At one time in America, grocery shopping was a lengthy expedition consisting of many stops. One at the bakery, one at the deli, one to the drug store, and one to the butcher.

It wasn’t a hardship: Most shops were in the neighborhood.

But with the rise of the suburbs came greater distances, and travel to many stores became more complex. So food retailers came up with the concept of a lifetime: Everything you need, just one shop.

Fred Meyer Stores, now owned by Kroger Co., promoted their food-pharmacy-bakery-butcher model in the well-worn motto: “One Stop Shopping.”

The supermarkets were so popular that the mom-and-pop outlets that preceded them could not survive and most went out of business.

As the major markets expanded their holdings, they offered lower prices and better selection than even the large independent groceries. Unable to compete, the independents buckled by the score, many of them to be reborn as Safeways or Albertsons or Thriftways.

But like life in the wild, dominance can be a fleeting thing: the chains are finding their position at the top of the heap faltering in the face of a dual challenge from opposite ends of the spectrum. On the one end, Wal-Mart, whose Goliath food centers overachieve in the low price arena, is adding stores everywhere that are cutting into supermarket profit margins. On the opposite end, a sort of death by 1,000 pinpricks, comes the revenge of the neighborhood markets: They’re back. They’re multiplying, and Oregonians are enthralled with them.

Analysts say it started with Trader Joe’s, whose nicely priced imports and unique foods took the edge off culinary boredom in the 1990s and led many to schedule occasional visits–once or twice a month, maybe, to browse its aisles.

But in Oregon, at least, Joe’s has become a regular and seemingly necessary destination, even though it lacks many of the staples and basics that comprise a family shopping list.

Consider the winter of 2003: Lake Oswego, especially the heights, had been iced in for nearly a week–ice so thick that even the post office failed at its sleet/snow/dark-of-night promise and gave up on the hillier portions of town.

Finally, the sun arrived and residents, whose patience and stores of food had both undoubtedly been worn thin, took to the streets and arrived, slipping and sliding, at the welcoming portal of Trader Joe’s.

Within minutes, the store was under siege. Thick-garbed customers reached around and over one another in the race for goods, and the register lines were soon eight-ten deep with folks carrying full baskets, most adorned with at least one bottle of Two-Buck Chuck (Joe’s reknowned cheap, but good wine).

While such a rush might be expected at a local Safeway or Thriftway, it’s another thing altogether to see it at a specialty store in the absence of a good sale: a sign that small markets are becoming not just a side dish, but a staple of Oregon life.

Trader Joe’s sparked the trend that has in recent years spawned scads of small groceries. New Seasons Market and Zupan’s, each Northwest-owned and each arriving in the 1990s, were a near-instant hit with shoppers, enabling them to send shoots all over the Portland metro area. Meanwhile, City Market on 21^st in Portland, offering the new, the different, the unique and untasted, has enjoyed steadily growing interest in its high-end Pastaworks products and chef-prepared charcuterie products, despite skinflint economic times. 

Wild Oats Natural Marketplace, purveyor of natural and organic foods, has blossomed in the northwest market, expanding to ten locations in Oregon and two in Vancouver in the past decade. The company went public in 1996 after being named one of the fastest growing ventures in the nation. Other specialty stores thrive here as well: Gartner’s Country Meat Market, which originally opened 48 years ago in Northeast Portland, has watched new customers suddenly discover it in the past few years. In Southeast, there’s Limbo, born in 1996, for produce, and Sheridan Fruit Co., both healthy in the presence of cheaper supermarkets.

Sally Koeller, manager of Limbo, says the business has been growing solidly each year of the eight it’s been in Portland, despite the recession. She says her customers tell her they like the idea of patronizing a locally owned grocery and the ever-changing variety of products it brings. She says the owners actually operate the store, meeting and getting to know customers personally.

Limbo has benefited from riding the coattails of Trader Joe’s, which is right next door to it on SE 39th. Customers head to Joe’s for wine, fish and other tasties, then come to Limbo to get their produce and browse the massive herb section.  

Shelly Clevidence, of Southeast Portland, is a Limbo’s regular. “It seems to me that small community stuff is coming back, and that’s great to see.” She says she likes the monumental herb and spice selection and the cheeses at Limbo, but “I still get diapers at Safeway.”

John Zupan might have seen it coming.

Or he could have been guessing.

Certainly if anyone could have a sense of the grocery thing, it would be Zupan, who started out stocking and washing veggies in the produce section of Fred Meyer, went on to became district produce manager in charge of 14 stores at the peachfuzz age of 26, and now owns a wildly successful chain of small markets in Oregon that are skimming the cream off supermarket profits.

He describes it as self-defense—the decision to go small. But it paid so well that the lone Zupan’s in 1994 was joined by five more Northwest Zupan’s stores in just nine years, including two that opened in 1996. A store near Lloyd Center is under construction now.

Zupan’s first solo venture was a conventional supermarket, but an independent, which like others was in head-to-head competition against a tide of chain stores that gave its victims an unholy choice: sell out, or die in a price war that would suck every retirement dime they had socked away. Independent markets were choosing each day to surrender to the consolidation wave.

Zupan says he sat down with his son, Mike, who had just graduated from college. It was 1990, and the question was: How do we survive and compete as an independent grocer?

The answer, the two decided, was not to try a head-to-head battle, but instead to come up with something wholly different. Something the Super chains could not do.

Rather than provide everything the world of food had to offer, the Zupan model would concentrate only on top-line products. Gourmet cheeses, the best vegetables, the best fruit—fresh figs. Restaurant quality seafood. “We’ll pay three dollars per flat more for strawberries because they taste best, so sweet you don’t have to add sugar,” Zupan says. “The seafood is the same seafood that Jake’s (restaurant) uses. Then it’s up to the customer to decide whether it’s a good value,” he says.

With the gourmet goods comes expertise on how to use them: Zupan’s corporate chef, David Dedrickson, makes the rounds of the various stores, demonstrating cooking techniques and suggesting new ways to combine ingredients most folks have not even heard of. And yes, he is a real chef, having spent 20 years in the haute restaurant scene.

On a sunny day in March, Dedrickson is offering a twist on an old standby, ham and cheese. Only the ham in this case it is Madrange French ham and the cheese is Couturier goat cheese combined in a croissant and embellished with apple garlic jam.

Customers linger, nibbling on demo sandwiches, asking how to make it Adkins-Diet compatible. Without hesitating, he suggests dieters simply eliminate the croissant and roll the cheese and jam into the ham and secure with a toothpick. Voila.

A schedule posted at the demo table advertises another Zupan’s specialty: wine tasting. In the store. Dedrickson gives this rationale: “This is a way to find out whether you like a wine. Usually, if it sounds good on the label and has a pretty bottle, you might buy it and just take a risk that you’ll like it. Here, it’s an informed choice.”

The Zupans also changed the box it all comes in: the grocery building. Rather than a cinder block plastered with this-week-on-sale posters, Zupan’s opts for an atrium-like glass façade, banked with flowers. Outside the front door is a Traeger gas barbecue, grilling something tantalizing for the lunch hour crowd. Inside, the lighting is subdued.

Ron Green, of Raleigh Hills, is a believer in the small market concept. He was shopping at a Zupan’s just down the street from two major supermarkets he occasionally visits, but only for incidentals, like milk. He says he can see with his own eyes how popular the small stores are becoming. “I like Zupan’s and I like New Seasons, too. Good selection. And I know that since they’ve come, I’ve seen a drop off in the crowds at Safeway,” he says.

Elaine Tatro says Zupan’s has changed the way she shops.

A west Portland resident since 1968, Tatro was a 30-year Fred Meyer regular—still is, for staples like flour and sugar. Zupan’s happened upon the scene, one thing led to another, and now she’s two-timing Fred.

