EAGAN, Minn. — The doors of the Cub Foods grocery in this middle-class suburban city open onto piles of picture-perfect peaches and nectarines nestled next to jewel-toned plums and grapes.
Around the corner, corn delivered in the morning from a local farm is heaped decoratively on one side of a wide, meandering path that guides shoppers through the produce section and toward the deli counter and sushi bar, where they can catch the aromas of freshly baked breads and doughnuts, a Cub specialty, a little farther away.
“You can pretty much be in Anywhere, USA, in center store, but the perimeter is the fashion side of the grocery business," said Sharon Lessard, chief designer at Supervalu, which operates Cub Foods stores as well as chains like Jewel-Osco, Shaw’s and Albertsons in some markets. “The perimeter is where we can best distinguish ourselves from everyone else."
By center store, Lessard meant those long, soldier-straight rows of shelves that have long been the heart of the American grocery store but are now showing signs of the grocery equivalent of atherosclerosis. Shopping and eating patterns are changing, and those changes have threatening implications for the food companies whose shelf-stable products have long filled the center store.
Analysts have been surprised by the volume of sales declines over the last two quarters. Heinz reported a drop of 2.4 percent in its second quarter. Kraft unit sales were down 2.8 percent in its first quarter, and Kellogg said its North American volumes fell 1.7 percent in its second quarter.
With center store sales down, the most forward-looking supermarkets are rethinking the allocation of space — shrinking the staid center and expanding the sexy perimeter. In the Eaton Cub, for example, the produce, bakery, deli, meat, seafood and other perimeter areas occupy roughly 40 percent of the store, Lessard said, compared with 20 to 25 percent of Supervalu stores that have yet to be remodeled.
“There’s been some stagnation in center-of-the-store sales," said Jeffrey Ettinger, chief executive of Hormel Foods. “Frankly, I think those of us who sell products there have been a little slow to innovate, and in the meantime, sales around the store perimeter have been strong."
Most major food companies have a presence in both the center and perimeter of the grocery store. Hormel, for instance, is firmly ensconced in one of the hottest areas, the deli section, with its Di Lusso line of cold cuts, while General Mills, maker of Yoplait, is engaged in the yogurt wars raging in the refrigerated cases, another sizzling perimeter section.
But food companies are nonetheless concerned at the softening of their business in the center of the store. They are responding with a variety of tactics, like attempts to add pizazz and flair to the products they sell in the center of the store and making acquisitions that give them a better toehold on the perimeter.
Hormel has shortened the cooking time of some of its Compleats microwave meals to 90 seconds and pumped up the flavorings of others — ginger spicy chicken, for one — that it sells in the center of the store. It has also begun tweaking packaging, putting stalwarts like Pizza Toppings in the pouches that consumers are suddenly crazy for.
Campbell Soup, taking a different tack, recently made its biggest acquisition ever, spending $1.55 billion to buy Bolthouse Farms, a vegetable and juice company that will give it a much bigger presence in places like the entrance of the Cub Foods store here.
“It gives us a great platform for the growth that’s going on at the perimeter," said Anthony Sanzio, a Campbell spokesman. “The vision is to build on the juice and baby carrots and salad dressings with dips and fresh sauces — and there will be things we can do with soups and salsas, too."
He said business in the perimeter was growing in part because of the demand from younger consumers for fresh foods and foods that are perceived as wholesome and unprocessed. At the same time, older consumers are looking for more healthful foods and juices.
That is not to say Campbell will be abandoning the center of the store. It will be introducing soup in pouches later this year with flavors like coconut curry, as well as sparkling energy drinks and jazzier skillet sauces like creamy chipotle with roasted corn.
“We don’t see the center of the store as a problem, even though the perimeter of the store is growing faster in some stores," said Ian Friendly, executive vice president of U.S. retail at General Mills. “You just need innovation to make it exciting to go down the cereal and snack aisles."
Friendly pointed to two products General Mills introduced last year — 90-calorie Fiber One brownies and multigrain peanut butter Cheerios — as examples of products that will lure today’s shoppers to the center aisles.
“There are other trends going on that are driving the changes you’re seeing," he said. “It used to be that people got their food pretty exclusively at traditional grocery stores, but there has been a pretty important migration to club stores, supercenters, drugstores, convenience stores and dollar stores, where sales have been growing much faster."
Stores like Sam’s Club and Target have put pressure on grocery stores to cut prices, while the other outlets offer convenience.
At the other end of the spectrum, Whole Foods and Trader Joe’s have upped the ante by introducing an element of Cirque du Soleil into the grocery business and proving that there are big profits in fresh produce, which was previously considered a risky business.
“There were big implications in how Whole Foods went about merchandising the types of products it was carrying," said Andrew Waldek, senior partner at Innosight, a consulting firm. “They do a lot of sampling, a lot of labeling and signs, all in an effort to create a sense of transparency and demonstrate the freshness and healthiness of what they’re selling."