Explore the fresh-focused specialty store’s distinct approach in the grocery space, shifting consumer behaviors, and tech’s role in the shopping experience.

Our guest is Larry Appel, CEO at The Fresh Market. He leads the fresh-focused specialty store through innovation and curation in its two thirds fresh, one third non-perishable offerings. Prior to his current role, Larry has led companies as CEO of Skeeter Snacks, Senior Vice President of Operations at Winn-Dixie, and Senior Vice President of Legal at The Home Depot. Join us as we explore The Fresh Market’s distinct approach in the grocery space, shifting consumer behaviors, and the role of technology in the shopping experience.

Episode 18 of RETHINK Retail was recorded on August 8, 2019

TRANSCRIPTION

Julia Raymond:

Hi, welcome to the show. Today we explore a topic that we all love and that is our groceries. And while it might seem obvious, two thirds of revenues from the top 50 global retailers is in the grocery space and that’s compared to only about 10% of retail. So that just shows you how huge grocery is and we’ve all seen the change that’s occurring in the space. So with that, I’d like to introduce you to the Chief Executive Officer at The Fresh Market. Our guest, Larry Appel. Larry has 30 years of experience in retail, legal and corporate strategy and he previously was CEO of Skeeter Snacks, a Florida based manufacturer of natural snacks and held senior leadership roles at the Winn-Dixie stores and the Home Depot. Larry, will you dive in by telling us a bit more about yourself and your role as CEO of Fresh Market?

Larry Appel:

Absolutely. And Julia, thanks for having me today. It’s a pleasure to speak with you. Definitely, I’m a grocer, but more than anything I consider myself a retailer. I had the good fortune to be able to work with frankly some of the best retailers of our generation. When I was at Home Depot, the two founders, Bernie Marcus and Arthur Blank were still active. At Winn-Dixie, I had the privilege to work with Peter Lynch who had had a long and distinguished career in grocery. And one of the things that from both of those experiences and all three of those leaders that I took, was the passion for people and the passion for stores and store teams. And that is something that stayed with me and hopefully something that I’m bringing here to The Fresh Market.

Julia Raymond:

Totally. And just personally, how was that transitioning from roles like at the Home Depot to the grocery space?

Larry Appel:

So, in my opinion, retail is much more alike than it is different. Obviously there are product differences, but retail is about assortment, it’s about price, it’s about presentation, it’s about quality. And those things translate. What you have to do in thinking differently, is how you align those in the guest value proposition that’s going to meet your needs. People that are looking for different things in a home improvement environment than they are in a food environment. But at the end of the day, it’s about being passionate about creating experience in your store, about having great people in the store, about treating your guests like guests, and about delivering something of value to them. So I think it was an easier transition than you might think.

Julia Raymond:

Well that’s good to hear your insight on that. And I love that you brought up just creating a great experience, because we hear so much about experiential retail and that transcends into the grocery sector as well. So I have some questions on that. First, let’s talk a little bit about The Fresh Market. So I read that you describe it as a fresh-focused specialty store. And so what does this mean for you? How is it a differentiator in such a large market?

Larry Appel:

So fresh-focused specialty to us, we’ll break that into two words, fresh and specialty. And fresh, we think of in two ways. One is what you would typically think of as the exterior of a traditional grocery store. That being the fresh departments, right? Meat, seafood, bakery, deli, produce, and our store emphasizes those fresh foods much more so than a traditional grocery store. To the point where we are well more than two thirds fresh, one third non-perishable and that is probably flipped from your typical traditional grocery store. So there’s much more of an emphasis on literally the fresh.

But even within our non-perishable departments, fresh to us is about innovation. It’s about interest, it’s about change, it’s about evolution and being fresh thinking even in the non-fresh departments. And that’s probably a decent way to transition to the second word, which would be specialty because that’s a little bit about innovation too.

But more than anything, what it’s about is what we call curation and maybe a little bit hard to define, but in most traditional food, retail environments, the goal is what I would call category management. The goal is to make sure that the broad variety of guests that come in are going to have an interest in different types of products and you should have everything to be able to do a full shop, so if they come in looking for soup, you want to make sure you have their favorite soup so that they can buy that and they don’t have to go somewhere else to buy it. That is what I think of as category management.

What I call curation is the opposite. It’s saying, “We’re going to go out into the world and we’re going to find things that we think are interesting, innovative, special, tastes great, and we’re going to curate a selection for you that allows you to explore new things, see new things, try new things and expand your eating horizons in a way that adds value to your lives in the way that you eat.” So specialty to us is about curation and fresh is both about the freshness of the perishable products and the innovation in our non-perishable departments.

