Modern Retailing Rooted in History

from CSNews - Barbara Grondin Francella - July 4, 2011

Tedeschi Food Shops' new concept store builds on the retailer's strong reputation for quality food and customer service

With the opening of a new concept store at the end of March, Tedeschi Food Shops is building upon the reputation it has been cultivating over the past 90 years.

The concept store, anchored in foodservice and differentiated services, confirms that the retailer's commitment to the brand is as strong as it was in 1923 when Angelo Tedeschi opened a small store in his home, said Peter Tedeschi, president and CEO of the now 190-store chain, which is based in Rockland, Mass., and operates in Massachusetts, New Hampshire, Rhode Island and Connecticut.

"As a brand, Tedeschi Food Shops has developed a relationship based on trust and respect with generations of loyal customers, dating back to our humble beginnings," Peter Tedeschi, Angelo's grandson, told Convenience Store News.

"We are the hometown company that has never strayed far from its roots in southeastern Massachusetts. Our reputation and customer focus gives us a sort of home field advantage. Many convenience store customers expect to experience nothing more than a transaction at their local convenience store. We want to provide our customers with an experience rather than a transaction."

Its newest location in Quincy, Mass., is the latest embodiment of that promise, strengthening the chain's positioning as a leading provider of fresh foods, beverages and private label products. The 3,926-square-foot store features an updated design with a ring of bright graphics hanging over grab-and-go merchandisers and services unique to the site.

The concept store offers butcher shop-quality, all-natural meats of the finest cuts, including certified Angus beef, organic chicken, pork and sausages. Customers can also find hot take-home meals; made-to-order pizzas; freshly baked artisan breads, rolls, pastries and muffins; specialty cheeses; an extended produce section and fresh-cut flowers; smoothies and shakes; and all-natural frozen meats and meal options.

"Customers can find all of the ingredients necessary to prepare a hearty meal at home," noted Joe Hamza, vice president of sales and marketing for Tedeschi Food Shops. "We know that people want one-stop shopping, and we aim to provide them with all the elements they need to create fresh, wholesome meals for their families."

The new site also showcases TD's Deli, the chain's proprietary deli operation. TD's Deli offers sandwiches, subs and wraps made with Thumann's meats and cheeses, as well as fresh salads, hearty soups, breakfast sandwiches and made-to-order party platters. Customers may customize their deli orders at state-of-the-art touchscreen ordering kiosks, and eat in a 15-seat dining area with complimentary Wi-Fi access.

When building the menu, the Tedeschi executives asked themselves several questions. What does the customer want? What new or unique attributes does the food offer? Is it healthy? Is it considered a comfort food or indulgence?

"We look to augment our everyday menu with foods that are not widely available in our markets," Hamza said. "We believe our growth in foodservice will be broadly driven by demand for flavorful, healthful and spicy foods in underserved markets and communities."

For instance, the chain's TD's Deli Fireball sandwich – Cajun turkey breast, pepper jack cheese, a signature pepper spread of cream cheese, fresh cilantro, lime juice, and serrano and habanero peppers on a freshly baked roll – targets a specific group of consumers with a taste for unique flavors and a specific customer occasion. So does its Lean Protein sandwich or salad, and its TD's Kids Box, which includes a sandwich, cookies and juice box all in one package.

While the chain has one expansive foodservice menu for all the stores, individual locations are free to customize the offer based on the local tastes of their neighborhoods and demographics.

"Offering a wide variety of healthy, delicious made-to-order items tells customers that we are serious about fresh foods," Hamza said. "People now view Tedeschi Food Shops as a destination for high-quality grab-and-go meals that can be complemented by standard convenience store fare, like salty snacks and assorted beverages."

To support the expanded food operation, the chain in January acquired a commissary in Rockland, Mass. The commissary produces the Tedeschi Fresh Foods line of take-home sandwiches, subs, wraps and salads. "The acquisition has allowed us to take control over one of the most strategic categories for our company," said Hamza. "It has given us the speed and agility to quickly go to market with new, unique and healthier food products."

Looking for foodservice to grow and reach 20 percent of inside-store sales within four to six years, the Tedeschi team is focused on creating the best value possible. "We believe that when it comes to food, freshness and quality trump price every time," Hamza noted. "Only in the absence of quality and freshness does price become a determinant."

Beyond fresh foods, the new store showcases the chain's 437 private label SKUs including Tedeschi Select sodas, water, chips, pastries and breads. "Proprietary products are important components of our growth strategy," Hamza said. "They were responsible for almost half of our non-tobacco sales growth each of the past two years."

Indeed, the combined sales of these products have grown nearly 30 percent over the past three years, comfortably outpacing equivalent branded products in every category. The private label items now generate 10 percent of total sales, excluding fuel.

