Even for a well-respected grocery store brand like Wegmans Food Markets, which opens a second store in the Richmond area today, the grocery industry is a tough business to be in these days.
The competition is not just the retailer across the street or down the road, but the apps on the smartphones in their customers’ pockets that can be used to order groceries online.
Grocery stores typically operate on razor-thin margins. According to the Food Marketing Institute, the average net profit for a grocery chain after taxes was 1.5 percent in 2014. But grocers make it up in volume, with median weekly supermarket sales averaging $516,727.
Danny R. Wegman, CEO of the 100-year-old family-run grocery chain based in Rochester, N.Y., said he and executives at his company like to view challenges facing the grocery industry a bit differently — as opportunities.
“Because when change happens, you get a chance to do something different,” Wegman said in a telephone interview last week.
“I think the traditional supermarket business is changing and, in fact, we believe that so much that our store will certainly be quite different from anybody’s in the market,” he said. “Because we believe that people will want us to do more and more. And that’s why we make a lot of meals in our stores for our customers.”
In fact, nearly 20 percent of the employees at a Wegmans store are involved in meal production or baking, he said.
“It’s quite a bit different from other supermarkets, and that’s because of our belief that our customers want more and more from us,” he said. “They don’t have time to cook as they used to, and they don’t have time in particular to cook healthy, which they are wanting to do.”
People are buying food over the internet, primarily products in cans and boxes, said Wegman, grandson of the company founder.
“We don’t think cans and boxes will be that important in the future, quite frankly,” he said, emphasizing again the consumer shift to wanting more prepared foods, including meals that are heat-and-eat.
The chain’s newest store is in the West Broad Marketplace shopping complex off West Broad Street near North Gayton Road in western Henrico County.
The store opens today at 7 a.m. (The store’s regular hours after today are 6 a.m. to midnight daily.)
If today’s Wegmans store opening is anything like the May 22 opening of the chain’s first area store in Chesterfield County, hordes of people will line up before the doors open, and hordes will stream through the store all day long.
That store opening was the third-biggest opening day for the chain.
Wegmans received more than 800 requests in the past decade to bring stores to the Richmond market, spokeswoman Jo Natale said. The chain has had a store in Fredericksburg since 2009 and stores in Northern Virginia for more than a decade.
What took them so long to get here? The short answer: Ukrop’s Super Markets, the home-grown chain that dominated the Richmond-area grocery market for decades.
“The Ukrops were wonderful friends for many years. That’s why we never looked at going to Richmond,” said Wegman, referring to the grocery chain started in 1937 by Joseph and Jacquelin Ukrop and later run by their sons James E. Ukrop and Robert S. “Bobby” Ukrop.
“It was only after they sold to Martin’s that we said ‘OK, that’s over,’” Wegman said.
The Ukrop family sold the stores in 2010 to Royal Ahold, the parent company of Martin’s Food Markets. Last month, Ahold and Delhaize, the parent company of Food Lion, merged.
To satisfy federal anti-trust regulators, the merged company is divesting itself of 19 area Martin’s Food Markets.
Ten of the Martin’s stores are being sold to Florida-based grocery chain Publix, which had previously announced it was building a store in western Henrico. Publix is looking for more store sites.
Like Wegmans, employee-owned Publix has a reputation for stellar customer service.
“They are absolutely wonderful people,” Wegman said. “George Jenkins, who founded Publix, and (my) dad (Robert Wegman, who died in 2006) were like best friends. In many ways, it’s kind of sad that we will compete. We didn’t know that they were going to Richmond. Anyway, here we go.”
“We have different strategies,” Wegman said.
“Publix stores have always been a little smaller and more convenient. That was what they believed in,” Wegman said. “Our stores have always been larger to try to bring people from a greater distance. I think where we both have a huge common belief — both George Jenkins and my dad — was in customer service and in treating people the best you could. Publix is a great company to work for and hopefully Wegmans is, too.”
Wegmans stores are big. The Short Pump store is 120,000 square feet, while the Midlothian Turnpike store is 115,000 square feet. A typical Walmart Supercenter has about 182,000 square feet, while a typical Kroger Marketplace is about 123,000 square feet.
