Supervalu goes small for big spenders in Chicago

CHICAGO Thu Sep 18, 2008 9:41am EDT

Related Topics

CHICAGO (Reuters) - Supervalu Inc, best known for supermarkets such as Jewel-Osco, is testing a small-store format again to attract upscale professionals who don't want to dine out, but don't want to cook much either.

Supermarkets have followed in the steps of chains such as Whole Foods Market Inc by offering more prepared foods in their large stores in recent years.

Now they're trying out smaller locations with ready-to-go entrees, as well as produce and basics like milk, so that shoppers can skip the hassles of a big store when they only want a few items.

"I don't think that anybody has got it yet where they've got the exact format that they could run with and know exactly why it works," said Jim Hertel, managing partner at Willard Bishop LLC, a grocery consulting firm.

Supervalu's newest store, Urban Fresh by Jewel, opens in Chicago on Thursday. It is clearly targeted toward shoppers who want to get in and out of the store quickly with pre-made meals and items that don't take much time to prepare.

While pre-made food carries a higher price tag than buying ingredients for meals, it is still less expensive than dining out and has become more popular as high-end consumers look for ways to curb spending in a weak U.S. economy.

Jewel-Osco is also trying to appeal to cost-conscious shoppers by keeping prices the same at Urban Fresh for items sold in its regular grocery stores.

"The broader trend is probably convenience and prepared foods, kind of restaurant or near-restaurant quality, at a discount," Hertel said.

SELF-SERVE

A display near racks of organic produce houses sushi and soup, steps away from a deli area where customers can buy sandwiches, rotisserie chicken and macaroni and cheese. Of the 10 checkout counters, six are self-serve.

Supervalu closed down another small concept, the five-store Sunflower Market that focused on organic items, earlier this year after it failed to meet the company's expectations.

Urban Fresh is housed in the same spot on Chicago's Clybourn Ave. where Sunflower Market had a store from late 2006 until early 2008, but has a more upscale look and new staff.

Employees at Urban Fresh will hand out feedback cards to customers, Jewel-Osco spokesman Miguel Alba said.

"This is very much a test," Alba said while walking through the 16,000-square foot store the day before its grand opening.

Rivals such as Tesco PLC and Wal-Mart Stores Inc are also trying to cash in on the appeal of convenient meals in the United States. Tesco opened its Fresh & Easy stores in the Southwest late last year and Wal-Mart is set to open small Marketside stores in Phoenix this fall.

Neither of those new chains have stores in Chicago.

Still, Urban Fresh faces a lot of competition from Whole Foods, Safeway Inc's Dominick's, Trader Joe's and other stores nearby.

Willard Bishop's Hertel said two small-format stores that have done well in other markets are Fresh Acres, run by Big Y Foods Inc in Springfield, Mass., and Arizona-based Sprouts Farmers Market.

"It's not a uniform success and it's an experimentation right now," Hertel said.

(Editing by Dave Zimmerman)

FILED UNDER: