Modern Retailing Rooted In History

Tedeschi Food Shops' new concept store builds on the retailer's strong reputation for quality food and customer service

With the opening of a new concept store at the end of March, Tedeschi Food Shops is building upon the reputation it has been cultivating over the past 90 years.

The concept store, anchored in foodservice and differentiated services, confirms that the retailer's commitment to the brand is as strong as it was in 1923 when Angelo Tedeschi opened a small store in his home, said Peter Tedeschi, president and CEO of the now 190-store chain, which is based in Rockland, Mass., and operates in Massachusetts, New Hampshire, Rhode Island and Connecticut.

"As a brand, Tedeschi Food Shops has developed a relationship based on trust and respect with generations of loyal customers, dating back to our humble beginnings," Peter Tedeschi, Angelo's grandson, told Convenience Store News.

"We are the hometown company that has never strayed far from its roots in southeastern Massachusetts. Our reputation and customer focus gives us a sort of home field advantage. Many convenience store customers expect to experience nothing more than a transaction at their local convenience store. We want to provide our customers with an experience rather than a transaction."

Its newest location in Quincy, Mass., is the latest embodiment of that promise, strengthening the chain's positioning as a leading provider of fresh foods, beverages and private label products. The 3,926-square-foot store features an updated design with a ring of bright graphics hanging over grab-and-go merchandisers and services unique to the site.

The concept store offers butcher shop-quality, all-natural meats of the finest cuts, including certified Angus beef, organic chicken, pork and sausages. Customers can also find hot take-home meals; made-to-order pizzas; freshly baked artisan breads, rolls, pastries and muffins; specialty cheeses; an extended produce section and fresh-cut flowers; smoothies and shakes; and all-natural frozen meats and meal options.

"Customers can find all of the ingredients necessary to prepare a hearty meal at home," noted Joe Hamza, vice president of sales and marketing for Tedeschi Food Shops. "We know that people want one-stop shopping, and we aim to provide them with all the elements they need to create fresh, wholesome meals for their families."

The new site also showcases TD's Deli, the chain's proprietary deli operation. TD's Deli offers sandwiches, subs and wraps made with Thumann's meats and cheeses, as well as fresh salads, hearty soups, breakfast sandwiches and made-to-order party platters. Customers may customize their deli orders at state-of-the-art touchscreen ordering kiosks, and eat in a 15-seat dining area with complimentary Wi-Fi access.

When building the menu, the Tedeschi executives asked themselves several questions. What does the customer want? What new or unique attributes does the food offer? Is it healthy? Is it considered a comfort food or indulgence?

"We look to augment our everyday menu with foods that are not widely available in our markets," Hamza said. "We believe our growth in foodservice will be broadly driven by demand for flavorful, healthful and spicy foods in underserved markets and communities."

For instance, the chain's TD's Deli Fireball sandwich — Cajun turkey breast, pepper jack cheese, a signature pepper spread of cream cheese, fresh cilantro, lime juice, and serrano and habanero peppers on a freshly baked roll — targets a specific group of consumers with a taste for unique flavors and a specific customer occasion. So does its Lean Protein sandwich or salad, and its TD's Kids Box, which includes a sandwich, cookies and juice box all in one package.

While the chain has one expansive foodservice menu for all the stores, individual locations are free to customize the offer based on the local tastes of their neighborhoods and demographics.

"Offering a wide variety of healthy, delicious made-to-order items tells customers that we are serious about fresh foods," Hamza said. "People now view Tedeschi Food Shops as a destination for high-quality grab-and-go meals that can be complemented by standard convenience store fare, like salty snacks and assorted beverages."

To support the expanded food operation, the chain in January acquired a commissary in Rockland, Mass. The commissary produces the Tedeschi Fresh Foods line of take-home sandwiches, subs, wraps and salads. "The acquisition has allowed us to take control over one of the most strategic categories for our company," said Hamza. "It has given us the speed and agility to quickly go to market with new, unique and healthier food products."

Looking for foodservice to grow and reach 20 percent of inside-store sales within four to six years, the Tedeschi team is focused on creating the best value possible. "We believe that when it comes to food, freshness and quality trump price every time," Hamza noted. "Only in the absence of quality and freshness does price become a determinant."

Beyond fresh foods, the new store showcases the chain's 437 private label SKUs including Tedeschi Select sodas, water, chips, pastries and breads. "Proprietary products are important components of our growth strategy," Hamza said. "They were responsible for almost half of our non-tobacco sales growth each of the past two years."

Indeed, the combined sales of these products have grown nearly 30 percent over the past three years, comfortably outpacing equivalent branded products in every category. The private label items now generate 10 percent of total sales, excluding fuel.

In design and layout, the Quincy store was planned with two objectives in mind. The first was speed. The second was providing an efficient shopping experience for time-strapped customers while also offering a relaxed, comfortable and inviting atmosphere for those who wish to eat their meals in the store, Hamza said.

