Neil Stern, longtime retail industry consultant for McMillanDoolittle, thought leader, author and newly named CEO of Good Food Holdings has acquisitions and aggressive store growth in mind for the company’s five premium banners. WGB recently sat down (virtually) with the grocery industry veteran, to discuss his strategy for taking Carson, Calif.-based Good Food Holdings, which includes Bristol Farms, Lazy Acres Natural Market, Metropolitan Market, New Seasons Market and New Leaf Community Market, to the next level, the company’s e-commerce goals and the challenges facing the grocery business today. Owned by the Korean retail conglomerate Emart, Good Food Holdings has 51 stores down the West Coast, from Seattle to San Diego.
Amanda Baltazar: What excited you about joining Good Food Holdings?
Neil Stern: The U.S. market is very crowded in the middle with conventional grocery stores and e-commerce exploding, and it’s really hard to differentiate yourself. With our five banners, we’re in the premium space and the natural/organic space and I believe that even as things go online, we’ll be neatly positioned.
Our customers are the adventurous foodies who are seeking out the latest food fashion and the mindful gourmets who care about what they’re putting in their body and where their food is coming from. They can shop online, but in our stores we create a sense of discovery. That’s the positive side. These stores are also really, really difficult from an execution standpoint so the degree of difficulty is really high but to some degree that keeps the market small because it’s tough to do.
We think we’re in a growth area of the market and if there’s such a thing as white space, we think there’s some available. There’s lots of great competitors in every market we’re in, but we’ve found and proved there’s a place for us.
And we’ll grow in the existing markets we’re in—Seattle, Portland and Los Angeles are our big ones—and we’ll fill in the gaps in between. Our brands also are not going after the mainstream, so we have to be really careful where we put them.
What are you most excited about in this new role?
Acquisitions and aggressively growing our stores. That’s the strategic piece. The piece that’s new to me is it’s really fun to be working with our management teams. We have amazing talent at the banner level. While I was interacting with them before, it’s exciting to dig in, hear about their plans, about what they’re doing and get more into the daily business. It’s totally different because at the consulting level you’re working on that high-level piece and not intimately involved in things like holiday planning.
What’s keeping you up at night?
It’s a really challenging time to be operating retail stores. COVID is very real so keeping our customers and associates safe is very important. We’ve had wildfires affecting stores in Santa Cruz and Portland, and we’ve had to shut down stores because of smoke.
The other thing is we’re in this really challenging political environment with political activism. We’re in Portland and Los Angeles, which are quite active, so we have to consider things like what we allow employees to wear and we’ve had to shut stores due to protests and riots.
We’re a supermarket and we want to sell good food but you surround it with all those other things—that’s what’s keeping me up at night.
What are your plans for Good Food Holdings in terms of growth?
We could get 50% larger in the next five to 10 years in the markets we’re already in. We’ll grow in larger and smaller cities at the same time, in markets we’re already in and new markets. There are lots of gaps; we’re in Seattle, Tacoma, Kirkland and will soon be in Gig Harbor, but we’re not in Bellevue and there’s probably a two-store opportunity there to grow the Metropolitan Market brand. Portland is our largest current market and there’s opportunity to grow with the New Seasons brand, which is so well-known. But Southern California is the biggest market we operate in and we have two great brands, Bristol Farms and Lazy Acres, to grow with.
Photograph courtesy of Lazy Acres
What key changes do you see on the horizon for the grocery industry and how will Good Food Holdings pivot with them?
Our company was at 2% e-commerce coming into 2020, will end with 7% to 8% and we were peaking at 13% at the height of the pandemic. At those levels it becomes really significant. We’re partnering with companies like Instacart and Door Dash, to understand the pickup and delivery market. This puts pressure on us to figure out new and better solutions to serve e-commerce customers. That’s a big initiative.
We also need to understand what the foodservice part will look like in the future—the salad bars, hot and cold deli bars. How do you retain the foodservice part in the stores? Part of it is changing because of COVID but customers are also looking for a better way to get the grocery experience.
That’s the part that’s really difficult to predict. Across our banners, we’ve taken some hot and cold bars and turned them into service. There are some that are concierge-style so you serve yourself but someone’s there, visibly cleaning up after you. We have others we haven’t opened yet. Or we’ve gone to a packaged product. We’re trying to bring that business back but we’re also learning. What is the customer willing to accept?
The foodservice side of things has also declined during COVID; there are fewer people buying lunch in urban stores; and fewer people picking up dinner in suburban stores as people are cooking more. I think we’ll gradually go back to a bit more balance of food at home and away from home, but we’re unbalanced right now. We’re positioned to serve both, so if we go back to that lifestyle of heavy food away from home and busy lifestyles, we’ll be fine. If it continues to be a food-at-home market, we have to figure out how we’re going to meet that market.
The other piece is how do you remove friction from the shopping process? We’re behind from a technology standpoint, from self-serve checkout, mobile scan-and-go apps. Being behind was somewhat intentional as we considered that in-store experience to be an important part of the brand. But even those in-store customers may want to check out on their own; they may want to order ahead for the deli line. So we’ll be experimenting with a lot of those things so we can deliver food any way they want it.
What technology is going to be vital going forward for grocery stores?
There’s consumer-facing side of things like mobile apps and self-checkout and then things to run the business smarter and more effectively such as food management, ordering and production, pricing and promotions. Customer-facing technology and back of house technology will come hand in hand. There’s no shortage of IT projects. There’s a shortage of time and money and people.
Your stores are in the premium/natural markets. What do you see as the future and opportunities for this segment of the grocery industry?
This segment is almost endless in terms of the innovation that’s happening so it’s really important for us to dial up local. That’s the opportunity for us vs. the big chains.
At New Seasons, we have a private label product called Partner Brand. We work with local vendors to make products for this brand. And at Metropolitan Market, as the restaurant community has struggled in Seattle, we’ve worked with local restaurants and put their products in our stores. The more we can tie ourselves to community plays to the niche we’re in.
What have you learned from your years with McMillanDoolittle that you’ll be implementing at Good Food Holdings?
I got paid for traveling the world and seeing innovation across all those markets. I’ve been in every great food store in the world. Our operators have their heads down every day so I hope I can bring that global perspective to our brand and introduce some new ideas they’re not aware of because they’re busy operating.
I’ve also had a chance to work with great companies, great leaders and hopefully some of that will rub off on me. I’ve picked the brains of a lot of people my network has been incredibly generous.