June 09, 2004

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Palo Alto Online

Need groceries, will travel

by Jocelyn Dong

If you're hoping to pick up a ready-to-heat gourmet dinner at a supermarket, Palo Alto is the city for you. With its abundance of upscale groceries with gleaming deli counters, busy residents regularly choose among a variety of high-end dishes, from grilled salmon at Piazza's Fine Foods to sesame chicken with orange sauce at Whole Foods Market.

If, however, you're interested in choosing from a vast array of low-priced breads, cereals and beverages, chances are you'll need to drive to another town.

A recent survey conducted by the Palo Alto Neighborhoods group showed that four out of 10 respondents regularly shop for food outside of the city. Approximately 300 people participated in the query.

With the probably closure of Albertsons at Alma Plaza, some speculate the trend could worsen.

Since the late 1980s, the city has lost a handful of lower-priced neighborhood grocers, including the All American Market in Barron Park, Duca & Hanley and Co-op in Midtown, and John's Town and Country Market.

Palo Alto is simply following a statewide pattern of grocers targeting niche markets. But local affluence and government restrictions on supermarket sizes have made the trend all the more pronounced in the community, tipping the scales toward a preponderance of "boutique" grocers and away from the all-purpose supermarkets that populate Mountain View and Menlo Park.

The loss of lower priced goods frustrates some Palo Alto residents.

"I buy groceries in Menlo Park because the grocery stores in Palo Alto are too small and lack the selection of products that are available in neighboring towns," wrote one survey participant.

"The restrictions on grocery-store size make grocery shopping in Palo Alto a chore -- either too expensive or not enough selection," complained another. "When I really have to shop for food, I go to Mountain View."

When asked what Palo Alto needed, one person summed up the thoughts of others: "Medium-sized, standard supermarket (30K-50K, not upscale, of which we have plenty)."

Palo Alto doesn't allow grocery stores of larger than 20,000 square feet, an issue of significant contention for Albertsons. The company has spent years trying to expand its Alma Plaza store.

The average supermarket size in the United States is 44,000 square feet, according to the Food Marketing Institute.

Supermarkets in neighboring cities are substantially larger. Menlo Park's Safeway on El Camino Real is undergoing a remodel, trimming down to a still-hefty 66,000 square feet. The Mountain View Albertsons on California Avenue is 41,000 square feet and the Safeway across the street is slightly larger.

While size does matter to some shoppers, there are other reasons the boutiques are here and the mega-markets aren't.

John Garcia, co-owner of JJ&F Market in the College Terrace neighborhood, explained that Palo Alto customers are hooked on convenience and quality.

"Convenience is becoming a huge factor," he said. His 8,000-square-foot store just finished putting in a warm deli, and he's seen a demand for prepared items such as bagged salads.

Also, he said, customers seem to hone in on quality and the latest choices, which he tries to provide. Fuji apples, for example, have become a top seller. Customers looking for generic brands of food, he figures, can go to the big chain grocers.

For that reason, he doesn't view megastores as a threat. Rather, his competition is the other upscale grocers.

"I put groceries in a lot of cars. I see a lot of Whole Foods (bags), Costco boxes; I see Safeway bags. Those are the problems; I don't think it's Wal-Mart," he said.

Still, business has changed as a result of big-box stores that give large volume at deep discounts. Back when Garcia's father and uncles ran the store, they used to bring in palettes of paper goods, such as towels and tissues, each week. Now, Garcia said, they bring in one palette. They stock paper goods for the convenience of customers who need to pick up a small quantity, rather than to generate sales revenue.

"I would say you have to carry it, but you don't have to have the selection," he said. "They go to Target or Costco for that."

Dave Heylen, vice president of communications for the California Grocers Association, has seen the niche trend pick up steam over the past five years as independent grocers strive to compete.

"In the Bay area, upscale markets -- Mollie Stone's and Andronico's -- they're going after a particular shopper, and they're very good at it," Heylen said.

Greater customer service is becoming an expected perk. Forget the "you buy, you bag" formats.

"That's probably a reflection of more discretionary income. (Customers) are not as focused on price. They want good service," he said.

Is the trend likely to reverse itself? Statewide, Heylen thinks not, as each class of merchant -- from the big boxes to the independent grocers -- continues to seek ways to differentiate itself in the battle for survival.

Meanwhile, Palo Alto residents -- though they may grumble about not having lower priced grocers -- evidently also love the quality and variety their chic markets provide. Nearly one-third of the 300 respondents to last year's retail survey identified yet another grocer, known for its unique quality goods, that they wanted to come to Palo Alto: Trader Joe's. Senior staff writer Jocelyn Dong can be reached at jdong@paweekly.com.

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