Julia Raymond:

Yeah, and I didn’t realize that you guys had such a huge fresh department in comparison to the typical grocery store. So that’s really cool. You said two thirds fresh and a third perishable?

Larry Appel:

That’s about right. It’s actually a little more than two thirds, but that’s mixed, right? So our space is much smaller than a traditional…. If you think about the traditional, conventional grocers, they might be 40, 45,000, 50,000 square feet. We’re more likely to be 15,000, so it’s a much smaller space, but our allocation of space is towards those fresh foods. Sort of like a European market that you might go and say not, “Gee, I have a list that I kept on my refrigerator for the last 10 days of things that I’m out of. Let me go fill up.” But instead, “What am I doing for the next day or two? What do I feel like eating, what am I snacking on?” Et Cetera, et cetera. So it’s just a different experience. Most of our guests, our stores are not perfect squares. Our stores don’t have big, long, endless aisles. We give free coffee when you walk in the door and most of our guests grab a cart or a basket, grab a little coffee and wander. So it’s just a very different experience in that regard.

Julia Raymond:

And that kind of leads me into my next question because you talk about how you’re focused on innovation even in the perishable department, but also the fresh. And then you talked a little bit about the importance of curation and you just said a keyword, which is people get their coffee and they kind of wander. And so we’ve heard like this scenario about being similar to a treasure hunt environment for your shoppers in-store. So how are you guys curating products so that it feels like a treasure hunt?

Larry Appel:

Curation starts with good old fashioned legwork, right? It’s about knowing your market. It’s about staying on top of your market, so obviously our buyers are expert in their fields and it’s also about taking the opportunity to travel, to go to shows, to do the things that you need to do to stay on top of that. We’ll also pick distributors differently from some, obviously we picked some distributors for their efficiency and supply chain, but we pick some because they cover parts of the world in unique ways that allow us access to things that we wouldn’t otherwise see in terms of how we source products.

So there’s a strategy in terms of how you go to market in the office that is designed to make sure that you can deliver on curation. That leads to what we’ve called treasure hunt. What I would really just call exploration, which is the desire to wander, the desire to check things out, the ability to see something new. Most people live in fairly defined eating ruts. They eat a certain number of things for dinner and they rip through those and then flip back. They eat a certain number of snacks. You would be amazed in traditional grocery, how little variation there is in the shopping list, right? That people pull and shop from week to week or month to month. We really sort of delight. We say that our mission is to inspire our guests to make everyday eating extraordinary, and we delight in inspiring our guests to expand those eating horizons and to see new things and taste new things and try new things.

Julia Raymond:

Yeah. And it’s funny that you said that, because as you were speaking I was thinking about, yeah, it’s kind of like driving a car sometimes when you’re in the grocery store you’re just go and do the aisles getting the same things you always get. Not always, but it can become monotonous.

Larry Appel:

It does happen, but if you were to walk one of our stores today, you would run into over by the grapes, a beautiful recipe for a roasted grape crostini. You would see a recipe for a tomato and mozz naan bread, the Indian bread. A beautiful Asian display, different sauces and authentic noodles with recipes or at least signs explaining and taking to our website to find out how to cook them. And we try to keep things simple so that folks who have an interest don’t have to be expert chefs to do it. But that’s the kind of exploration that we hope our guests will engage on and that they can try new things and different things.

Julia Raymond:

Yeah. And it’s nice to actually see those recipes and get inspired in-store instead of just looking things up online, and going into the store, so that’s very cool. And it seems like there’s this huge trend, just people becoming increasingly, probably, it’s a good thing, but people just becoming really health conscious and more concerned about the differences between natural and organic. And how do you see consumer behavior changing in the grocery space and how is this bringing opportunity or challenges?

Larry Appel:

Consumer behaviors changing in a lot of ways. Obviously there are tastes preferences, which is what you talked about, whether it be flavor profiles, people are much more adventurous. People will try all kinds of different flavors and ethnic foods. And in part because the restaurant culture has evolved greatly from when I was a kid, right? So people will explore more tastes. They certainly look for healthier, fresher foods.

And the younger our guest is, the more they’re likely to value that, frankly. Although I think that is across the spectrum becoming more and more prevalent. There are also two other macro factors that impact the way people think about groceries. One is time, we are a time-starved generation and the other is frankly cooking skills, which are not the same. The way that my mother thought about shopping and preparing dinner was very different than the way my wife did, which is very different than the way my children do now.

