Associated Wholesale Grocers Inc.
People want to be healthy, but they still want their creature comforts. “When you take the average everyday customer, they want to be able to buy Coke and Fritos, but they’re also starting to see the health trends and news, and are changing to a healthier lifestyle,” Oldright insists. “They still want conventional goods but are buying into the organic for a healthier lifestyle.”
AWG launched its in-store organic brand, “Clearly Organic,” in 2008 with fewer than 50 items. The line and its labeling were revamped and redesigned in 2013 and relaunched this past year with 200 items. “We created that cost-reduced, private-label organic line so that our retailers could be competitive in their marketplaces,” Oldright says. “There are a growing number of Sprouts and Whole Foods out there. We want to make sure we have a great organic line that is cost-competitive against those retailers so that our members can be in the organic game and draw those customers in and give them a reason not to go anywhere else. They’ll have the organic and healthy lifestyle foods they are looking for.” The next phase of development is to increase the Clearly Organic line this year to 300 by adding additional categories in meat, seafood and produce.
Health and Wellness
Consumers wanting to avoid health problems are fueling the move toward organic food. “When we talk about people trying to move away from highly processed foods and sugary foods and non-organic, they’re trying to move into a healthier lifestyle,” Oldright points out. “There’s a rampant issue with diabetes, obesity and heart disease. A lot of people are trying to avoid these diseases. You see a movement to an organic or non-GMO diet or ‘free-from’ diets, which are gluten-free, grain-free, sugar-free, fat-free, that whole free-from diet lifestyle that is really driving a lot of sales right now.
“Organic is becoming the trend,” he insists. “Natural still has that, ‘What is it?’ until we have a better weigh-in from the FDA and legislation comes forth that says, ‘This is what natural is.’ People understand what organic is. It’s non-GMO, without pesticides, so they are starting to understand the strict designation is organic. I think we’ll see in the next few years a consistent swing toward the organic label.”
Oldright expects this swing despite the frequently higher prices of organic food, an increase that he pegs from 15 to 20 percent over conventional food. “That’s the biggest hurdle and what most large retailers and wholesalers are looking at,” Oldright says. “How can we decrease that gap? Something you’ll see more and more in 2015 and 2016 is the shrinking of that gap. We all want that, but the biggest factor in there is supply and demand. If this demand keeps going up and we reduce the price differential, how do we come up with the product and the supply?”
Foods without genetically modified organisms (GMOs) also are popular and complement organic. “All organic items are non-GMO, but conversely, non-GMO does not have to be organic,” Oldright notes.
AWG covers grocery, dairy, frozen, produce, meat, deli and foodservice. VMC handles health and wellness products such as vitamins, supplements, over-the-counter drugs and personal care products such as natural toothpastes, deodorants, shampoos and conditioners. “Healthcare based on more natural ingredients or naturally based chemicals are a big part of that 20 percent jump,” says Anna Mancini, VMC vice president of marketing and merchandising.
Declaration of Independents
Unlike wholesaling competitors, AWG serves only independent grocers. “That is our competitive edge, our calling,” Oldright says. “We help our independents compete against the Walmarts and Krogers of the world. Because of our collective buying power, we can pass those savings to our co-op members.”
AWG does not service national grocery chains. “We aren’t competing against ourselves,” Oldright notes. “We wouldn’t want to have to service a large national chain and an independent in our backyard. We have some simple philosophies. When you talk of a co-op, you’re equal. It’s not based on your size. So we don’t give one thing to one member that we can’t give to another – that’s the rule of the co-op. With a co-op structure, whatever you generate in profits, that’s the co-op’s money. We are owned by our co-op members. Those profits are returned back to the membership. It’s a rebate they get every year.” The size of that rebate has shown consistent growth. “Every year, we rebate more, and our sales have grown significantly,” Oldright says.
Mancini attributes VMC and AWG’s success to its cost structure. “We provide the lowest costs available,” she maintains. “We make sure our members are not paying extraordinary fees. We can try to control cost on our side, and also the service. We help members handle their ads. We do store layout and design. We help them with POS technology and how they run things through the system. We help them in every phase of how you’d run a grocery store. We provide them with a cost structure so that they can compete with national chains and dollar stores. We have a very sustainable business model, where it’s really the cost of goods, the control of expenses and overhead, and combining purchasing power. Our company is very disciplined about that.”
In addition to the VMC division, AWG also has a strong military division, Mancini points out. “We serve quite a few military bases, and it is a strong program for us,” she says. “We help give those commissaries a great price point, and they pass all those savings on.” VMC Distribution Centers has a 220,000-square-foot warehouse in Fort Scott, Kan., and another one that measures 500,000 square feet in Memphis, Tenn., to serve its stores. “We have a very extreme commitment to freshness for our retailers to make sure we’re rotating inventory out and getting as many turns in a year as possible,” Mancini says.
VMC carries more than 11,000 health and beauty care items and more than 10,000 general merchandise and seasonal items, along with more than 3,000 dollar grocery items. It has more than 850 BestChoice, HBC and GM Private Label items along with more than 10,000 natural, organic and specialty food items.
VMC hosts two trade shows annually in Kansas City. “We bring in more than 1,000 retailers to Kansas City and showcase programs and promotions,” Oldright says. “We showcase a lot of new items, trends, innovations and new planograms sets. It’s a big part of how we go to market and show in person to our members some of the initiatives and promotions that we’re working on.”
For the future, “We’re going to continue exploring growth opportunities for our members and really concentrate on capitalizing on the desire of the consumer for a healthier lifestyle,” Mancini stresses.