Rise of the Super Regionals
Cary, N.C., looks a lot like any other American suburb. Subdivisions with newer colonial-style houses, townhouses and apartments dot the landscape. Strip malls feature Starbucks, nail salons and sushi joints. But there’s something about Cary that makes it distinctive from a food retailing standpoint. It’s home to what could be called a “supermarket superhighway,” a 5-mile stretch of State Road 1613 in the heart of the most, or certainly one of, the nation’s most competitive grocery markets.
Many of the biggest and best names in the grocery industry operate stores in this part of the country: Wegmans, Whole Foods, Walmart, Target, The Fresh Market, Kroger, Food Lion, Aldi, Publix, H Mart and Lidl. Despite considerable competition, Winston-Salem, N.C.-based Lowes Foods is the local favorite and a company that has positioned itself for growth with a unique brand of food retailing that makes it worthy of the moniker “super regional.” The company is winning with shoppers across its three-state trading area with a four-pronged value proposition that Lowes Foods President Tim Lowe describes as safety, friendliness, show and efficiency.
“I don’t worry about my competition; I worry about my consumer,” Lowe says during a tour of the company’s 52,000-square-foot store in Kernersville, N.C. “Our No. 1 goal is safety. Then it’s friendliness, show and efficiency.”
When it comes to safety, the COVID-19 crisis remains top of mind at Lowes, although the retailer has always had a pandemic plan in place. According to Lowe, the company has renowned epidemiologist Mike Osterholm on retainer to advise on safety protocols. Osterholm was recently named to President-elect Joe Biden’s COVID-19 Advisory Board.
“We meet with him every month at the executive level and have a call with him for 30 minutes,” Lowe says. “He looks over our plan, gives us feedback, and says, ‘Yes, these are good things to do,’ or not, because he’s an expert in the field.”
While the retailer has made some operational adjustments, like everyone else in the industry, the other three elements of the Lowes Foods value prop remain in full force, to much success, the company says. In fact, Lowe isn’t kidding about the focus on “show” at Lowes Foods stores.
On any given day, when a new batch of rotisserie birds comes out of Lowes’ Chicken Kitchen oven, children can dance and clap along with employees under an animated chandelier of singing chickens that can be heard throughout the store.
“It’s a celebration of our fresh chicken; they're locally raised and harvested,” Lowe notes. “It gets people back there. The kids and kids at heart love it. It’s one of our best-known rituals.”
Employees are also trained to chant “hot fresh bread” or “hot fresh cookies” when those just-baked items are in the bakery. And folks of all ages can join in shouts of “Yee-ha!” when pulled pork or ribs are fresh-cooked at the Smokehouse. Lowe explains that it’s all done to help employees, whom the company calls “hosts,” engage with customers, whom the company calls “guests,” more deeply.
“We actually worked with Disney to come in and teach us how to train our hosts to offer guests more of a fun, Disney-esque-type experience,” Lowe says. “But one of the things we talk about is, we can have the best experience in the world, but if we don’t have a great food experience, if the product doesn’t perform well in the consumer’s mouth and in their home, then it doesn’t matter.”
That's why part of the Lowes Foods strategy, in addition to “friendliness” and “show,” is to offer a 200% guarantee on its products, he adds. If a product fails to meet customers’ satisfaction, they can return it, and the store will replace it and give customers their money back.
Hyper-local Refresh
In 1954, one of the brothers who started Lowe’s Home Improvement stores decided to open a grocery store and call it Lowes Foods (without the apostrophe). Over the years, the company expanded, and after several ownership swaps, grocery wholesaler Alex Lee Inc., based in Hickory, N.C., acquired the grocer in 1992.
For years, Lowes competed with larger rivals as a fairly traditional operator. Then, in 2013, Alex Lee decided that it was time to give the Lowes Foods value proposition a refresh. The company recruited Tim Lowe (no relation to the original Lowe brothers), a pharmacist by training who has more than 30 years of retail experience under his belt, including stints at Walmart, Meijer and Supervalu, to preside over that transformation strategy. Lowe set out to break the mold of the standard supermarket and create a distinctive and hyper-local grocery-shopping experience. The company mined shopper data and over the years created several store-in-store fresh food concepts — Cakery, Sammy’s, SausageWorks, Chicken Kitchen, Bread Crumb, Pick & Prep — that have paid big dividends, according Lowe, who won’t disclose sales data.