So those all create challenges because so many food retailers, to be honest with you, although the way my daughters think about it is so different than the way my mother does, the grocery store doesn’t look all that different, right? From the way my mother shopped. And so the challenge is how do you evolve to meet those changing needs? And we think we do that in a lot of different ways. But that is, I believe, the challenge of food retailers. And then of course there’s the other sort of ubiquitous change, which is part of that whole time equation that I talked about, which is online as well as in person. So just a lot of change and a lot of opportunities for food retailers to think about how they evolve to meet that change.

Julia Raymond:

Yeah, I love how you talk about the comparison of the consumer behavior, how different it is. Yet the stores are broadly speaking, slower to evolve.

Larry Appel:

I mean, look, there’s obviously different products in the store than when my mother shopped in the store, but the basic idea of a dairy case, the frozen food aisle, a meat counter, a produce department, they look at first blush, very similar. And so you have to look at that as creating tremendous opportunity for retailers who can deliver an evolved value proposition that that those guests are looking for, because of those factors we just talked about have changed. It creates opportunity.

For instance, for us, one of our real areas of focus, are meal solutions. If I’ve got a time-starved guest who doesn’t have the same cooking skills perhaps as a generation before, then we need to make it easier for them to be able to put great food on the table. And we think about that in sort of three buckets, what I’ll call ready to eat, ready to cook and ready to inspire.

So ready to inspire is really the way people have thought about shopping for groceries for years, which is an ingredient list that leads up to a menu. We want to have a website and have resources, whether it’s on the website or it’s that crostini recipe that I mentioned that they see in the store for people to enhance the way that they do the traditional cooking when they do that.

But, because of the time and cooking skill factor, we also want people to be able to put great healthy meals on the table at affordable prices through work that we do. So for instance, you could walk into our store today and get a southwest chicken with asparagus and rice that we’ve done all the prep.

We’ve pulled it together, the chicken and the vegetables come right from our stores, so they’re absolutely as fresh as if you bought them off the shelf, but we’ve done all the work, we’ve created all the sauces, we’ve put it together for you, and in 15 minutes with one pot in one pan, you can be eating a wonderful dinner instead of putting a bag of something down that you picked up at a fast food restaurant, that is ready to eat for the guests that just wants to grab a chicken bistro meal from us. They’re ready to cook for somebody who wants to elevate, but might not necessarily have the time or skill and the ready to inspire. And I don’t think those are different guests.

There are times, Julia, that you walk in the door and you say, “It’s Tuesday and I’m busy and I got to grab something, but I want it to be healthy and good.” And there are times you say, “I’m having four friends over on Saturday. I’m going to devote some time to this. I want to do something special.” You’re the same Julia, but you’ve got a different need and we want to be there for you for both of those needs.

Julia Raymond:

Yeah, and that’s kind of… We hear, the concept a lot meeting guests where they are at that moment in their life. So that makes a lot of sense. And are these things, the eat, cook and inspire are these meal solutions at all competing with like a Hello Fresh or Blue Apron or are these totally separate?

Larry Appel:

No, some of them are. So a Blue Apron or Hello Fresh would be what we would call ready to cook. So we have a series of offerings that are similar to what they do. They range from pre-seasoned or sauced individual proteins and individual starches and individual vegetables that you could pull together your meal, which is a little bit different than a Blue Apron where you’re buying a finished meal.

Two, they range to fully finished meal options where you pick up a package and it’s got everything you need for what the picture shows you. Our distinguishing characteristics in those areas are A, we do all the prep. So you’re not cleaning vegetables, you’re not making sauces. We’ve done all the work. And two, that chicken or beef or salmon came right out of the same cooler that it went into the case that somebody bought, right? The produce is all right out of the produce cooler. So it’s fresh to you. Just the same way as if you’d bought it elsewhere in the store that day, which a lot of our guests like the notion that those meals are prepared fresh for them in-store.

Julia Raymond:

Yeah, totally. And it seems like it’s not even as in time intensive as some of the home delivery, but speaking of home delivery, I did see that you guys partnered with Instacart and that was just a few months ago I think. So how did that come about and why is that so important to start partnering with them? Are there other partnerships that are top of mind for grocers?

Larry Appel:

When we talked about the macro factors that are changing our environment, one of them was time and if you sort of take time and technology together more and more we are capable of ordering things from our desk or from our couch and either picking them up in-store or having them delivered and it saves time. So I would say two things about that.

