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Emerging Markets

Full-service markets are finding a niche on campuses, serving the students, faculty, community, and creating profits for the school.
University Business, Mar 2005

Julia Jacobelli, a junior at George Washington University (D.C.), is a regular at her local market, often stopping in two to three times a day. Sometimes she goes for a piece of fresh fruit; other times it's to pick up the requisite college dinner: packaged pasta and canned sauce. So how does this busy college student find the time to do so much grocery shopping? Well, considering the nearest full-service market is just a three-minute walk from her on-campus apartment, the answer is: easily.

Jacobelli shops at District Market, GW's first full-service, on-campus supermarket. Conveniently located on the ground floor of GW's bustling student union, the DM boasts fresh produce, organic and kosher items, preprepared foods, a full deli, a bakery, a rotisserie station, an international foods aisle, an online grocery ordering service with free delivery, a DVD rental service, and health and beauty products.

"It sure beats having to walk to the Safeway two miles away," says Jacobelli. "When weather is bad, carrying heavy bags of groceries can really be a pain," she adds.

Serving the entire on- and off-campus community, the 12,000-square-foot DM replaced a traditional 2,000-square-foot convenience store, which primarily carried dry goods. "There has been a natural evolution from the era of the convenience store--think ramen and Diet Coke--to the era of the small grocery store, where you can offer fresh produce," says Claudia Scotty, CEO of Envisions Strategies, a higher ed consulting firm. "Students are driving this evolution. They want fresh foods and they want them available in a variety of formats."

"I think there's a certain niche for on-campus
grocery stores. It really depends on
how many students have the ability to do
their own cooking." - Greg Billhardt, GWU

Aramark funded the $6 million project, which was completed last September. After surveying more than 4,000 students, faculty, and staff to determine the market's viability, Aramark found that many people were keen on the concept. "The major question we had was: Just how much are students leaving campus to go shopping?" says Leanne Scott Brown, a spokesperson for Aramark. "We wanted to gage the demand for a store of close proximity." It turns out that 49 percent of the students surveyed said they made regular visits to local grocery stores.

It's no surprise that GW's students are such avid grocery shoppers--of the 7,000 students who live on campus, 4,000 reside in apartments with full kitchens. "I think there's a certain niche for on-campus grocery stores," says Greg Billhardt, manager of the DM, who previously worked as an executive chef at Whole Foods Market. "It really depends on how many students can do their own cooking." Clearly, people at GW are doing a lot of cooking--about 75 percent of the on-campus population shops at the store, Billhardt says.

Aside from its ample population of cooking-savvy students, GW was a good supermarket candidate for other reasons. First, it met Aramark's residential population requirement, which states that a store can only exist if at least 3,000 students live on campus. But equally important was GW's willingness to take a risk on food service. "GW is extremely progressive in the way they want to serve their students," says Mark Walker, national marketing director for Aramark. "As it is, none of GW's dining services are really traditional. They don't have conventional dining halls or meal plans. This is just an extension of that."

Since its opening, students have gravitated toward the market's home-meal replacement section, boasting 16 feet of freshly prepared foods such as veggie salads, wraps, poached salmon, chicken cordon bleu, and sesame asparagus. It is in this section that Billhardt's Whole Foods background is evident.

"The clientele here is a bit more sophisticated. They understand what natural foods are--they're very health conscious," Billhardt says. "They don't want the typical Kraft macaroni and cheese." Organic food sales are up 33 percent from last year and kosher foods sales increased by 42 percent. There are even kosher microwaves behind the deli counter.

"The success of DM has truly exceeded my expectations," Billhardt says. "Because this was my first time in a university setting, I didn't know what to expect. But this young clientele is really open and willing to experiment with food."

Brigham Young University (Utah) is another pioneer of the campus supermarket movement. In September 2001, it opened its Creamery on Ninth East, a 10,000-square-foot, stand-alone grocery store sporting 1950s decor. Built in the late 1950s, the store was originally an off-campus, small, family-owned grocery. That all changed four years ago when the university inherited the property. "It was almost going to be torn down and used as a parking lot," says Dean Wright, director of dining services at BYU. "But once everyone realized that the a sizeable student population lived in the apartment buildings across the street--many of whom didn't have private transportation to go the nearest grocery store two-and-a-half miles away--the grocery store idea started to make sense."