"By including a seating area and Wi-Fi, we are inviting customers to stop in for a meal from TD's Deli and enjoy lunch with friends, or catch up on work while they are on the go," he said. "By leveraging the foodservice kiosk technology, Tedeschi was able to provide customers with a scale of fresh food choices and a level of meal customization not matched by any of our competitors."

To engage customers at the new location when it first opened, Tedeschi offered a free fresh-baked muffin with the purchase of any freshly brewed Green Mountain coffee. Promotional discounts on gallons of Garelick Farms 1 percent milk, 2 liters of Tedeschi Select soda, 24 packs of Poland Spring water and 48-ounce tubs of Edy's Ice Cream also ran through April. Meat shop, deli and produce selections were on sale for a limited time, too.

A more formal grand-opening celebration, with local dignitaries such as Quincy Mayor Thomas Koch and city council members, product sampling, entertainment and prize giveaways, was held in mid-May.

BRAND POSITIONING

With the new concept store and an aggressive remodel and refurbishing program, the Tedeschi team has been able to position the brand as modern without losing its connection to its rich tradition, according to Hamza. "We're proud of our history and optimistic about our future," he said. "Our brand, through its longevity and transformation, has remained bonded to the same values that have contributed to its success for nearly a century."

The goal is to deliver a compelling value proposition that's built on a passion for serving customers and a commitment to maintain relevance by creating innovative offerings that are difficult to duplicate by others.

The team emphasizes execution and store-level operations to set the Tedeschi experience apart from other retailers. "Unique may be a pretty strong word in most any industry these days," said Bob Tedeschi, executive vice president of operations. "But I would like to think that we do some things better than our competition. One look, feel and quality across all [our] stores has become an expectation we have been striving to capitalize on. We do not want any surprises regarding our customers' shopping experience from one store to another. It's a tall order, but one that we continually try to make a reality."

To improve the chain's consistency, Tedeschi Food Shops last year doubled the number of remodels it had ever done, completing 22 major projects. This year, the chain will add a number of mini-remodels to the mix as it replaces older equipment with newer fresh-food cases.

"Although we may not complete as many major remodels this year, we will improve a greater number of stores overall," noted Bob McGann, vice president of store development. The mini-remodels, which have been well received by customers and store personnel, will continue next year.

Outside the store, the retailer is moving away from branded gasoline. New ground-ups have opened with private label motor fuel, which Bob Tedeschi said has been much more successful than initially anticipated. Gallons sold have increased dramatically, while per-gallon gross profit has held steady.

"The quality of unbranded motor fuels has improved to a point where the consuming public has implicit trust in the purchase of this product," he said. "We believe our customers have already come to trust our name and the merchandise we sell, so rebranding to TFS motor fuel was a given for us." As major contracts expire, more conversions will be made.

Alternative fuels aren't expected to play a significant role in the retailer's offerings for the next 10 to 12 years. "Our children will likely see a more significant change in the way we fuel our vehicles in their lifetime," Bob Tedeschi said.

With stores varying greatly in building and lot size, the company's design and construction department works with the merchandising team to create a flexible floor plan that maximizes every square inch through the use of various equipment sizes, McGann explained.

On top of same-store sales growth, the Tedeschi team is looking for unit growth. Today, the chain's store growth strategy is focused on existing, vacant real estate and raw land development. Given the economic climate, the management team believes there are opportunities to lease or buy existing structures in well-situated locations at reasonable prices and they're looking for raw land to develop freestanding buildings with or without motor fuel.

The retailer also is interested in buying single businesses or c-store chains in New England.

Tedeschi Food Stores is well positioned to grow both organically and through the addition of stores, said Richard Jasper, vice president and CFO. "Organic growth will stem from a variety of initiatives, from re-merchandising the stores to minor or major remodels," he said. "The structure and strength of our balance sheet, where we are very well capitalized, demonstrates strong cash flows providing us with enviable liquidity and very little risk. This allows us tremendous flexibility in regard to providing or securing funding."

With current financial markets providing attractive borrowing rates, but more restrictive borrowing terms, Tedeschi will consider financing for major acquisition opportunities, purchases of raw land and ground-up builds. Remodels and other organic growth initiatives are funded through its operating cash flow and sizable cash reserves.

Reinvestment and constant improvement based on customer feedback is critical to Tedeschi's success in today's marketplace, Hamza said. "Competition keeps us on our toes; it keeps us sharp and focused. It challenges us to consistently be innovative," he said. "We have a great deal of respect for our rival retailers and for how they go to market.

"But when it comes to competing, we pay more attention to our own game plan and less on what others do. We consistently challenge ourselves to stay relevant by staying new, fresh and unique."

For comments, please contact Barbara Grondin Francella, Senior Editor, at [email protected].