Taking Stock

Print Friendly

Key Food Rocks The House At Vendor Meeting As Membership Base, Revenue Continue To Grow

Buoyed by another strong year of member growth, Key Food Stores, the Staten Island, NY-based retail cooperative, posted stellar sales and earnings in fiscal 2017. Based on what executives Dean Janeway, CEO, and George Knobloch, COO, told more than 950 sales reps, brokers and distributors (a record crowd) at the company’s annual vendor meeting (aptly titled “Out in the Streets”), 2018 is shaping up to be another strong year. The meeting was held earlier this month on Staten Island at the Hilton Garden Inn.

Knobloch provided an overview of Key’s progress since the last vendor meeting which was held in October 2017 and challenged the audience to “think different” throughout the entire meeting. Currently, Key Food consists of 265 stores in the metro New York market (Tri-State area) which are operated by 128 different members. Annual retail sales are estimated at $2.7 billion ($1.3 billion in wholesale revenue). Knobloch told the audience that not only is Key Food the fastest growing food retailer in New York City and the Northeast, but also in the U.S. The co-op’s stores now command a 25 percent share of the NYC grocery market. Projections are high as the growth continues and 400 stores with $4 billion in retail sales are in sight.

And it’s not just the top line that’s been impressive; operating profit grew 18.8 percent during fiscal ’17 (ended April 29, 2017) and is projected to increase nearly 9 percent this year, marking a 225 percent operating net increase over the past decade.

Janeway detailed Key Food’s retail growth by illustrating (with a slide) that the co-op’s sales by percentage gain has not only been number one in its core Metro NY market, but also on top of the leaderboard in the entire U.S. for the past four years. The company is predicting a 20 percent retail sales gain for fiscal 2018 which ends on April 28. And over a 10-year period, Janeway

noted, Key Food has added 168 net new stores. Janeway told me after the meeting that he was particularly encouraged by recent member gains over the past few months which have included about 15 new stores from the Aurora and Tavera independent groups.

The 49-year old chief executive, who has spent his entire career in the grocery business, believes there is still significant opportunity to grow. He estimated that there are approximately 745 independent stores in the five-borough market that are not Key Food members. Janeway hopes to double the co-op’s market share over the next five years by continuing to unite independent supermarkets in the largest market in the U.S.

Supporting some of Janeway’s predictions was Piyush Chaudhari, president of the Americas for IRI, the large data syndicator. Approximately two years ago, IRI and Key Food began work on providing data and analytics specifically for the “five borough” New York City market, and over the past year that data has been available for both Key Food and the vendor community to utilize.

The power of the five boroughs is enormous. Nearly 8.5 million people live in the area and, if viewed as separate markets, Brooklyn, Queens, Manhattan and the Bronx, would respectively rank third, fourth, sixth and ninth nationally in population. Chaudhari noted significant differences in buying patterns between the five-boroughs and the rest of the New York metropolitan area.

Items like sugar, whipped toppings, baby formula, diapers, mayonnaise and margarine are much more likely to be consumed in the New York City than in the adjacent counties that comprise the rest of the metro NY market.

The uniqueness and market power of the five boroughs is something that both Janeway and Knobloch have featured in their presentations at previous vendor meetings. This year, with the new IRI data to substantiate their claims, both executives believe their support from the supplier and broker community will expand, too. Knobloch took the stage again and reinforced the importance of the four “Ps” – promotion, product, place and price – to drive same store sales. He utilized a series of slides featuring specific categories such as cola, ice cream, mayonnaise and cooking oil to illustrate how proper promotion can create significant sales lift. Knobloch then touted Key Food’s elite vendor program, explaining that those 37 vendors who have joined experienced $450 million in sales, increased distribution and the ability to customize a distribution plan by individual store. He also offered suppliers an opportunity to lower costs and increase their efficiencies by participating in Key Food’s direct shipment program.

Over the past year, Key Food has restructured its in-store execution (ISE) program. The new initiative, led by industry veteran George Harris, features more focused geographical alignment, better training and improved communications.

And as he has done in previous meetings, Knobloch praised (by company name) those vendors who have performed well over the past year and also singled out those suppliers who need to “pick it up” if they want to keep pace with the co-op’s fast-moving expansion plans.

Michele Gissi, Key Food’s talented integrated marketing and public relations leader, focused on three priorities: co-marketing, looking ahead and ways to partner. One of the Key Food’s goals is to promote greater brand awareness through improved and diversified communications which will also help drive brand value. She asserted that Key Food needs to develop content that resonates with the consumer while also seeking bigger basket sizes both in-store and online. Moving forward, Gissi said that her company is also developing more customized content, offering more digital coupons and providing its customers with more exclusive offers. From the vendors, Gissi is seeking to customize national programs for the co-op’s members and to discover and test new programs and items that are offered.

As the meeting entered its final phase, Knobloch emphasized the importance of the retail co-op’s major initiatives – e-commerce, its Urban Meadow store brand conversion and its ongoing effort to integrate its enterprise resource planning (ERP) and its customer relationship management (CRM) platforms.

Knobloch detailed Key Food’s current relationship with grocery delivery firm Instacart which it has partnered with since 2014. Accessed through the company’s websites (most notably keyfood.com) there are currently three fulfillment models that are offered to give their members maximum flexibility while getting their stores online – click & collect, delivery only and full-service – with nearly 75,000 items being available online.

The former Wrigley executive was particularly excited about the future of Key Food’s new Urban Meadow own brand performance. At the last vendor meeting 15 months ago, the new private brands plan was first revealed. Today, the Urban Meadow label has gained traction with 900 SKUs in 68 categories being available. By June, Key Food hopes to have 75 percent of the program converted and will support the brand with a consumer awareness program the following month. As a subset, the co-op has developed an Urban Meadow “Green” line featuring natural and organic products with more than 80 SKUs that is currently being introduced.

In trying to integrate its ERP and CRM systems, Key Food has had to deal with many of the same challenges other retail-driven organizations face when trying to upgrade their internal data systems. Knobloch admitted the company’s current systems are antiquated and inefficient and the co-op is currently beginning to gather information on how to create improved data accuracy through a single source, achieve greater flexibility, agility and speed and seek a more automated solution.

In closing, Knobloch addressed Key Food’s customer trip (Germany – April 17-26); its affiliation with the Los Rancheros Unidos Foundation (reception to be held on May 4); the upcoming “friends of the Food Industry” dinner (May 21 – Knobloch will be honored); the co-op’s two food shows (February 28 and August 22); its annual golf outing (July 9); and its new affiliation with the Academy of Food Marketing at Saint Joseph’s University in which Key Food is offering summer internships and co-op program job opportunities.

Many vendors were overhead saying this meeting was “more like a concert” – lights, confetti, favors, and awesome videos to pump the crowd up and leave everyone inspired to “think different” – about Key Food, about this marketplace, and about their business. Vendors were challenged when resourcing Key Food to bring their best to the table at all times – in terms of funding, as well as intellectual capacity and talent.

As one vendor told us as he was leaving the meeting: “This was the best vendor meeting they’ve had so far. All the presentations were laser focused, they got us in and out in under two hours and, of course, they have a very compelling story to tell us in terms of increased growth and their ability to move boxes for us.”