In design and layout, the Quincy store was planned with two objectives in mind. The first was speed. The second was providing an efficient shopping experience for time-strapped customers while also offering a relaxed, comfortable and inviting atmosphere for those who wish to eat their meals in the store, Hamza said.

"By including a seating area and Wi-Fi, we are inviting customers to stop in for a meal from TD's Deli and enjoy lunch with friends, or catch up on work while they are on the go," he said. "By leveraging the foodservice kiosk technology, Tedeschi was able to provide customers with a scale of fresh food choices and a level of meal customization not matched by any of our competitors."

To engage customers at the new location when it first opened, Tedeschi offered a free fresh-baked muffin with the purchase of any freshly brewed Green Mountain coffee. Promotional discounts on gallons of Garelick Farms 1 percent milk, 2 liters of Tedeschi Select soda, 24 packs of Poland Spring water and 48-ounce tubs of Edy's Ice Cream also ran through April. Meat shop, deli and produce selections were on sale for a limited time, too.

A more formal grand-opening celebration, with local dignitaries such as Quincy Mayor Thomas Koch and city council members, product sampling, entertainment and prize giveaways, was held in mid-May.

BRAND POSITIONING

With the new concept store and an aggressive remodel and refurbishing program, the Tedeschi team has been able to position the brand as modern without losing its connection to its rich tradition, according to Hamza. "We're proud of our history and optimistic about our future," he said. "Our brand, through its longevity and transformation, has remained bonded to the same values that have contributed to its success for nearly a century."

The goal is to deliver a compelling value proposition that's built on a passion for serving customers and a commitment to maintain relevance by creating innovative offerings that are difficult to duplicate by others.

The team emphasizes execution and store-level operations to set the Tedeschi experience apart from other retailers. "Unique may be a pretty strong word in most any industry these days," said Bob Tedeschi, executive vice president of operations. "But I would like to think that we do some things better than our competition. One look, feel and quality across all [our] stores has become an expectation we have been striving to capitalize on. We do not want any surprises regarding our customers' shopping experience from one store to another. It's a tall order, but one that we continually try to make a reality."

To improve the chain's consistency, Tedeschi Food Shops last year doubled the number of remodels it had ever done, completing 22 major projects. This year, the chain will add a number of mini-remodels to the mix as it replaces older equipment with newer fresh-food cases.

"Although we may not complete as many major remodels this year, we will improve a greater number of stores overall," noted Bob McGann, vice president of store development. The mini-remodels, which have been well received by customers and store personnel, will continue next year.

Outside the store, the retailer is moving away from branded gasoline. New ground-ups have opened with private label motor fuel, which Bob Tedeschi said has been much more successful than initially anticipated. Gallons sold have increased dramatically, while per-gallon gross profit has held steady.

"The quality of unbranded motor fuels has improved to a point where the consuming public has implicit trust in the purchase of this product," he said. "We believe our customers have already come to trust our name and the merchandise we sell, so rebranding to TFS motor fuel was a given for us." As major contracts expire, more conversions will be made.

Alternative fuels aren't expected to play a significant role in the retailer's offerings for the next 10 to 12 years. "Our will likely see a more significant change in the way we fuel our vehicles in their lifetime," Bob Tedeschi said.

With stores varying greatly in building and lot size, the company's design and construction department works with the merchandising team to create a flexible floor plan that maximizes every square inch through the use of various equipment sizes, McGann explained.

On top of same-store sales growth, the Tedeschi team is looking for unit growth. Today, the chain's store growth strategy is focused on existing, vacant real estate and raw land development. Given the economic climate, the management team believes there are opportunities to lease or buy existing structures in well-situated locations at reasonable prices and they're looking for raw land to develop freestanding buildings with or without motor fuel.

The retailer also is interested in buying single businesses or c-store chains in New England.

Tedeschi Food Stores is well positioned to grow both organically and through the addition of stores, said Richard Jasper, vice president and CFO. "Organic growth will stem from a variety of initiatives, from re-merchandising the stores to minor or major remodels," he said. "The structure and strength of our balance sheet, where we are very well capitalized, demonstrates strong cash flows providing us with enviable liquidity and very little risk. This allows us tremendous flexibility in regard to providing or securing funding."

With current financial markets providing attractive borrowing rates, but more restrictive borrowing terms, Tedeschi will consider financing for major acquisition opportunities, purchases of raw land and ground-up builds. Remodels and other organic growth initiatives are funded through its operating cash flow and sizable cash reserves.

Reinvestment and constant improvement based on customer feedback is critical to Tedeschi's success in today's marketplace, Hamza said. "Competition keeps us on our toes; it keeps us sharp and focused. It challenges us to consistently be innovative," he said. "We have a great deal of respect for our rival retailers and for how they go to market.

"But when it comes to competing, we pay more attention to our own game plan and less on what others do. We consistently challenge ourselves to stay relevant by staying new, fresh and unique."