It’s important for us to be there because we want to meet our guests where they are and if our guests have occasions where they want to be able to sit at their desk at four o’clock and say, “Boy, I want to go grab a wonderful chicken dinner from The Fresh Market, but I don’t have time. I want to order it online and either pick it up on the way or tell them I’ll be home at 6:15”, then we need to be able to do that for them. And so it’s important for that reason.

Having said that, we’re not going to think about technology as divorced from the store experience. We think there’s a virtuous cycle between our guests exploring us online or using a delivery system, experiencing great foods, stopping in and continuing the exploration, because we do seek to create a unique experience. Like I said, if you’re going to take a cup of coffee and wander our store, you’re not thinking of that as a chore. Right? You’re thinking of that as a little bit of fun. And so, we do think of both ends, and while technology will always be there for our guests, our store experience is going to be our calling card.

Julia Raymond:

So from your perspective, do you think there’d ever be a world where people, majority of people only ordered groceries online, had them delivered or…?

Larry Appel:

So, ever as a big word. So, I’ll never say never. But yeah, I think what we see is that delivery is most impactful, at least now, in markets with density. So more urban areas, right? In the non-perishable products more than the perishables. So I’m not saying there won’t come a time when people are perfectly happy to have their steaks and everything that they’re buying online and shipped. But as a general rule, if you’re going to have a dinner party and you’re going to serve some cocktail with a mixer that’s Schweppes tonic and you’re going to serve a Ribeye steaks, which one are you more likely to feel comfortable being delivered to you that you’ve never seen?

So I do think there are some limits on that and hopefully I believe the retailers that continue to see in-store traffic are going to be the ones that being in-store presents value above and beyond the transaction of buying. And again, that goes to exploration and education, and passion around new ideas, right? If you’re online, you’re only going to do so much to expand your eating horizons. If you’re see it in front of you and somebody is doing a demo and you can taste it, that’s a different experience.

Julia Raymond:

Totally. And it’s really, as we’ve seen, it’s pretty difficult for some of these retailer grocery retailers to deliver on those experiences. And I know, I was wondering just if you had an opinion on the Amazon’s acquisition of Whole Foods, I know it’s not going as well as they hoped. So are you threatened at all by the Whole Foods situation or do you think that they’re going to be successful in the longterm with that?

Larry Appel:

Well, first off, Whole Foods is obviously a competitor and I would not undersell the combination of Whole Foods that has a generation of experience in delivering all natural healthy foods to guests with the power innovation in technology as well as resources of an Amazon. So I think if you live in our space and you don’t have a healthy dose of awareness and a knowledge of what they’re doing, then you’re probably not doing your job well.

I do believe that there are opportunities as folks like that seek to expand, they do so often through centralization and so there are inconsistency. And so there are opportunities in innovation and in localization where folks like us can compete very effectively.

Julia Raymond:

Yeah, that makes sense. I just wanted to get your take since you’re in the space. So thanks for answering that.

Larry Appel:

What we’ll do for instance, is we’ll look at that marketplace and say, “Hey, we have an opportunity to go build our brand among emerging and innovative small brands.” Right? Which we can afford to bring in in a different way. And we’ve got some interesting partnerships going with some growth funds and some incubators to try to make sure that we’re seeing innovation at early stages and bringing that to our guests. So they’re just different opportunities to compete. But Amazon Whole Foods is a powerhouse and they’re going to be a powerhouse.

Julia Raymond:

Yeah. Yeah, they’re definitely a beast. But that actually, you kind of talked about discovering new products and that was one thing I wanted to ask. How do you guys discover new products and do you think that, are we going to see more private labels in the future or do you think it’s going to be more consolidation?

Larry Appel:

So I do think you’ll see more private label, but innovation typically doesn’t come from private label, doesn’t start with consolidation from the big companies. Innovation is happening in our business in a very entrepreneurial, small way where people have ideas, people are willing to take chances. The big food companies have become so big that a brand has to be doing a lot to make an impact for them. And so, they don’t spend as much time sort of incubating from the ground up. So where I think we’ll see our innovation is from small entrepreneurs, people who have a passion around a specific kind of food or a specific experience.

You see these great things, a family recipe, something that they did, they traveled and saw something beautiful that that impacted them and they invest their time, energy, passion and love into building that. Now, at some point, does that become a target for consolidation or for private labeling in order to sort of copy the idea and make it mass affordable or mass accessible? Sure. But I think the innovation in our industry is going to come from the small folks with small passions and big ideas.