In contrast, Publix, which has 1,122 stores in Alabama, Florida, Georgia, North Carolina, South Carolina and Tennessee, keeps its stores closer to the size of the typical supermarket — about 45,000 to 55,000 square feet.
But Publix is a much bigger chain in terms of sales. Publix generated $32.4 billion in revenue last year, while Wegmans had annual sales in 2015 of $7.9 billion.
James Ukrop, the former chairman and CEO of the family-owned grocery chain, said last month when Martin’s announced it was selling 10 stores to Publix that the consumers in the Richmond region will have so many more options than any other market in the country. “It is the North meets the South with Wegmans and Publix colliding in Richmond. All of this competition makes me think that I am glad to be out of the grocery business.”
The Richmond area has been described as unusually competitive — with existing grocers looking to expand here while others look to come here.
Walmart, with 21 local stores, had the No. 1 market share for the 12-month period that ended March 30, according to Food World, an industry publication that tracks the grocery industry. Kroger, with 18 area stores, was second.
The most recent market share report was for a reporting period before Wegmans entered the market.
Danny Wegman and daughter Colleen Wegman, the company’s president, and daughter Nicole Wegman, who oversees perishable foods and wines at the chain’s 90 stores, are expected to be at the Short Pump store opening today.
Todd Strassner, a Wegmans employee who started with the company in 1981 as a meat clerk, is manager of the Short Pump store. The two area Wegmans stores employ about 1,100 people total.
The Short Pump store layout is the similar to the Midlothian store but flipped — so that when you walk in, the prepared foods, bakery and Market Cafe areas are to the left in the Henrico store and to the right in the Chesterfield location.
The Henrico store is 5,000 square feet larger, and some of that extra space is devoted to a separate seating area, with a fireplace, large-screen television and cozy chairs, that will be available for eating and hosting private events.
The stores carry many locally sourced foods and products, including those made by Ukrop’s Homestyle Foods LLC, the company created by the Ukrop family to continue to offer many of the former chain’s prepared foods, including its White House Rolls and Mrs. Marshall’s brand chicken salad, pulled pork, potato salad and coleslaw.
In addition, Wegmans’ Natale said, Ukrop’s Homestyle Foods produces a number of items under the Wegmans label, including chocolate pie, lemon chess pie, biscuits, cheddar biscuits and cornbread.
“They worked with us to tweak their recipes to our specifications,” Natale explained. For instance, the Wegmans bakery products do not contain high-fructose corn syrup or partially hydrogenated oil, she said.
”We are always tweaking,” said Colleen Wegman, when asked about what Wegmans executives have learned about area tastes after opening the first area store.
“One of the things we are committed to is continuous improvement,” she said. “We are always learning and trying to get better. One of the things we were quite surprised at, even on opening day, was the number of products that sold from the North, from upstate New York where we are from. We just didn’t expect that,” she said.
For instance, the No. 1 hot dog sold at the Midlothian store is the Zweigle’s brand, which is made in Rochester, N.Y.
“A surprise to us is there must have been many customers who have relocated,” she said.
Also selling well at the Chesterfield store is a beer — called Evelyn, a session IPA — made by Richmond-based Hardywood Park Craft Brewery specifically for Wegmans. That beer is available in The Pub, the store’s full-service restaurant, and customers also can fill their growlers, said Kathy Haines, director of restaurant operations for Wegmans.
“It’s doing amazing. In fact, we are looking to take it to our Northern Virginia stores because of the demand for it,” she said.
A Wegmans store is scheduled to open in Charlottesville in November, while a store proposed for Newport News is in limbo over some local zoning issues.
Is more expansion planned for Virginia? Or perhaps another store for central Virginia? What about reports that Wegmans might be looking at adding a smaller footprint store to its lineup?
“It’s something we keep looking at,” Danny Wegman said about the smaller stores.
“We really have come from the suburbs; if we do a smaller store, it would be to service people in the cities where shopping is more often per week. … It’s a different model. We keep looking at that. We don’t have a special site in mind,” he said.
“If you ask us tomorrow, we might. We are kind of on the fence. We enjoy doing what we are doing. It’s a lot of work and, for all of our people, our primary goal is to do things very well, take care of our people so they can take care of our customers.”