“I’m here at Zupan’s once per week. Perhaps twice,” she demurs, admitting to a weakness for Zupan’s fresh seasonal fruit and its sugar-free chocolate chip cookies. Beyond the groceries, Tatro says, she likes that fact that the store’s staff members know her by name and know what she likes. And she knows them. “Here everyone knows me,” she says. “At Fred Meyer, I know maybe two or three people after all these years.”

She says Zupan’s reminds her of a past era, “when we all used to go to the corner grocery store.”

Foodie Nation

Certainly, smaller markets have an easier time remembering who’s who. An easier time creating an intimate environment.

But that’s not the only reason small markets have hit a spark in the Northwest.

Industry insiders say markets featuring fashionable fodder happenstanced at the time of a sort of foodie renaissance in the Northwest, where even the comings and goings, tiffs and travails of various restaurant chefs is considered worthy of print in local newspapers.

Grocers say the Northwest is at the forefront of a slow-food revolution, where the kitchen—and by extension the market—becomes the hub of a lifestyle and the macaroni and cheese generation embraces the fact that no one’s going to eat for at least an hour.  “Portland, Seattle, the Northwest in general, and San Francisco are ahead of the rest of the country from a food aspect,” John Zupan says.

He points to independent restaurants—chef-owned restaurants—that have exposed the Northwest to new ideas and the best ingredients.

“Food has become more here,” says Zupan, himself a confessed foodie. “It’s more like the European mentality than it has been. It’s an entertainment issue that says there’s nothing better than to cook a meal for friends—an evening that is centered around savoring the food. I like to say the best restaurant in town is my kitchen.”

Europeans also tend to shop more markets more often to get the finest ingredients—something Americans are doing more of, he says. “Ideally, if you’re buying fresh fruits and vegetables, you should buy them three times a week.”

He says the food transcends income, because Oregonians living in rentals with a shoestring budget find simple pleasure in cooking an excellent meal. As proof, he points to the Zupan’s he opened in a low-income area of southeast Portland on a blighted street. “People thought we were crazy going into Belmont in 1996,” he says. “It turns out we were ahead of the curve, not because we knew it, but because we just felt there was a need.”

The Northwest’s temperate weather also has made it easy to supply each store with fresh floral goods, vegetables and fruit to make a successful run at the niche market. “The climate is conducive,” Zupan says.

The Northwest has been key in the success of other alternative grocers, like Pioneer Organics, a Seattle-based venture that delivers organic vegetables and fruits to subscribers’ homes each week.

It began as a one-man, single station-wagon business, with Ronny Bell—the one man—bumping along dusty fields, collecting farm-fresh produce for sale. In seven years, it has swelled into a 3000-customer business with 30 employees in Washington state and a handful more in Oregon to launch a new outlet for a new seed batch of 300-some customers. Bell no longer has to drive an old Subaru wagon. “No, I got rid of the Subaru two years ago, but I don’t want to say what I got because…well, I feel kind of guilty about it.”

Bell says he stumbled onto the business idea after washing out of farming in short order. “I was really into the idea of organic farming. I had a friend who was doing it, and I went to work for him. I thought I was going to be a farmer. So, I farmed for a week and then said, ‘I can’t be a farmer.’”

He decided to try distribution, packing up his friend’s surplus products and selling them for him. As it happened, he says, the timing was perfect because people were starting to show signs of interest in quality food. The trend has grown. “People are moving away from fast food and the entire mentality that convenience is king. People are trying to get back in touch with food.” Like, maybe “citrus marinated snap peas and mixed greens,” a Pioneer Organics springtime recipe.

And Portland, he says “is leading edge…people in the Portland area take their food seriously. They’re a savvier group wanting to know where their food is coming from.”

Brian Rohter, president of Oregon-based New Seasons Market, says Oregon is one of the last places where independent grocery stores can still be found. “Oregonians are an independent group of people,” he says. And, they like to know that their stores are locally owned, and that their perishable foods are from local vendors.

“People want community, the way it used to be when people owned the stores in their own neighborhoods. I live in Portland myself,” says Rohter. “My kids go to school here. I’m committed to the quality of life in this community.”

