How Grocer Ahold Experiments with Smaller Stores

By Alicia Kelso |  October 26, 2015

For a retailer with more than 3,000 locations, $36 billion in 2014 revenue, and a narrowing profit margin, going small might seem a strange strategy. But a new small-format grocery store from Dutch grocery giant Ahold that is integrated into a neighborhood streetscape — rather than sitting behind a massive parking lot — may be the key to attracting a young, discerning urban shopper who ordinarily frequents farmer’s markets or Whole Foods.

Ahold USA, which has head offices in Carlisle, Pennsylvania, and Quincy, Massachusetts, created a new unit called Fresh Formats LLC in 2014 with an eye toward spawning new store formats. The first brand to emerge from Fresh Formats is bfresh, which opened in early September in Allston, Massachusetts, a part of Boston that is populated by students, recent graduates, and a significant Asian and Russian population. Bfresh offers a large selection of natural, organic, vegan, gluten-free and international foods, as well as fresh-baked breads and a wide selection of prepared, ready-to-eat meals.

Though technically part of Ahold – which operates chains including Stop & Shop, Giant Food, Martin’s Food Markets, and online grocer Peapod – Fresh Formats is a wholly separate company. And before opening the 10,000-square foot bfresh store this year, Fresh Formats set up an even smaller “learning lab” store in Philadelphia last December.

InnoLead spoke with Suzi Robinson, one of the developers of the bfresh concept and the “Marketing Magus” at Fresh Formats, about how the new format moved from ideation to launch.

InnoLead: When did this idea for bfresh first come up and why?

Robinson: Fresh Formats was created in 2014 to explore and develop new and innovative format opportunities for grocery. To be honest, small format is not a new idea, but Ahold recognized that it was growing and that we needed to get serious about this.

When we developed this concept, we started totally from scratch and purposefully decided to reach foodies who want convenience. That’s how we designed the experience. Being able to work with a clean slate, we could come up with our brand, identity, and voice to fit these customers, and we also had an ability to have fun, have humor and snark and playfulness. We want to make food fun again.

InnoLead: What was your consumer research yielding?

Robinson: bfresh’s debut coincides with a significant change in the way people shop for groceries. The 2015 American Pantry Study recently published by Deloitte found that the attributes most important to food shoppers are healthy, innovative, convenient and customized. Shopper habits have shifted. There is now more of a need for convenience, savings, a need to shop and support local businesses.

InnoLead: How did you choose the appropriate neighborhood for this concept? 

Robinson: The diversity of Boston and the immediate Allston community was a great combination – from students to working professionals and families, to various ethnicities and palates – to learn about great ideas from foodies of all backgrounds. Allston has a tremendous food culture.

InnoLead: How long did it take to go from ideation to launch and what was the process? What were your priorities?

Robinson: We have been developing bfresh since Ahold established Fresh Formats in 2014, and at that time, there were just a few of us. The great thing is that Ahold gave us a lot of autonomy and because we were a small team, we could move quickly and build a concept quickly.

While we were developing bfresh, we launched a learning lab in Center City Philadelphia, called Everything Fresh, last December 2014. This learning lab serves as a space for teammates and customers to test new ideas. It is a real store with real products and real customers – a customer-facing test. We didn’t just survey what consumers wanted, we opened a fully operational, functional store.

InnoLead: What are some of the learnings and challenges you encountered during this process? 

Robinson: As with any new concept, it’s an evolving process. We continue to test, learn, and improve. Much of the learnings we’re keeping close to the vest, but we are tweaking as we go.

We opened the learning lab concurrently with finalizing details on the bfresh concept, and this allowed us to see what is working and resonating and try different things. The learning lab gives us flexibility if we need to change something quickly, such as fixtures, merchandising, or signage.

The bfresh concept, however, is quite different from the lab. It’s more expanded and, for instance, includes the Little Kitchen and Bakery.

InnoLead: Why did you add the Little Kitchen to this concept and what does it include?

Robinson: The Little Kitchen and Bakery is based off of a concept from The Netherlands called La Place. La Place operates fresh restaurants and we are their first U.S. entry into the retail space. It’s a huge component of bfresh. The Little Kitchen is truly fresh on the spot. Ahold doesn’t have a relationship with La Place and we’re not doing this with any other Ahold stores in Europe.

[VP of Marketing, Format & Store Development] Saskia de Jongh is Dutch, and she was instrumental in bringing La Place to our offering. As for the relationship, we source everything – our employees, food, equipment. But we are basing the Little Kitchen experience on the La Place model and have licensed their recipes and are following their practices and processes. It’s not a restaurant like La Place, so we’ve made adaptations, but it is the craft of La Place. We partnered with them to gain their knowledge and essentially borrow on their concept.

The menu includes a variety of dishes that are made on the spot, including sauces in small batches. And there is countertop seating for those who choose to eat in the store.

InnoLead: How do you maintain a value-centered price point?

Robinson: Several of us came from the Ahold family and have a deep experience working with vendor partners. A lot of our partners are excited about this concept and we received a lot of support from that community.

We also did our homework on how to maintain value. The learning lab in Philly helped us test different things, including price points. We’ve been intentional about having a “smart” value. It doesn’t mean we’re low-priced on everything, but we have smart values where it counts [especially on produce and fresh items.]

InnoLead: How, if at all, did you leverage Ahold’s existing infrastructure to put this concept together?

Robinson: Our leadership team comes with extensive grocery and retail experience. This helps the organization make informed decisions about everything from marketing to merchandising to operations. We certainly leverage some of our existing relationships – like key suppliers – but effectively, this concept is wholly new.

InnoLead: What was your marketing plan to introduce consumers to bfresh?

Robinson: We didn’t do a ton of traditional marketing before we opened because social [media] works for us. We are trying to keep our marketing strategy social and fun. For example, we had a lot of fun with the Allston opening. We had a great opportunity because of the [September] timing.

Allston is a huge college town and has the reputation of having some of the best universities in the country. September 1 is a huge day for apartment leases to turn over. People move in, people move out. So on that day, the neighborhood is a hot mess. There is a ton of stuff lining the streets – couches, coffee tables, TVs. That’s why people call it Allston Christmas. It’s called Allston Christmas, and so we started putting messages out there to coincide with that and really play off that theme. We had our own version of a freshified Merry Allston Christmas, with parodies, carolers singing throughout the neighborhood, street teams handing out fresh fruit. We had so much fun with it, and it raised a lot of awareness.

InnoLead: What are your goals for year one? 

Robinson: We will open in Fairfield, Connecticut, before the end of this year. It’s a very different neighborhood with a lot of New York City commuters and much fewer students. The income capita skews higher. It’s much more of a driving neighborhood than Allston, which has more foot traffic. …We are still very much are still very much in test and learn mode. We are focused on refining the prototype. (Below, a “Not Coming Soon” ad used in promoting the Allston store.)