While the store underwent a substantial remodeling, the Creamery (or CONE, as it's known) still retains its old-school charm. Not only does it sell ice cream that's made on the premises, but the store features a grill counter complete with diner-style booths and stools, and a fresh meat and dairy counter which features BYU-produced and -branded products. "We provide some of the best beef in the valley--and it's all raised on our university farms," says Wright. Despite little outreach efforts, 35 percent of the CONE's customer base is not connected with the university, Wright says.

"The university has an expectation that
the Creamery is run as a business and
will provide a return to the university."
-Dean Wright, BYU

However, in regard to the on-campus community, BYU is a marketing machine. Targeting mainly upper-class students because of their access to kitchen facilities, Wright offers weekly ads in the campus newspaper featuring heavy discounts. In addition to offering its own line of dairy products, the university sells another proprietary label, known as Brigham Creek, which has a line of salsa and salad dressings.

Students are also encouraged to use their meal plans in the store. Until 2001 students living off campus did not typically buy meal plans--now about 3,000 students have them. "The CONE has acted as a gateway to attract students to meal plans," says Wright. "And once they have one, they take advantage of dining with us all over campus." The university also expects an additional 1,500 students to sign on with meal plans next year because first-year students are now required to purchase meal plans. "The housing department did this to demonstrate that our prices are competitive," Wright says.

With total sales reaching just under $3 million per year, the CONE's success has spurred plans for other grocery store developments on campus. Plans are underway to construct a 12,000-square-foot store known as the Creamery on Seventh North. It's no coincidence that a 1,200-bed apartment complex is being built near the store. Strategic thinking is BYU's forte. "The store is not run on a convenience store philosophy," he says. "The university has an expectation that the Creamery is run as a business and will provide a return to the university."

While GW and BYU are seasoned grocers, other schools, such as the University of North Carolina at Chapel Hill, are just entering the supermarket arena. The university opened its new 6,500-square-foot Ram's Head Market this month. Situated on the ground level of a new 30,000-square-foot dining center, which will also feature a sports cafe and dining hall on the top floor, and a 700-space parking deck, the market is geared to students living in apartment-style housing, as well as faculty and staff. "Essentially, it's going to serve that person who hates to stop off on the way home to pick up a gallon of milk," says Ira Simon, director of food and vending services at UNC.

Ram's Head Market offers a full line of produce, an organic foods section, cheese display, household goods section that includes beauty products and irons, a Java City coffee stand where students can grind their own beans, a Boar's Head deli, and a hot bar area for home-replacement meals. While Aramark is currently operating the grocery store, the original intent was to have Harris Teeter, a food market chain in the South, run the campus operation as a Harris Teeter Express. But that never materialized. "When it came to putting down the bid documents, Harris Teeter took another look at it and said: 'There's no alcohol sales, no drive-up parking, and no summer service. This doesn't make sense for us to do it'," Simon says.

"When it comes to canned spaghetti or
individually wrapped brie cheese, there's
going to be a difference in the quantity
and price we can charge for it."-Ira Simon, UNC

But Harris Teeter's backing out did not thwart efforts to construct the facility, which is expected to generate $1.7 million in sales per year. This figure is based on the average spending of college students in the immediate area. As it is, the campus's 2,000-square-foot minimart already produces $1 million in sales. His optimism is not presumptive--the market's largest target customer base has yet to arrive. When five new residential apartment-style buildings open in 2006, the pool of potential customers will only increase.

The market also boasts a very strategic location. The nearest off-campus grocery store is three miles away, and most students are not allowed to bring cars to campus because parking is at such a premium. Furthermore, the Ram's Head facility brings the north and south sections of the campus together, which are often viewed as separate entities. "It was designed to merge the two campuses together and serve as a conduit to get to and from each section," Simon says.

To obtain a competitive edge, UNC also hired an experienced grocery store manager. The criteria for the new hire was that he or she had to have a culinary or hospitality degree. "Not a lot of us are involved in business and it's a unique animal. We wanted someone who could help us drive participation in sales and realize purchasing power opportunities," says Simon.

Maintaining competitive and reasonable prices will also be another challenge. "We are hoping to drive costs down now that we have a larger volume and storing capabilities," says Simon. While he hopes there will opportunities to get better prices on bulk goods, there will always be a markup with certain specialty goods. "When it comes to canned spaghetti or individually wrapped brie cheeses, there's going to be a difference in the quantity and price we can charge for it," he says. "We're not a Wal-Mart."


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