Julia Raymond:

Yeah. And do you guys find these entrepreneurs, is it mostly at shows or do they come directly to you guys or what kind of discovery is there?

Larry Appel:

I hate to take the cop out answer, but it’s all of the above, right? So there are shows. There’s some wonderful shows, Expo East, Expo West where you can find some of the emerging brands. They do come to us quite often. That’s hard to sort of work through that. And then as I said, we’re trying to develop some partnerships where we can reach out to them. And then finally, as I said before, there are distributor relationships that help us find that innovation. So it’s an all of the above strategy.

Julia Raymond:

Very cool. And I’m interested to hear more about those partnerships later on, because that sounds really like a good thing you guys are doing in the market. So just wanted to kind of talk a bit broader just for a few minutes and one of our podcasts guests in episode seven, Carl Boutet, he noted that when you look into the future, when you’re talking about connected experiences, creating that seamlessness between digital and physical, consumers won’t even realize when it’s missing in a store. Sort of like you don’t walk into a store and say, “Oh wow, there is electricity in here.” So do you see that happening in the grocery space? Do you think it’s going to become really one of the same in the coming years?

Larry Appel:

In terms of technology, seamlessly integrating into what we do every day in a store, the answer to that is yes. Technology changes the way we do everything, right? A lot of which frankly, is not customer-facing. So a significant amount of what we sell in our store, we’re producing in the store, right? It’s not a can of beans. It’s a seven layer dip that we’ve built in-store, or a meal or pies that we’re baking, right?

So we have automated our production planning, so that we can do a better job of understanding how to do demand forecasting and how to match our production to the needs of the guest, to be in stock better for them and deliver the right products at the right time in the way that they want. That’s technology. Now all the guests sees is that the pie table has all the things that they want at the times that they want it. Technology empowered.

The same thing with ordering. The stuff that we don’t produce in the store. Having demand forecasting and computer generated ordering to make that process more efficient, more effective, and make sure that your shelves are full and there are all sorts of other technology. There are loyalty programs that enable us to target marketing to specific customers and customer types rather than one size fits all. All of those things are technology.

Now in terms of the truly integrated experience, some of that’s going to come from the retailer and some of that comes from the guest. In other words, we’re walking around with a piece of technology in our pocket today that we couldn’t have dreamed of 20 years ago, right? In terms of the power of your phone and a lot of the technology that you use in our environment and in other environments you bring with.

So I think it’s going to be a combination of the way that we integrate technology and the way that the guests brings technology. I will agree with your prior guest that yeah, it is going to be a little bit like electricity, right? You’ll notice it when they don’t have any, but I don’t think it, just like electricity hasn’t taken over the shopping experience in the store. I don’t think technology will either. I believe that the heroes in our store will for a long time, if not forever, be our products and our team members and what’s you’re going to remember and engage with in our store are great products and friendly team members who want to help. And I don’t think technology will change that.

Julia Raymond:

Yeah, that’s a good perspective. I really enjoy hearing that. And I liked that you said team members because there is no replacement for the human experience and connecting with others. I can totally see that.

Larry Appel:

We have four values at this company that we try to live by. Passion, which is just being passionate about people, being passionate about food, bringing energy to our business everyday. Excellence, which is if we’re going to curate, let’s curate the best. Teamwork, which is about how we work together. We mean it, when we say team members. And hospitality, we’re welcoming guests into our home every day. We should be hospitable. So teamwork is one of our core values. It’s very important to us. That word was not used by accident.

Julia Raymond:

Yeah, I love that. And you said being hospitable.

Larry Appel:

Yeah, we’re in a hospitality industry every bit as much as the hotel industry is. There are guests walking into our store every day, and they can either have a great experience, or an adequate experience, or a poor experience. And more often than not, the differentiator between that is the way our team members have engaged in getting the store ready. And the way they engage with that guest. That’s hospitality, right? That’s you inviting somebody into your home.

Julia Raymond:

100% well, thank you, Larry, for joining the show today. I hope everyone who’s listening checks out The Fresh Market, because they have amazing selection and service, as you mentioned. And thanks for joining the show. I really enjoyed hearing your perspectives.

Larry Appel:

Julia, thanks for inviting me and thanks for what you do. It’s an interesting and important space and I like your approach to helping us rethink it. So have a great day and it was a pleasure.

Julia Raymond:

Thanks.

 

Photo courtesy of The Fresh Market