BUSINESS BY THE BAY

Andronico’€™s wanted to enhance its reputation as the Bay Area’€™s go-to store for gourmet lifestyles and so, when the company decided to remodel its flagship store in San Francisco’€™s Sunset District, it enhanced its beverage alcohol departments with new displays, new fixtures and a brand new tasting area that will offer customers a new dimension of service.

Andronico’€™s president and ceo Bill Andronico, whose grandfather founded the company 80 years ago, said quality, variety and attention to the customer’€™s dining plans were critical to what the company wanted to convey, which lead to significant upgrades to several key operations including produce, deli/take out and adult beverages.

While wine takes a special place in Andronico’€™s merchandising, San Francisco being adjacent to the expanse of California’€™s vineyards, the new merchandising plan was developed to update the profile of beer and spirits as well.

Differentiating Itself

Andronico’€™s wants to make a statement in every key department in the store to differentiate itself not only from supermarket chains such as Safeway that have placed a greater emphasis on fresh food and upscale consumables, but also from the several gourmet grocery chains that operate in the San Francisco environs including national chains such as Whole Foods and local operators such as Mollie Stone’€™s Markets.

Andronico’€™s was determined to do this in part because two years earlier it rolled back an expansion initiative, shuttering two stores after closing a distribution center six months earlier. Completed last summer, the remodel is part of a $15 million investment in the eight-unit chain’€™s stores and meant to demonstrate that Andronico’€™s is back on track.

The redesign of Andronico’€™s San Francisco flagship didn’€™t proceed around how to dress up the product presentation but rather how to create a stage for a new store experience. The décor changed certainly, but the main consideration was how to present the sales floor as a resource for good living. The flagship’€™s fixtures and layout were developed to create opportunities to present merchandise in a manner that suggested combinations, meals and how to best enjoy the products being offered, Andronico said.

Sampling Station as Centerpiece

Centerpiece of the updated beverage alcohol section, which essentially divides the fresh wing of the store from the grocery section ‘€” and so becoming a major pivot of activity ‘€” is an element that literally brings that strategy to life.

Built into the wine aisle is a sampling station that functions as a mini prep area. Andronico’€™s can use it to sample wine and beer, and pair them with whatever food items are appropriate to its purposes.

In the redesign, gourmet cheese was moved into a spot adjacent to wine. Most grocery stores and supermarkets place gourmet cheese in dairy or deli sections, even if they are assigned a separate or adjacent space, but that isn’€™t the case at Andronico’€™s. Wine and cheese at the San Francisco store are as closely paired as they ever were at a cocktail party, something that was an integral part of Andronico’€™s thinking about how it would use its sampling station.

The redesign of beverage alcohol operations as well as sampling, end caps and cross merchandising all aid Andronico’€™s in encouraging its customers’€™ gastronomic exploits. So, the new flagship incorporates sophisticated merchandising designs that the company will refine as they are tested and customer response considered.

‘€œWe’€™re learning and we’€™ll respond to things as they evolve,’€ Andronico said. ‘€œWe haven’€™t really changed the product assortment in major ways, but how we pull things together, how we promote and how we make positioning statements is important.’€

Remodeling Beverage Alcohol Presentation

‘€œThe remodeling of the San Francisco store led to a number of changes to the adult beverage set,’€ said Jeff Porter, Andronico’€™s wine shop and beverage category manager. ‘€œFirst the department has a more ‘€˜front and center’€™ location in the store. The moment guests arrive they see the wine department. Secondly, we decreased the selection by a little less than half.’€

The reasons to cut back were several. For one, the former selection was ‘€œoverwhelming,’€ Porter said.

‘€œThe store carried too much inventory,’€ he insisted. ‘€œOur merchandising philosophy has become more aggressive and, hopefully, better thought out. Our end-caps are designed to showcase new exciting items, exclusives or great values. In addition to the larger end-caps we are focusing on cross-merchandising items with an actual purpose, meaning that we put the right products together. The various fixtures created for the remodel help facilitate this and ensure that we do not have inter-department competition for floor space.’€

Although Andronico’€™s has had to wait for California’€™s alcohol control authorities to grant it a license to sample adult beverages, how the store will use tastings in its promotions already has been carefully considered and a plan awaits the regularity nod to shift into motion.

