The department wasn’t a focus pre-pandemic, but double-digit gains have made it a priority for the Hispanic-centered chain.
Although more acculturated Hispanic consumers use frozen foods at much the same rate as other shoppers, first- and second-generation U.S. Latinos tend to prepare more meals from scratch using fresh ingredients. That’s one reason why one of the largest independent supermarket chains in Southern California, Santa Fe Springs-based Superior Grocers, offers only 431 frozen SKUs at the majority of its stores, where various fresh departments take center stage. But the pandemic changed things.
Superior’s frozen food sales jumped 25% in 2020, but even during the first quarter of 2022 sales were up 12% versus Q1 2021, according to a recent presentation by company president Richard Wardwell.
“During the pandemic, everything was selling,” including frozen foods, explains Martin Reynoso, category manager of deli/dairy and frozen foods. “So shoppers discovered categories they didn’t buy before.” Of course, the same thing happened at mainstream supermarkets, but since Superior serves mostly Hispanic consumers who weren’t buying much frozen pre-pandemic, the shift was more dramatic. And based on recent growth, it appears to be sticking, causing the chain to re-evaluate its frozen food strategy.
FROZEN RISES TO THE TOP
“Pre-pandemic, there wasn’t a huge emphasis on the frozen department, and lots of categories were underdeveloped,” says vp of marketing Dale Nakata. But that’s all changed, he says, citing progress in segments such as frozen Asian foods that didn’t have much of a presence before. “Now, instead of putting frozen on the back burner, it’s at the top of the list [of priorities]. We’re trying to stay ahead of the curve as far as trends, and we’re open to innovation.” New additions to the mix include riced veggies and plant-based pocket snacks. Though there are no plans to expand space for frozen foods — the department is already bigger than at competing Hispanic-focused chains — the assortment is definitely more refined than before, he adds.
‘By adding more direct vendor purchases, we gained the flexibility to secure additional products and new SKUs that our wholesaler may not carry to get us through these ongoing supply constraints.’
Top-sellers in frozen include larger size pizza snacks, burritos and ice cream. In fact, premium ice cream in particular has done so well recently that the chain added more doors. Frozen entrees, on the other hand, continue to see declines, while veggies, breakfast foods and breaded poultry have been dragged down by supply chain disruptions, according to Wardwell.
In the refrigerated section, meanwhile, “regular” milk continues to decline while plant-based alternatives register double-digit growth. Eggs are also performing well despite rising costs, and the chain continues to add more organic dairy and meats. Block cheese is down year-over-year, but the company has seen a strong shift to shredded. Yogurt and creamers — including oat-based varieties — are also on the rise; however, refrigerated snacks and lunches are racking up some of the biggest gains. Juice and cream cheese, on the other hand, are being negatively impacted by supply chain issues, reports Wardwell.
Still, supply chain disruptions have been much less of a problem since Superior began pursuing direct relationships with CPG manufacturers last year. Pre-pandemic, product procurement was left primarily to the chain’s primary wholesaler. But after 2020, it realized it needed more options. “By adding more direct vendor purchases, we gained the flexibility to secure additional products and new SKUs that our wholesaler may not carry to get us through these ongoing supply constraints,” says senior director of grocery Chris Denney.
In addition, he reports, the company pivoted from a just-in-time approach to inventory to carrying 25% more inventory in distribution centers. As a result of the shift, “we are able to secure larger quantities of key items when available and react quickly to opportunity buys,” both of which have helped reduce out-of-stocks. “We feel the supply chain will strengthen over time but not in the immediate future,” adds Denney. “Once we begin seeing consistent relief, we’ll focus on getting back to more just-in-time inventory.”
RELIEF IS ON THE WAY
Another by-product of the pandemic, reduced CPG trade spend, is fueling additional changes at Superior Grocers. The decrease in promotions wasn’t a problem when consumers were flush with stimulus cash. But the double whammy of stimulus checks ending at the same time inflation is spiraling out of control means today’s shoppers are more price-sensitive than ever. To offer some relief in the face of fewer promotions, the chain recently kicked off a campaign to collect cell phone numbers so it can text money-saving offers each week. “We have 3,000 subscribers already, and the redemption rate has been very strong,” reports Nakata, who says the company is also considering an app so it can capture digital coupon offers.
To offer some relief in the face of fewer promotions, the chain recently kicked off a campaign to collect cell phone numbers so it can text money-saving offers each week.