In addition to offering a fun and friendly atmosphere, the company says that it positions itself for success by instilling a deep sense of community in its stores. The company slogan is “Your homegrown grocer, here to inspire Y’ALL to connect with your roots.” There’s a big chalkboard calendar of community events at the front entrance. A pub called the Beer Den offers local craft brews and sponsors concerts and cornhole tournaments.
“Those are the things that are important to the consumer, and we want to make sure they are making that connection,” Lowe notes. “We want to be a place of entertainment and connection that happens to sell groceries. I don’t want people to say, ‘Well, Lowes Foods is the best grocery store.’ I want people to say, ‘Lowes Foods is the best experience.’ "
As part of that experience, the bakery at Lowes offers communal tables for noshing on a macadamia nut cookie or fresh baguette. “Our tables are made from wood reclaimed from old tobacco barns in the region,” Lowe observes.
Instead of numbers, the checkouts at the front of the store have signs with the names of roads local to each community. “Maybe a guest needs help at the checkout,” Lowe explains, “so the announcement is ‘Attention Lowes Foods community, guest assistance on Salisbury Street.’”
Even the fresh departments on the perimeter have been localized. “The delis are always named locally,” Lowe says. “This is Evansville Deli. If you’re in Clemmons, it’s the Clemmons Deli.”
All of these “Easter eggs,” as Lowe calls them, go a long way toward making the stores authentic, friendly, and the opposite of the corporate and regimented competition.
Farmhouse Chic
The reclaimed wood tables in the bakery are part of the recent brand refresh and new visual merchandising strategy that have helped grow the business, Lowe says.
“We actually did visual merchandising training across the entire organization,” he adds. “You won’t find tables in our store unless they’re tables that we’ve built specifically to our brand.”
What you will find at a Lowes Foods store is burlap crates, wood, metal — anything that speaks to the relaxed and rustic farmhouse aesthetic. But there’s nothing rustic about the retailer’s innovative assortment, both in its fresh departments and center store.
In the meat department, shoppers will find HelloFresh meal kits, Certified Angus prime beef and sustainably harvested seafood in the cold cases. The center store offers an assortment heavy on local brands, regional brands, private brands, and national brands that are local faves. The perimeter offers salad and hot bars (sales have been way up as shoppers have stayed home, Lowe says), as well as a Smokehouse that will smoke meat to order. The produce department has mix- and-match bars for tomatoes, potatoes and onions, not to mention an herb garden and sous chef for vegetables at the Pick & Prep station. A customer here can grab any fruit or vegetable from the produce department and have the product sliced, diced, julienned or chopped while they wait.
Meanwhile, in the herb garden, shoppers may cut their own herbs for 99 cents. “We replant that on a regular basis, based on the consumer’s need,” Lowe says of the garden, adding that the company plans to build a greenhouse on top of stores to grow fruits and vegetables.
Planting Seeds
In September, Alex Lee made a deal with Jacksonville, Fla.-based Southeastern Grocers to acquire 20 Bi-Lo stores in South Carolina and Georgia. Alex Lee plans to operate five of those locations under the Lowes Foods banner, bringing the Lowes Foods footprint to 79 stores in the states of North Carolina, South Carolina and Virginia.
Lowe says that the company is constantly re-evaluating store concepts and strategy, looking to stay “evolving.”
Smaller stores may be on the grocer’s horizon. “We’re testing both larger and smaller stores,” he notes, “but I don’t think much larger for us is really the path forward.”
Meanwhile, the acceleration of e-commerce isn’t new for Lowes. The retailer has been doing click-and-collect for more than 20 years, and “had a leg up on a lot of folks in 2020 that didn’t have curbside pickup,” Lowe says.
“Our first logo on the curbside pickup sign was an actual wired telephone,” he recounts.” That's how far back we started click-and-collect. In fact, we have a handful of guests who still place orders by calling into our customer call center.”
Coupled with the rise in delivery orders over the past year, Lowe says that the penetrations he’s seeing in e-commerce weren’t expected for another six years. Going forward, providing a great e-commerce experience is the way to keep that consumer sticky, he adds.
As for how many stores Lowes Foods plans to operate, Lowe notes that he’s not worried about how many locations the competition has versus his company’s tally. He’s focused exclusively on meeting the unmet needs of his customers.
“Our focus is going to continue being the consumer, and anticipating where they’re going, and trying to anticipate their unmet needs,” he asserts.
By the looks of the crowds of shoppers taking videos, doing the chicken dance and filling their carts in Lowes Foods stores in the Winston-Salem area, the company is faring quite well. The locals appear to love Lowes, making the company the type of super regional operator that should be of concern to the big national chains and others intent on expanding on Lowes home turf.
