Case Study Analysis of Marketing Potential for

Local Producer to Independent Grocer in Jackson, Lenawee, Monroe,

Washtenaw and Wayne Counties

History of Grocery Retailers1859 – The Great Atlantic & Pacific Tea Company is founded (Retailer Farmer Jack is now part of this company)

1870 – SUPERVALU (now owner of Save-A-Lot) began as a wholesaler serving the Minneapolis/St. Paul area

1883 – Barney Kroger opened the first Kroger Co. store in Cincinnati, Ohio

1918 – Independent Grocers formed Cooperative Wholesale Grocery Company (Now Spartan Stores)

1926 – Independent Grocers Alliance (IGA) established to increase buying power

1934 – Hendrick Meijer opened first store in Greenville, MI

Four of the five top grocery retailers operate stores in the five counties

Wal-Mart Supercenters are located in

Jackson & Adrian

#1

#3

#2

#54 Stores in Wayne &

1 Store in Washtenaw

County

2 Stores in Wayne County

(Livonia)

4 Stores in Ann Arbor &

1 Store in Ypsilanti

Part of A&P group

(11th largest grocery chain in US)

- all stores are located in Metro Detroit area- 2 stores in the city of Detroit

~ 18 stores in Wayne County- 2 stores in Monroe County

• 14th largest grocer • Meijer visits farms in

each of 5 states to ensure quality, food safety, packaging & cooling techniques.

• Reviews what worked & what didn’t with farmer to plan for upcoming year.

Advantage of Cooperatives

Ex: IGA & Spartan Stores

• Independent grocer enjoys same purchasing power as chain retailers

• Cooperatives offer advertising guidance, and placement – reduces costs for independent grocer

• Technical support available

Grocer Classifications

• Chains – companies with many stores and influential purchasing power.

• Independent Grocer – owner of one or two stores, affiliated with a cooperative group to lower purchasing costs.

• Mom & Pop Shops – owner of one or two stores without cooperative affiliation

For this study…

• Spoke with Small Chain Grocer – Polly’s Country Market (Stores in Jackson, Lenawee and Washtenaw Co.)

• Independent Grocers with Cooperative Affiliation – Franks Shop-Rite (Jackson Co.) & Interlakes Market (Lenawee Co.)

• Independent Grocers without Cooperative Affiliation (Mom & Pop Shops)– Shannon’s Market (Jackson Co.), The Springs (Lenawee Co.), Danny’s Fine Foods (Monroe Co.), Anand Bazaar (Wayne Co.) & Andy’s Market (Wayne Co.)

Findings… Small Chain

• Does one ad for all stores, needs to be able to have enough product to fill all 12 stores

• Purchases produce at Eastern Market and requests Michigan grown products from suppliers - ultimately buys lowest priced item

• Buys chicken and lamb from Jackson Co. & Lenawee Co. Fair each year. Unable to compete with Meijer on price of Beef.

Findings…Independent Grocer with Cooperative Affiliation

• Co-op allows grocer to get lower price on goods (compete with chain)

• Penalized if delivery truck is not full – typically get delivery 2x per week (have to pay for entire truck regardless)

• Co-op compiles & prints ad with store name on it – store saves lots of $$$

• Those grocers who are affiliated with co-op are making money and doing well

Findings…Mom & Pop Shops

• Most likely to purchase from local farmer (4 out of 5 interviewed are or would like to)

• Believe buying from local farmers provides competitive advantage

• Very committed to neighborhood & community

Barriers in Farm to Grocer Relationship

Communities where residents receive state assistance for food, grocers cannot stock fresh produce & meat because it is not purchased (spoils)

Barriers in Farm to Grocer Relationship

• Even companies who are buying locally may have high employee turnover. New Buyer may not be aware of, or care how well local product is doing & cut product from purchase list.

• Chains and Co-ops have reduced purchasing price because of buying power. It will be difficult for small to medium farmers to enter this market.

Opportunity

• Increase fuel charges may force grocers to source locally.

• Chains are using locally grown as way to connect to community.

• Mom & Pop grocers are tied to community and want to support the local farmer.

Photo: www.meijer.com