“Lots of CPGs have digital marketing dollars that we can’t take advantage of, and one of the biggest [vehicles for delivering them] is digital coupons,” says Nakata. “No one in our space is doing apps,” he adds. “But we’d like to be the first.”
The two moves coincide with a broader shift from print to digital. Although Superior still prints approximately 2 million flyers each week, “Ultimately, we’ll rely solely on digital,” says Nakata. “Digital display ads on Instagram, Facebook, Spotify and other venues have proven effective based on click-through rates, and we are pleased with our OTT campaign results,” he adds.
The other way Superior Grocers is helping lower shoppers’ grocery bills is by making sure it’s offering entry level price point items in each category. The chain does offer private brands — both its own (but only in a handful of refrigerated categories such as milk, eggs and orange juice) and its wholesaler’s. However, they only represent about 5% of total sales.
“We’re looking at adding more private brand items, but we’re finding a lot of second label and packer label products that can also serve as that entry level price point,” says Denney. “Sometimes it costs less to source those brands than to develop a private label.” In many cases, he adds, “We’ve actually been able to negotiate lower prices on existing items so we don’t have to bring in new ones. It’s difficult when everyone is having supply chain issues, but we have a lot of really strong vendor partners.”
Another recent change driven by the pandemic is the introduction of curbside pick-up at 20 strategically located stores last November. Although Superior Grocers has offered home delivery through Instacart since 2018 (sales jumped 400% after COVID hit), the new pickup option fills the gap between full-service online ordering and in-store shopping, says Nakata. “It’s a more economical way to shop online because there’s no delivery fee,” he explains. Although Superior employees fill the orders, they’re placed through Instacart’s platform “in order to provide a more consistent e-commerce experience for customers.”
We’re looking at adding more private brand items, but we’re finding a lot of second label and packer label products that can also serve as that entry level price point.
So far, however, the curbside program hasn’t lived up to expectations — though sales are growing each week. “I think that our customers are more comfortable choosing their own perishables. They want to touch the fruit they buy and choose their own cuts of meat,” says Nakata, who’s not surprised that online orders are heavier on center store items and liquor than fresh foods. In addition, “Shopping brick and mortar stores is an event for our [primarily Hispanic] customers. They like to bring the kids and walk the store to see what’s new. The convenience of curbside is definitely taking hold,” he adds, “but it will take more time to evolve with our customers.”
Shopping brick and mortar stores is an event for our [primarily Hispanic] customers. They like to bring the kids and walk the store to see what’s new. The convenience of curbside is definitely taking hold, but it will take more time to evolve with our customers.
100 STORES BY 2025
Next month, Superior Grocers will open its 48th Southern California supermarket in Santa Paula. Stores in Victorville, Santa Monica and Dinuba are also on the books. But by 2025 the company expects to double its store count, both organically and through acquisition. Many of the new acquisitions will operate under The Market by Superior banner, which is reserved for smaller footprints, often in urban areas where space is at a premium. However, the chain is convinced that small formats done right can meet all of consumers’ grocery needs.
“The original Market opened in 2019 in Los Angeles where not a lot of big footprints are available,” says Nakata. “The challenge was to create a primary grocery store, not a convenience store, where customers could enjoy the full Superior experience even though it’s a smaller box. But we proved that it can be done. We are truly the neighborhood store.”
However, the SKU count is pared down significantly, so offering the right items at the right price for the community is critical, says Nakata. While many stores cater to Hispanic shoppers — which is reflected in the assortment — some are located in areas with large Asian or African-American populations as well, he explains. So even though buying is centralized to ensure a degree of consistency from store to store, “In areas that have a higher percentage of other ethnicities, we offer special items and ingredients for that customer base,” says Nakata.
Sometimes people look at Superior Grocers’ concept — limited SKUs, mass displays, etc. — and assume that it’s more of a warehouse-type store. They miss the fact that we’re… very driven by superior customer service.
While the proper assortment, including ethnic items not found in “conventional” supermarkets, has helped Superior Grocers succeed in markets where others have failed, community involvement also plays a key role. “Being part of the community means more than just operating a store where residents can buy groceries,” says Nakata, citing efforts to support local schools and other organizations. But it goes beyond that.
“People look at Superior Grocers’ concept — limited SKUs, mass displays, etc. — and assume that it’s more of a warehouse-type store,” he explains. “They miss the fact that we’re all about our people, and we’re very driven by superior customer service.”