At the same time, he positions his market as a sort of general store rather than a specialty niche, with a product line that contains a little of everything—a place where organic meets practicality. New Seasons’ web page puts it this way: “Most everyone likes to eat healthy and natural foods but who's perfect? And who has the time to make two stops to get free-range chicken and Frosted Flakes? “

If that’s not enough for you, you can sign up for one of New Seasons’ workshops on natural medicine, Pilates or the use of cultured foods and something called “probiotics.”

Whatever niche it fills, it’s been successful, growing to four stores in four years, not counting the fifth store, set to open in 2005 in north Portland.

Neither Rohter nor Zupan are worried about locating near supermarket powerhouses. “I’m not afraid to be across the street from Safeway,” Zupan says. “We have been and we’ve been successful.”

Oxymorons

You can’t have it both ways.

At least, that’s what Mom used to say.

You can’t have a Wal-Mart superstore trend at the same time you’re having a small market comeback.

Or can you?

Bert Hambleton, president of Hambleton Resources Inc., an Issaquah, Washington-based food industry analyst, says the twin trend can indeed exist. “Big box and specialty can both succeed by addressing different segments of the market that don’t have a lot to do with one another,” he says.

Specialty and small markets do best in urban environments, he says, such as Portland. “A lot of them are small, probably less than 30,000 square feet, which is pretty small by any measurement of any grocery, which would average about 45,000 square feet. They’re addressing relatively small geographic areas with a dense population base,” Hambleton says. “People in those areas are more oriented toward higher-end characteristics, like customer service or quality or even variety–the unusual.”

A Wal-Mart superstore, however, is “addressing the population on the fringe of a city, and that’s by necessity. You can’t locate 240,000 square feet and 20-plus acres at (NE) Killingsworth in Portland.” And, he says, the demographic is different, more likely to be households with children and a big mortgage.

Small and specialty grocery demographics in urban settings tend to be small-house neighborhoods, Hambleton says, “Dual income couples with no kids.”

A separate trend might explain how Zupan’s, New Seasons, Wild Oats and Trader Joe’s markets have all succeeded in pockets of suburbia: Chefs and recipes and “atmosphere” in small markets cater to people with time and money to spend, he says. Often, time and money are found in high-end suburban areas such as West Portland, West Linn and Lake Oswego, where the new niche has taken off. “It really is a total shopping experience,” Hambleton says. “You’re surrounded by the type of product and type of shoppers you feel affiliated with. The emphasis is on product demonstrations rather than on how high we can stack it and how low can we sell it for.”

He said small market popularity sprouted “from the belief that no one can be good at all of it. When I have the time, the income and the means, I’m going to pick out the best in each category.”

Hambleton does not believe Oregon is unique in its infatuation with small market philosophy. “Portland is not the first to go through it. It was in the Bay Area first and now it’s happening all over the place.”

Not to say that the supermarkets are in any danger. “Safeway is not going out of business any time soon. Now that there are more choices out there, they will take a little away from the share of the wallet. But these little stores are not going to be the primary place where people drop $100 a week. What they will do is chip away at the edges.”

Hambleton believes the small markets are intriguing to shoppers because of the “treasure hunt. It’s new and it’s neat and there’s something sizzling on the grill and you don’t know what it’s going to be. It’s the same thing with Costco. They don’t have everything, so you go in and see what they have.”

Safeway, by contrast, is successful for the opposite reason. “It always has the same stuff and you know right where it is, down to the aisle and how far down. You can count on them, which is why the chains have been able to get away with being dismissive of the specialty store trend for as long as they have,” he says.

Combat

Supermarkets, however, have not been standing still. To the contrary, most chains are doing their best to stay current without upsetting customers who want to see what they always see. And so, most stores have added inoffensive fresh fish counters, fresh-baked French bread, carts with infant seats built in, and florists.

Fred Meyer has been systematically renovating outdated stores; the Kroger-owned chain and California-based Safeway have each bonded with Starbucks, which has a kiosk and even a full cafe at some stores. Grocery carts have been fitted with coffee cup holders just in case you’re on the run and want to take it with you.