Merchandising Strategies

‘€œTasting will be an integral part of our strategy. It will allow us to show our guest the unique, high-value items that make us better than our competition,’€ Porter said.

California law limits what Andronico’€™s can sample to beer and wine, and both will be featured in store sampling initiatives, he said, adding, ‘€œI am hoping to create a series of tastings that have themes and an educational bent to them, not just the standard supplier pouring wine. I will focus heavily on the food and beverage pairing aspects and look forward to working with our corporate chef to introduce our guests to the variety of take-home entrees we have ready to go everyday.’€

Andronico’€™s approaches wine merchandising in several different ways, as its penchant for cross-merchandising demonstrates. In the main presentation, however, Porter has a particular philosophy in operation. To help him execute it, the section is staffed by dedicated wine stewards who are on hand to put customers together with a wine or other beverage alcohol product that will satisfy their particular tastes.

‘€œWe work very hard to have a person in the store and ready to help our guests with a wine, beer or spirit selection seven days per week for a minimum of eight hours per day,’€ he said.

Wine Displays

Wine is displayed in a set that combines varietal and regional considerations.

‘€œI merchandised the wine on the shelf based upon geography versus the typical expensive at the top and less expensive at the bottom,’€ Porter said. ‘€œI wanted the wine stewards to show a guest the entire range of a region in one shelf or two. For example, if a guest wishes to have a Chardonnay from Napa, we have the entire Napa Chardonnays group together. The price range goes left, most expensive, to right, least expensive. Many people thought this idea would fail, but after six months, we have not had any guest complaints, and it has forced a better interaction between the wine stewards and the guests.’€

Yet, ultimately, the goal of Andronico’€™s wine merchandising isn’€™t driving every customer to elite wines but rather getting them engaged with the presentation and prompting them to think about it as a lifestyle resource.

‘€œWe promote everything about wine. I seek to have a balanced set between the comfort of national brands [and] the discovery of new emerging wine regions and forgotten ones,’€ Porter said.

Beer Focus

Despite the emphasis on wine, beer isn’€™t given short shrift at Andronico’€™s. It’€™s merchandised both in its own section and in satellite presentations that also promote considerations of the role beer can play in gourmet-oriented lifestyles.

‘€œOur beer business has always been geared to the consumer that seeks micro or imported beers versus the traditional domestics,’€ Porter said. ‘€œWe seek to provide a unique array of beers from around the world that provide the guests the opportunity to try new and exciting beers that are high in quality and in value. I review the category three to four times a year adjusting to movement reports and research on new products.’€

Located just beyond the main wine display, the beer shares an aisle with soft drinks. The beer presentation includes a fixture that is a built-in equivalent to the pop out displays Andronico’€™s uses for satellite merchandising to present product from one department in others. In this case, a protruding curve of the shelf is used as a feature location for brews the store wants to highlight. Among those that have taken the place of honor is an import Celtic Angel, a Belgian take on Irish red ale.

Earlier in the year, Andronico’€™s dedicated a major end cap display to Australian products with beer from Coopers Brews the central element. The effort was part of a larger themed promotion, and Andronico’€™s marketing determined that beverage alcohol, in this case beer, ought to play an important role. ‘€œI was told that the theme for January was going to be Australia and I need to find a good Aussie beer, so I did,’€ Porter said.

The Spirits Challenge

‘€œSpirits is a small but critical category for us,’€ Porter said. ‘€œI am trying to push the department to focus on the renaissance of cocktailing. I am working with the vendors to create promotions to highlight unique spirits at value price points with cocktail recipes.’€ Porter is trying to get the store personnel to be enthusiastic promoters of spirits in terms of discussing trends, combinations with dining and new ways to enjoy specific products.

Despite its long, storied history, Andronico noted that the San Francisco location is still something of an experimental zone. The $15 million allocated for store remodeling will be spread beyond the flagship store to the company’€™s Berkley units. The company reopened the flagship with the understanding that it would continue to refine operations, a circumstance that has affected the deli department as well as spirits.

