When it comes to food, fresh is best. The Fresh Market operates
about 160 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 sq. ft., 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, which went public in
2010, was acquired by Apollo Global Management in mid-2016.
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
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, the grocery chain has announced
plans to double its store count in the Southeast to more than 200
locations. Currently, 104 of its 160 stores are located in the
region. 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.