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Save-A-Lot looking to improve performance in south Texas with new partnership

by Chip Carter | October 05, 2010
In late July, Save-A-Lot and its parent company Supervalu made a move to strengthen its position in south Texas, partnering with Rafael Ortega, owner of Texas-based El Ahorro Supermarkets and La Michoacana Meat Markets, to form a new company, Adventure Supermarkets LLC. The company will own and operate six former Save-A-Lot stores in the Houston and south Texas markets under a co-branded format, El Ahorro Save-A-Lot, with a focus on Hispanic consumers.

Supervalu previously announced plans to double the number of Save-A-Lot stores to 2,400 from 1,200 over the next five years. Half of those new stores are planned for underserved, lower-income urban markets. New Save-A-Lot stores are slated to open in the next three months in Alabama, Florida, Texas and St. Louis.

The Produce News recently talked with Bill Shaner, chief executive officer and president of Save-A-Lot, about the new partnership in south Texas and the company's plans.

The Produce News. What were the reasons for this partnership?

Bill Shaner. Save-A-Lot continuously evaluates its stores to identify opportunities to strengthen our overall business. We are looking for innovative opportunities to bring the "Save-A-Lot" brand to specialized communities, and we think this partnership best enables us to serve the Latino community in this area. This partnership is a new business model for Save-A-Lot, allowing us to combine Mr. Ortega’s local insights with the power of Save-A-Lot’s network of stores to provide our Latino customers in this part of the country with the products and services they need and want. From a consumer perspective, we gauge our success on what we hear from our customers so that we understand their needs. We have certainly found over the years that one size does not fit all. Our stores are tailored to meet [specific] neighborhoods’ needs, and a prime example of this is our partnership with Rafael Ortega.

TPN. Why now?

Mr. Shaner. Save-A-Lot has operated in the Houston and south Texas market for several years with minimal success. The stores are located in highly Hispanic populated areas where we never seemed to have attracted this important consumer on a consistent basis. We realized we needed to make drastic changes to succeed in this highly competitive market.

TPN. How will the new stores address the needs of the local Hispanic population?

Mr. Shaner. We’re confident that this partnership will help Save-A-Lot continue to make a difference in the communities we serve by providing great food and great prices for the diverse Hispanic community in Houston and south Texas. We stock the most frequently purchased grocery items in the most frequently purchased sizes, making our stores smaller, easier to navigate and operationally more efficient. On average, we have 1,500 SKUs per store, which allows for much greater efficiency, higher velocity and lower prices. We actively pursue new store locations in neighborhoods largely overlooked by our competitors — locating in diverse neighborhoods, hiring from within those communities and stocking products tailored to the neighborhood.

TPN. How will the new stores cater specifically to Hispanics?

Mr. Shaner. The partnership is in the early stages; however, we are already seeing positive results. We believe this alliance will help us better understand the Hispanic consumer and allow us to implement best practices in other large Hispanic communities across the U.S.

TPN. It is assumed that the new brand will follow the Save-a-Lot mantra of lower pricing in order to provide access to healthier choices in “food deserts” — areas that have little access to healthier food choices.

Mr. Shaner. In regards to demographics, Save-A-Lot targets urban and suburban neighborhoods with household incomes less than $45,000. We actively pursue new store locations in neighborhoods largely overlooked by our competitors — locating in diverse neighborhoods, hiring from within those communities and stocking product tailored to the neighborhood. Our commitment to bringing healthy, nutritional food at affordable prices to underserved communities is a hallmark of the “Save-A-Lot” brand. We recently opened a store in Pagedale, MO, an economically challenged community that has not had access to a grocery store for 40 years. We received overwhelming support from the community and local city government leaders. Our store is the beginning of an overall community revitalization project. It was great to see what a positive impact Save-A-Lot can bring to a community.

TPN. Where will produce for the El Ahorro Save-a-Lot stores be sourced?

Mr. Shaner. Our strategy is to source produce as locally as possible while adhering to our quality standards. As a part of delivering our commitment for providing the lowest prices, we always evaluate local options first. In the case of the “Ortega” brand, some products are sourced from the Texas area, while others are more available outside of the general market.

TPN. What kind of niche-specialty items will be carried to cater to the Hispanic demographic?

Mr. Shaner. You will see a significant increase in meat, produce and freshly baked selections, an area critical to the Hispanic consumer.

TPN. What is Mr. Ortega’s background?

Mr. Shaner. Mr. Ortega has 24 years of experience in serving the Hispanic community in Texas and currently owns and operates 15 El Ahorro Supermarkets and almost 100 La Michoacana Meat Markets.

TPN. Where are the six stores located, specifically? Are any of these operating as El Ahorro Save-A-Lot yet? If so, which ones; if not, when will that occur?

Mr. Shaner. Brownsville, Victoria, Harlingen and [three stores in] Houston.

TPN. Are there future additions to the “El Ahorro Save-A-Lot” brand on the books, or are there any that are under consideration?

Mr. Shaner. At this time, we do not have anything to announce regarding new sites. However, this partnership is working well, and we will continue evaluating our market planning and strategy moving forward. We see a great deal of opportunity for building the brand.