Satellite Displays

Besides working out the departmental merchandising, Andronico’€™s is testing satellite displays. Placed storewide, pop-outs are shelf small sets designed fit in with department’€™s fixtures throughout the store as cross-merchandising vehicles pairing product that might match well. Wine is one of the products that pop-outs often feature, although the store also does beer pop-out displays. The meat and sea food departments offer among the more conspicuous pop-outs, adjacent as they are to the rear racetrack aisle, and they will become even more common at the store going forward. ‘€œThe opportunity is ripe to cross-merchandise beer and wine in the refrigerated sections,’€ Andronico said. ‘€œIt’€™s a work in progress, but we’€™ve had some very good successes.’€

Pop-outs, which for their size can carry 60 bottles of wine into new territory, have been a critical cross-merchandising element, but Andronico’€™s has developed other, larger fixtures that have worked well. One is a bargain bin-type set that features value products, while another has the official designation and identifying signage, ‘€œUnder the Radar.’€

Ultimately, Andronico’€™s launched its new flagship store as a dynamic undertaking that would require refinement but would provide critical lessons it could apply throughout the chain. And beverage alcohol has become an important part of that effort.

Wine, Wine Everywhere

You can’€™t go far at Andronico’€™s flagship store without encountering wine.

In its store redesign, the company moved produce up front to make a statement about the freshness of its product and its position in a community that insists on superior edibles.

Still, fruits and vegetables aren’€™t all that’€™s sold in the produce department. There, Andronico’€™s offers products to complement the main presentation, including items like cheese and, inevitably, wine. In one set this year, Andronico’€™s offered gourmet cheddar and Pinot Grigio amid organic apples, for instance.

When wine is arrayed in the produce section, it’€™s not just a matter of sales velocity but a statement about the store and how it’€™s merchandising relates to providing the best eating experience. So, store staff selects wines that complement the food that is the major component of the display, which in the case of the Pinot Grigio was apples. ‘€œWe’€™ll talk about that and carefully select wine to bring out components of the fruit,’€ CEO Bill Andronico said. ‘€œWe’€™ll do something like that whereever we cross-merchandise wine.’€

Andronico said the dry tables in produce were an ideal spot for the company to establish a standard for the store. In combining food and wine, Andronico’€™s does more than remind customers they can use the store to initiative a complete eating experiences. Andronico said the satellite displays leave the consumer with a sense of abundance and also slows them down to consider additional purchases in a manner similar to sampling stations, but with less stagnation in through-store traffic and a lower labor cost.

Along the back wall of the store, the adjacent meat and seafood departments are heavily cross-merchandised with wine. Service counters in both are fitted with Andronico’€™s pop-up fixtures. Yet, the departments also are cross-merchandised with temporary stack-out displays and Under the Radar Wines of Discovery, a substantial movable fixture topped with the identifying signage that Jeff Porter, Andronico’€™s wine shop and beverage category manager, characterized as a great success.

Andronico noted that the combination of food wine and an expanded selection of related housewares at the San Francisco flagship provide the basis for more creative cross-merchandising. Drink of the month promotions might include spirits from the adult beverage section, mixers from the frozen food aisle and serving vessels from housewares. ‘€œIt’€™s kind of limitless,’€ Andronico said.

Navigating The Economy

San Francisco may be a gourmet Mecca, but it still can’€™t avoid the impact of the recession. Jeff Porter, Andronico’€™s wine shop and beverage category manager, said he has seen changes in consumer behavior since San Francisco started to feel the effects of the recession late last year, and he has been responding.

‘€œAs guests trade down in their price points and/or the number of bottles they take home at any one time, I have been searching for high-value items that fit into the company’€™s philosophy,’€ he said. ‘€œI recently took a buying trip to Argentina and Chile and found a group of small production wines that we will feature in a few months that provide the guest with unique, great wine at a fair price and provide the business with a substantial return with regards to margin.’€

Fortunately for Andronico’€™s, food culture is a big part of San Francisco life. Restaurants there have been seen lower traffic early in the week and business clients cut back on dinners, but weekend crowds remain hungry and the power lunch remains strong. Retailers have experienced some interest in value products and packs, but they’€™ve also gotten some restaurant customers coming in for gourmet items that are a relative bargain at home when considered against restaurant menu prices.

The consensus seems to be that elements of the good life, including beverage alcohol, will feel an impact from the recession but not a precipitous decline in San Francisco.

PHOTOGRAPHY BY ANNE HAMERSKY

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