In The News

From the Contra Costa Times (Walnut Creek, CA):

Growing in a shrinking economy
By Eve Mitchell

Some have been coming for years to get the bargains while others are recent converts in response to economic hard times. Then there are those who just like to browse the aisles of a Grocery Outlet store, a place where the merchandise is constantly changing.

Whatever the reason, the Berkeley−based discount retailer with 136 stores in California and five other Western states has experienced a double−digit increase in business since the recession began in December 2007, according to the company. Last year, five new stores were opened, including ones in San Leandro and Manteca and a second location in Hayward. Plans call for opening between six to eight new stores this year, including a location in Pinole.

"I would say we are one of the few retailers that has seen a big increase in both transaction size and the number of customers coming through the door," said Eric Lindberg, co−chief executive officer of Grocery Outlet. And while the chain has seen business improve during earlier recessions, "we have never seen an increase to the magnitude of the last two years," he said.

Privately−owned Grocery Outlet specializes in buying heavily discounted close−outs of excess inventories from manufacturers. It's known as "opportunistic sourcing" in the retail trade. Most of the merchandise is acquired from national brand−name manufacturers, but there are some private−label products from outside the chain's market area.

"We appeal to frugal people," said Lindberg.

College student Ruben Rojas is living on a tight budget, so he's always looking for ways to be frugal and save money. Shopping at the Grocery Outlet on Fourth Street in Berkeley helps.

"It's just a way to save money," said the 32−year−old philosophy major at the University of California
Berkeley. "When I first found out about this place, I was sold the first time. There is always something new. Of course, there is always something missing.  If there is something you like, you really need to stock up."

Here today gone tomorrow is indeed part of the retail formula when in comes to Grocery Outlet's business model. But shoppers don't seem to mind.

"There are surprises. I like looking for interesting things. I like that everything is changing," said Berkeley resident Sally de Becker as she perused the shelves for a discounted buy on fine chocolates. Yes, the brand of chocolate may change, but whatever is on the shelf will be a good brand, she explained while shopping with her 13−year−old daughter, Elsa.

If a food or beverage item on the shelves has a "best−if−used−by date," the price gets cheaper the closer it gets to that date. Once that date is reached, merchandise is pulled from the shelves. Stores also carry fresh produce, delicatessen, meat and dairy products. But it's not just groceries that are available. The store also has things you wouldn't expect to see in a grocery store: hair dryers and vacuum cleaners, for instance.

Among the food items that have seen a pickup in sales over the last couple years are those big portions of frozen lasagna and 10−piece packages of chicken, said Lindberg.

"People look for basic high−caloric items like pasta and rice," he said. Wine sales have also picked up, he added.

Customers who shop at Grocery Outlet have what Lindberg calls the "frugal gene" and really can't be pinned down when it comes to a demographic profile. Rich, poor, or in between they all shop under the same roof.  Some people are frugal because they don't make much money and have to be while other frugal people do have money but are just looking for a bargain. "They love a deal, whether they need a deal or like a deal," said Melissa Porter, vice president of marketing for Grocery Outlet.

Frugality is catching on.

Nearly two−thirds of consumers said there were being more careful with money than they were in 2008 to cope with the economy, said a survey released last October by Mintel, a leading market research company. To that end, budget−conscious consumers hoping to save money are looking to a wider range of stores to meet their shopping needs. As a result, super centers, warehouse clubs and dollar stores are seeing more shoppers, the report said.

"The value message, that's what consumers are digging right now. Frugality is revered," said Bill Patterson, a senior analyst at Mintel. Even when the economy turns around, Patterson expects that value−conscious consumers will still continue to shop at places where they found bargains, even if overall growth at such stores slows.

"You end up with the concept of a smarter shopper," he said. "The value proposition is something that is really going to play out much more."

Mitchel Rubin, a Berkeley artist and resident, has been shopping at Grocery Outlet for about 20 years. "You never know what you are going to find here and the prices are great," he said. But like many who go to Grocery Outlet, Rubin does not do all his shopping here. "I don't buy fruits and vegetable here. I go the Berkeley Bowl."

Others like to do all of their shopping at a Grocery Outlet. "I do everything here, vegetables and meat and produce," said Russell Moran, an 83−year−old semiretired Berkeley resident. The low prices bring him in but he also likes the changing merchandise, brands from different part of the country that show up from time to time.

"It's a little adventure," he said.