A Customer Service Culture

Tedeschi Food Shops' aim for high-quality consistency extends to its customer service. Indeed, the chain's true uniqueness comes from its store personnel, Bob Tedeschi said.

"The way our employees treat our customers is paramount to us above all else," the executive vice president of operations said. "Our associates know how we feel about that starting with their initial interview and throughout their tenure with our company. At the end of the day, having great customer service and caring associates has been the key to our success."

Like the operators of the chain's 90 franchised locations, the chain's store managers play "the most important role" in the company, he added. "They must serve as the team leaders and not lose sight of that. Their primary role is to recognize and address all the physical and service demands that are inherently present each day and make sure they are properly met, which is no easy task when the standards bar is set as high as it is in our company."

A limited labor pool has made finding the right people for these positions a huge challenge, he said. "Managers also know they are on the front line when it comes to spending the appropriate time needed with each associate to improve their morale, attitude and performance."

In some ways, however, the associate-customer relationship begins in the c-suite. Tedeschi's corporate culture is based on mutual respect for each other and a commitment to excellence, said Peter Tedeschi, president and CEO. "Our employees are our brand ambassadors; we cannot expect them to treat our customers with courtesy and respect if we don't afford them the same courtesy. Our 2,000 employees ultimately report up to me, but I am mindful that I work for them. When your employees know that you care about them, they will go the extra mile for you, and in the process, they will realize their true potential."

Having a corporate culture that bases the company's well being and success on how well its associates and employees are treated by management at every level is integral to the chain's retention record, which is far better than the industry average. Tedeschi's companywide tenure averages 5.3 years.

"We are proud of our low turnover," said Bob Tedeschi. "Improved retention of our most valuable asset has, over the years, translated into better customer service. It only stands to reason that employees who feel valuable to the company will be employees who promote improved customer loyalty and repeat business. We are very fortunate to have as many long-term employees at every level of our organization and in particular, at store level."

Another key component of Tedeschi's culture is risk-taking. "While some companies play not to lose, we play to win, with the knowledge we will lose from time to time," Peter Tedeschi said. "When we do make a mistake, we acknowledge it, learn from it and endeavor to never repeat it."

Leveraging Technology to Communicate

Tedeschi Food Shops, which generates more than $600 million in revenues annually, is supporting its branding and trumpeting its strengths with a website redesign and other internal and external marketing and promotion initiatives, including a Facebook page.

The refurbished corporate website, which launched last August, provides information about the chain's fresh food offer – a breakfast suggestion of a banana, orange juice and TD's Deli bacon and egg sandwich was featured in the spring, for example – its most popular products, store locations and special events. A blog highlights store-level and chainwide news.

The site includes the option to search by service or offering, and customized store web pages that clearly convey Tedeschi's extensive core offering. It also offers details on current promotions. A recent Web promotion encouraged customers to "Like" Tedeschi on Facebook (or send an e-mail) to qualify for a chance to win Boston Red Sox vs. New York Yankees tickets.

"Our goal was to create a website that feels youthful while offering an intuitive user experience, appealing to a broader audience within a wide range of age groups," said Joe Hamza, vice president of sales and marketing.

The Facebook page gives Tedeschi Food Shops the opportunity to discover true fans for the first time, as well as deepen the respect of current customers and business partners, he added.

Last year, the stores began offering Blockbuster movies through DVD rental kiosks and were equipped with GoGo Cast's high-definition Go-Screens to engage customers with targeted messages. The Go-Screens highlight monthly and seasonal sale items with eye-catching graphics. Moving forward, store-specific deals and unique offerings will be displayed. For example, deli-equipped stores may have different specials than locations that sell beer and wine. Based on pilot tests, the retailer expects the screens to influence buying decisions at the point-of-sale.

"We're extremely excited about our ability to communicate with our customers in real-time with current promotions and compelling content," Hamza said.

In a more traditional marketing strategy, the chain often holds customer appreciation events at the re-openings of refurbished stores, handing out samples of TD's Deli Express sandwiches, hot dogs, salty snacks, ice cream and packaged beverages. Drawings for iPods, passes to Canobie Lake Park and tickets to New England Patriots football and New England Revolution soccer games are also typical.

To continually improve, the chain encourages – and acts on – customer feedback in many forms, including e-mail, postage-paid and conspicuously placed in-store comment cards, standard mail, office visits and phone calls.

"We are receiving more feedback these days from a varied cross section of our customer base profile, which is a good thing," Bob Tedeschi executive vice president of operations, said. "As a customer-centric organization, we take customer feedback very seriously. Every customer comment or complaint is personally reviewed by [Peter], then addressed promptly and responded to by a member of our management team. We do take the feedback to heart and pass it along to everyone that should be involved in learning the lesson or message, so we all can continue to do a better job in every aspect of our business."