by Treva Bennett/staff writer
A strong Arizona economy, along with a pro-business governor, was good for the state in 2019, according to Arizona Food Marketing Alliance (AFMA) President Mark Miller.
Phoenix, home to AFMA, has benefited from the pro-business environment in the state.
“Downtown has really exploded,” Miller said, noting the new Fry’s Food Store that recently opened next to the Phoenix Suns basketball arena (see story, facing page). The area previously had been a food desert for “a very long time,” Miller said.
He said the new Fry’s will attract tourists in the downtown area but also will appeal to residents of new downtown apartments.
“The economy’s been really strong. The growth’s been consistent,” Miller said.
A new player planning to enter the Arizona market is Aldi, with the company planning to build or open about eight stores in the state, he said.
“Aldi seems to be really customer-focused, and the private labels have grown here, too,” Miller said. “All of our grocery stores are really doing a good job of making their labels look better and making the product look a little more market-friendly. I think that our current grocery stores are set up very well to be able to compete against them.”
Walmart, which has continued to focus on growing its food section, has “done a good job of continuing to build food here in Arizona,” Miller said. “They…are very competitive. It’s continued to make our traditional grocery stores perform a lot stronger to compete against them.”
He said a big focus in 2019 for all grocery stores in the state was delivery, with some offering delivery themselves and others using third-party entities, such as Instacart.
Miller said most of the state’s grocers are doing a good job of keeping their stores fresh, with Bashas’ being one of those.
“Bashas’ came in with a fresh approach, where they took the best of some of their formats—they have a Food City format that focuses on the Hispanic customer and then they have their Bashas’ nameplate that is a traditional grocery store—and interchanged them between their different formats. So far, and they’re still in the middle of changing their stores, it’s been successful…It’s a very creative approach and I think it’s going to resonate that you don’t always just pigeonhole different consumers,” Miller said.
He said the Hispanic population in the state is growing, with about 30 percent of the population speaking Spanish. Several stores, including Food City, are doing a good job marketing to the Hispanic population, Miller said.
“They (Bashas’) definitely do a really good job of knowing what the demographics are of the neighborhood and setting the schematics and the selection to accommodate that customer,” he said.
More and more grocers in the state are using social media to reach customers, with several offering apps and electronic coupons.
“I think the biggest win has been where the stores are customizing the couponing,” he said. “You go onto the apps—Kroger, Safeway and Albertsons—and the big thing they are doing is pushing the electronic coupons. You go on the app and they have your profile. They might not know a lot about you, but they know your cell number likes to buy a lot of baby food items, so you must have children in the house. They start pushing different items for that. I think they do a really good job of offering some special lower prices for people that take the time to download their app and then take advantage of the electronic coupons.”
Miller said one thing that has remained consistent is the competitiveness of the Arizona marketplace.
“There’s a grocery store on every corner of every major city. From Phoenix to Tucson, it is really heavy with chain-driven stores,” he said. “Independents have been focusing more on the rural markets and do a good job in the rural areas.”
He said he thinks grocers are doing a good job of talking to their customers and focusing on customer service. They want to provide a good in-store experience. For example, he said several of the Fry’s stores have bars inside and “it’s just a hoot to watch all the fun that’s going on in a grocery store.”
Miller said he recently was in a grocery store near his son’s house and there was a party-like atmosphere in the store.
“I think that’s what they’re going to have to do is enrich the experience of shopping and make it as fun as possible,” he said.
Legislative issues
When the Arizona legislature convenes during the second week of January, one of the top issues of concern to the AFMA is finding a state solution to raising the age for tobacco purchases to 21, Miller said. In 2019, there were eight bills that addressed the sale of tobacco products and none of them passed. The bill that AFMA joined with a coalition to support, Senate Bill 1147, was among those. That bill provided a comprehensive approach to deal with the dramatic rise in youth vaping, Miller said. The bill also provided a statewide, uniform law to address the sale and marketing of tobacco, vapor products and alternative nicotine products.
“We’ve had several cities take it upon themselves to raise the age to 21, which our industry and our retailers do support,” Miller said. “The issue is they wanted to initiate an expensive licensing fee and heavy penalties for retailers only. We’re planning on working together with stakeholders and proposing a bill in January that will have a state solution vs. a city-by-city solution.”
Miller said another thing to consider is the fact that Native American reservations in Arizona are not subject to state sales tax. When the legislature placed a tax on tobacco several years ago, the result was many consumers started going to the reservations to buy their tobacco products.
In the 2019 session, several bills affecting the food industry were debated, including omnibus legislation dealing with the ordering, delivering and pickup of liquor items. Through the cooperation of several entities, legislation was passed to allow grocery stores and third parties such as Instacart to deliver liquor, following strict guidelines.