Safeway’s Museum Place store in downtown Portland, newly built, has shown the stores’ willingness to change with the times. It’s glassed in on three sides, offering natural daylight atmosphere rather than the traditional fluorescent look.

Cherie Myers, spokeswoman for Safeway’s Seattle office, says that the chain is keeping up with the trend toward more gourmet-level ingredients while “still maintaining our core store. You need to make sure you’re still a retail grocery. After all, customers may still want vanilla versus the latest flavor of ice cream.”

More changes are coming. “We just opened three ‘concept’ stores and they have all the bells and whistles. There’s an area where you can get complete dinners—a prime rib dinner, for instance. The deli is expanded with more choices for take-out food and not just traditional deli items,” Myers says. “There’s even an olive bar.”

Likewise, the store has experimented with organic items, which have driven the success of Wild Oats/ Nature’s stores, among others. But it’s careful to pull items that aren’t selling quickly enough. “Organic foods are a niche, but they’re not the biggest niche. There are some who like them and we need to have them, but if in fact there’s not a lot of turn in organic food, it will only be there as long as people are buying it.”

She says Portland has been excellent proving ground for new concepts.

But it has been a difficult few years for Fred Meyer, Safeway and Albertsons. Their ongoing battles nationwide with Wal-Mart and alternative markets have shaved profits. The shavings turned into dramatic profit losses this year in the aftermath of a nasty, four-month long worker strike that affected all three chains. Safeway in May reported its first quarter profits at 10 cents a share or $43 million, a 73 percent slide from last year’s same-quarter profit. Sales, too, are down: $7.6 billion this year compared to $8 billion last year at this time, according to a stock report published by the San Jose Mercury News.

The outlook for the stores is not exactly chipper, either.

Lehman Brothers analyst Meredith Adler told Business Week in April that even with the economy blooming out of recession, she predicts that the three will not experience meaningful recovery until possibly 2007. Adler said the supermarkets are having to address price issues and promote heavily to compete with expanding Wal-Marts and alternative markets.

Of the three, Adler says Kroger, the parent company of Fred Meyer, is best positioned to recover quickly.

Mary Loftin, Portland-area spokeswoman for Fred Meyer, said the chain can more easily absorb rising competition in the food area because of its success in other retailing areas, such as home décor.

“We stepped out of the home improvement niche after Lowe’s and Home Depot came in. Now we’ve gone toward home décor, which is an avenue we can succeed in. And so, we’ve changed out our furniture area to include upholstered items…We have more things for the ‘Trading Spaces’ shopper.”

The Sandy Fred Meyer store has skylights in the roof allowing more natural light on bright days, and a sensor that turns up the house lights on gloomier days. It was meant as a way to save energy, but more closely resembles specialty market lighting.

In the food arena, the company has made other changes to entice its customers, including offering fresh-made but uncooked pizza for shoppers looking to get a meal on the table in 15 minutes or less. It has brought back café seating and welcomed Starbuck’s franchises in some stores. And, it offers more organic products than in the past. “Specialty stores may have an expanded organics section, but we do have organic products and we have so many items the (specialty stores) don’t have,” Loftin says.

While Wal-Mart has not yet built a superstore in the Portland-metro area – the closest one is in Woodburn – supermarket representatives say they’re not worried. Loftin, for one, says Wal-Mart draws a different kind of shopper anyway. “We may all carry Coca-Cola, but on the other items, they carry a lower-end line than we do…A Wal-Mart shopper is not a Fred Meyer shopper.”

Some customers, however, are sold on picking and choosing what they like from whatever store might have it.

Elizabeth Underwood, of Boring, finds it no big deal to travel a bit on her lunch break in west Portland to patronize small markets. “I like their delis, the variety they have. And the atmosphere is more relaxing to me than ordinary stores. But I do shop at Safeway, too. Why do I make multiple stops? Because I think it’s worth it.”

BrainstormNW - August 2004