh right off the wheel.”

Price points run as high as $14.99 but are generally in the single-digits. Signs promote Boar’s Head Artisan Cheeses. We sample some cheese at an unmanned demo, and like it a lot — but darned if we can find it in the display. It’s probably just us — our better half complains that, like most men, we can’t find gallonmilk on the top shelf of the fridge.

FROZEN & DAIRY We’ve never seen anything quite like this before, and it’s sort of hard to explain. We’ve reached the left rear quadrant of the store. There are the usual doored cases along the perimeter walls, but in the aisles from the back of the store to the front, are what we can best describe as three “little houses” with the walls made of doored cases.

They each have about six doors on the sides, with the front and back made up of endcaps that remind us of bay windows. The “bay windows” have four doors of product sticking out, plus two more doors on each side, angling back into the main structure, much like a bay window would stick out from a house.

On one of the sides of the “house,” there’s a metal freezer door, so store associates can go inside and get inventory for re-stocking.

If you’re still confused, think of Costco’s huge frozen sections with the door at the end, allowing access to the storage area inside. But this is on a much smaller scale, with a little “roof” of two-by-sixes turned on their sides, painted white and trimmed out so they look sort of like a fancy grape arbor. If only they’d let me take a picture. (Sigh.) If you still don’t get it, call us at 603-252-0507 and we’ll try to explain. Some of these endcap doors have signs sticking out at the top, marked “Promotional.” Others are marked “Pizza,” “Seafood,” or whatever. Looks like you could change the signs easily.

We’re told by a market observer that this set-up was in the store when Harris Teeter bought the unit from Hannaford Bros. While we found it really interesting, it’s not being replicated in the chain’s newer stores, so perhaps it isn’t working all that well.

We do wonder if shoppers might find the arrangement confusing, going in circles around the little houses instead of up and down an aisle. But after standing and watching awhile, it seems like customers knew where to find what, as they tend to do at stores they shop frequently.

Our friend did tell us that Harris Teeter is not using this arrangement to give it more endcaps to sell. Ice cream and novelties, by the way, are all merchandised along the perimeter, and not in the “houses,” so this isn’t an issue in those categories.

We like the separate doors marked for frozen kids’ meals, and the easy, friendly banter between shoppers and store associates. Store morale seems high, and that’s refreshing (and increasingly rare today, it seems). We notice that there’s probably enough space for four shoppers abreast most places in the aisles, with aisle clutter kept to a minimum. Vendors tell us that unauthorized POS brings stiff fines, so that helps.

Categories flow pretty seamlessly here. Our only gripe merchandising-wise is with instances where product is stacked when it should be faced out. Examples: lots of the frozen bagged veggies, potatoes, Athens Fillo Appetizers, pie shells and whipped toppings. There are fixture solutions for these problems now, and we’re surprised we see this problem recurring so often, even at excellent retailers such as this one.

Shelf flags identify new products, organic items and “unreal deals” (price promotions), and there are doors set aside for “Premium Dinners,” Organic (two doors) and Kosher (one door). The latter two get identifiers in the form of little ribbons a few inches high at the top of the glass on the doors. Signs for “Organic” and “Kosher” — about four inches wide and a foot or so high — extend out from the top half of the doors, so they can be spotted as you come down the aisles. There’s a similar set-up for a door of “Unreal Deals,” which today includes Bagel Bites, White Castle and TGI Friday’s products.

We also find this type signage in dairy along the perimeter, marking “Creamers,” “Flavored Milks,” “Whole Milk,” “1% Milk,” and so on. (No Boar’s Head milk in evidence.)

We don’t see much along the perimeter for dairy that’s unusual. It’s well-merchandised, and in-stock on a Tuesday afternoon. Yogurt is the usual jumble, and we watch one shopper spend several minutes searching for her particular variety, knocking things over and reaching way in back. Fixturing we’ve seen could help this problem, too, as could some of the recommendations by key vendors on SKU rationalization and shelf segmentation strategies. But this set is really no worse — or better — than most we’ve seen.

Seems to us there’s a lot of frozen pizza here — must be a good market for it. We buy an all-natural Harris Teeter pizza to take a photo to show you, and notice little bags of pepperoni clinging to the side of the case. Yeah, Boar’s Head.

The ice cream section has lots of price promotion going on, but hey, it’s early August. On the local merchandising front, we see signage promoting tickets for the Charlotte Knights baseball team, in a tie-in with Blue Bunny.

If you buy two packages of Harris Teeter 48-ounce all-natural ice cream, you get three more for free. The limit is 10 packages per customer, but that’s still bound to be a door buster. (Branded vendors say they have worked similar promotions with Harris Teeter, and while margins are slim, cases really move.) Shoppers have been tearing apart the displays of the product, with packages jumbled and some flavors nearly out of stock. But we’re pleased to see product being refaced and restocked during our visit.

The wall space above the ice cream section has a huge poster of the store brand Hunter Ice Cream, “The Creamiest of the Scoop, Exclusively at Harris Teeter.” While private label gets its share of attention store-wide, Harris Teeter does not come under much fire from vendors complaining about it becoming too dominant. Vendors tell us the chain works well with them, and promotes their brands fairly and well. At this writing, private label makes up 27.1% of Harris Teeter’s dollar volume.

Our little shopping cart is full, and it’s time to leave. At the self-service Fujitsu checkouts, we are appropriately and quickly profiled as one of those older guys who has a hard time with technology, and a clerk hovers nearby. She springs in to help us with the pears we’ve bought, which of course aren’t scannable. Did we find everything okay? Yes, we did, thanks. It’s typical of the friendly and competent customer service we’d seen all afternoon.