“The major thing was to ensure that the person receiving the liquor was to be verified over 21 years old. That was the main concern, that alcoholic products did not get into the hands of anyone underage,” Miller said.
Another bill that passed in 2019 concerned the inspection of egg products. The USDA raised the cost of inspections, but the Arizona Department of Agriculture, which also inspects all egg products, uses the same high standards as the national inspectors. The legislation allows egg producers in the state to use Arizona Department of Agriculture inspectors for food safety, Miller said.
Legislation addressing the labeling of milk and meat products did not pass last year but may come up again. House Bill 2604 specifically addressed items such as soy or nut products that used milk in the name. Also, the meat industry did not want any products listed as meat that did not come from an animal.
“AFMA believes this is a national issue and should be handled by the FDA,” Miller said.
SB 2757, known as the Fairness Bill, was passed by both houses and signed by the governor. This bill taxes online purchases of non-food items at the same level as all Arizona retailers and includes all state and city taxes.
“AFMA has been working hard on this issue for several years,” Miller said. “This will ensure a level playing field on all purchases made at retail or online providers.”
Retailers moving forward
The grocery industry in Arizona is extremely competitive, and retailers are trying to find ways to attract and keep customers coming into their stores. Following are some of the moves they’re making.
Bashas’ and Food City stores in Arizona began expanding their baby departments. The expansion will bring more than 600 additional items to the stores’ baby departments, expanding the in-store footprint by 50 percent.
Newly-added products span a range of everyday needs like formula, early stages food, diapers, breastfeeding supplies, and health and wellness products.
“Time is a precious commodity when there are young children at home,” said Edward “Trey” Basha, president of Bashas’ Family of Stores. “We’re broadening our baby departments to offer a greater variety of high-quality infant and toddler products so that our stores become even more of a one-stop-shop for everyday baby essentials.”
By January 2020, more than 20 stores will have undergone the baby department upgrade and expansion. Plans call for the expansion to be fully implemented in every Bashas’ and Food City store in the state during the next two years.
The upgraded and expanded baby departments at Bashas’ and Food City stores complement the additional services in place for families, including one year of free prenatal vitamins (with a doctor’s prescription) for moms-to-be and free dosage syringes for children’s medicine from in-store pharmacies. Bashas’ bakeries also offer a free made-from-scratch cake for a child’s birthday every year (from the first birthday to the 10th birthday) through its Kids Birthday Club. And select Bashas’ stores have a free supervised play center (called the Cub House) for young children (between the ages of 2½ and 10 years old) to use while their parents shop the store.
Bashas’ also continues to fight hunger in the state. In May, the grocer joined with FirstFruits Marketing in donating about 16,000 pounds of apples to St. Mary’s Food Bank in Phoenix. The donation was part of the “Take a Bite Out of Hunger” give-back campaign.
FirstFruits Marketing created the campaign to help feed the underserved while bringing attention to the problem of food insecurity in the United States and Canada. This is the second year that Basha’s has participated in the campaign. Bashas’ earned the donation—the equivalent of about eight pallets of apples—based on the number of apples it sold in stores across the state during the first quarter of 2019.
Sprouts Farmers Market, which is headquartered in Phoenix, opened a new store in Laveen Sept. 11. The 30,000-s.f. store, located at 7700 South 59th Avenue, created about 150 full- and part-time jobs.
Sprouts also is hosting a hiring fair Jan. 15-16 for its new Cave Creek store. The nearly 30,000-s.f. store, located at 5355 East Carefree Highway, is scheduled to open Feb. 19 and will bring approximately 140 full- and part-time jobs to the area.
In its third quarter earnings report, Sprouts CEO Jack Sinclair said as costs to build new stores has increased significantly, the company plans to build fewer new stores (20 in 2020) and will stick to its smaller-store format. He said the smaller stores tend to be more productive than the larger ones.
“Going forward, the expansion of our store network and associated logistical support will be more coordinated and concentrated, driving efficiency in distribution and transportation,” Sinclair said. He said expectations for 2021 are to return to or exceed the current rates of growth.
He said Sprouts also will be concentrating more on its private label products and will be looking at spending more marketing dollars on digital efforts and less on print.
“We can build our brand, modify our store format and rebalance our pricing and promotions investments. There are so many great stories that we can bring to life as we transition our marketing spend toward more digital and less print,” Sinclair said. “We have the opportunity to build one of the strongest grocery brands in the United States by making healthy eating affordable to all through improved marketing effort. Our customers should know our product depth is far superior to our competitors.”
Patel Brothers, based in Hanover Park, Illinois, opened a new store in Chandler. Located at 1315 South Arizona Avenue, the store opened April 4, 2019.
Patel Brothers is the largest Indian-American supermarket chain in the U.S., with 56 locations in 22 states.
