When it comes to food, fresh is best. The Fresh Market operates about 150 full-service upscale specialty grocery stores in some 25 US states, from Florida to Wisconsin. As the name suggests, the chain specializes in perishable goods (two-thirds of sales), including fruits and vegetables, meat, and seafood. The stores average 21,000 square feet, about a third to half the size of a conventional supermarket. However, customers won't find the nonfood items sold in most grocery stores these days, such as cleaning and cooking supplies. Founded by husband-and-wife team Ray and Beverly Berry, who opened their first store in 1982, The Fresh Market went public in 2010.
The Berry family and other company officers were the selling shareholders and received all the proceeds from the November 2010 initial public offering, which raised about $290 million. With the economy rebounding, the Berrys apparently felt it was time to cash out.
The fast-growing chain operates grocery stores in 26 states, primarily located in the Southeast, Midwest, Northeast, and Mid-Atlantic region. New markets include California and Texas. However, established markets Florida, North Carolina, and Georgia, are home to more than half of The Fresh Market's stores.
Sales and Marketing
The Fresh Market spends far less on advertising than its conventional competitors, relying primarily on word-of-mouth publicity to attract customers. Indeed, the grocery chain reported advertising costs of only $3,862 in fiscal 2013 (ended January), or just 0.3% of annual sales, up from $2,652 in the previous year. In-store marketing activities include cooking classes and demonstrations, tours, and product demonstrations. It also distributes a weekly online newsletter named "Fresh Idea" to promote new products, seasonal produce, recipes, and weekly specials.
Fueled by the addition of new stores, The Fresh Market's fiscal 2013 (ended January) sales increased 20% versus the prior year, to more than $1.3 billion. Net income rose 25% over the same period to about $64 million due to higher sales and decreased interest expanse. Same-store sales at Fresh Market stores increased 6% year over year. Indeed, fiscal 2013 marked the fifth consecutive year of rising sales and the second consecutive year of rising profits (since the 2010 IPO).
The Fresh Market's recipe for growth is to continue to open stores at a rapid pace in new and existing markets and to increase sales at older stores. Indeed, in fiscal 2013 the chain added 16 stores, including its first in California and Iowa. In fiscal 2014 it plans to open a record 22 locations. Ultimately, management believes the US can support at least 500 of its upscale grocery stores. The Fresh Market is forecasting same-store sales to increase 4% to 6% in the coming year. The chain caters to its affluent customers by offering high-margin specialty foods, such as hand-trimmed aged steaks, fresh seafood, hand-stacked fresh produce, and a high level of customer service. Its smaller store footprint gives the retailer more flexibility in picking locations.
The investment firms FMR LLC and Wells Fargo & Company each own about 11% of the company's shares. T. Rowe Price Associates owns about 10%. Founder and company chairman Ray Berry, and his son, vice chairman Brett Berry, together own about 7% of the company stock.