By Erin Dunn
Tim Lowe isn’t afraid to do the chicken dance in the middle of a crowded grocery store. He’s in mid-sentence, talking about fresh produce, when the music starts. As a crowd gathers beneath a giant blue and yellow chicken chandelier, Lowe hustles over to take his place. He flaps his arms, shimmies and claps his hands. Exchanging high-fives, he heads back to brag about the original song commissioned by the supermarket chain he leads. He then plugs pizza crust imported from Italy and batter made from local sources that’s poured onto poultry in the store’s adjacent Chicken Kitchen. “It always starts with the quality of our product,” he says.
Lowe, the president of Winston-Salem-based Lowes Foods, is in Pinehurst to celebrate the company’s newly remodeled grocery. The day has the trappings of a party. Near The Cakery bakery area, there’s a large, hanging cutout cake where children can “blow out” the candles — which retract when an employee discreetly presses a button. The place is packed with executives, vendors peddling samples, and customers.
The store is starkly different from its predecessor, which opened in 1997. Gone are harsh, fluorescent lights and cookie-cutter displays. In their places are industrial red pendants and colorful sections labeled Beer Den, Blue Ridge Bakery, Outer Banks Seafood and SausageWorks — complete with a crazy professor who concocts more than 30 flavors. Pick & Prep produce lets customers select their own vegetables to be sliced, diced or julienned by Lowes’ staffers while they shop.
More traditional aisles occupy the center of the building, which looks like a giant greenhouse. The store was designed “so you could experience it the way you want to experience it,” Lowe says. “You can go in and out quickly, you can sample or you can hang out.”
It’s a mad experiment, perhaps, with nothing less than the company’s future at stake. Traditional grocery stores such as 64-year-old Lowes Foods and the Food Lion chain, started in Salisbury in 1957, are besieged by faster-growing, low-cost competitors including Wal-Mart Stores and German discounter ALDI and upscale chains such as Whole Foods Market and Greensboro-based The Fresh Market. Food Lion’s response is to bulk up; its Belgian owner Delhaize Group is merging with Dutch rival Ahold in a $10.4 billion deal being scrutinized by regulators. Lowes’ revitalization strategy is less well-known.
The 95-store chain is a division of Hickory-based wholesale-food distributor Alex Lee Inc., one of North Carolina’s largest private companies and owned by the George family, who have shown patience since acquiring the retail chain in 1984. Lowe, who isn’t related to the company’s founder, wouldn’t disclose revenue. A comparison with Ingles Markets Inc., based in Asheville, suggests Lowes turns over more than $1.5 billion annually. Lowes’ revenue makes up a big chunk of Alex Lee, which sold its $600 million restaurant-food distribution business in 2012. It retains Merchants Distributors Inc., a food distributor for more than 600 groceries from Ohio to Florida.
But Lowes is a fraction of the size of some rivals in the consolidating supermarket industry, such as Cincinnati-based The Kroger Co., which reported 2014 revenue of $108.5 billion and has more than 2,600 stores, including one under construction a block from the Pinehurst store where Lowe is dancing. The new grocery will be a Harris Teeter, part of the Matthews-based chain acquired by Kroger last year in a $2.5 billion deal. Lowes knows its rival well, having mostly retreated from the Charlotte region three years ago, swapping 10 locations in exchange for six Harris Teeter stores in western North Carolina — plus $26.5 million. (Lowes still has stores in Harrisburg and Mooresville, near Charlotte.) Harris Teeter has shifted toward urban locations, but it also sees opportunity in Moore County, a haven for wealthy retirees and golfers. Meanwhile, Lowes stores are spread across North Carolina and coastal South Carolina, with 23 in the Triad and 17 in the Triangle.
Exiting Charlotte also kept Lowes out of the bull’s-eye of Publix, the Lakeland, Fla.-based chain with 1,100 stores. It has opened 10 stores in North Carolina over the last 18 months with plans for many more. “Publix has more money than God, and they’re extremely aggressive,” says site-selection consultant David Livingston, founder of Milwaukee-based DJL Research. Lowes is “going against two behemoths. Where does Lowes fit in? They’re not even in the middle now.”
Lowe, who joined the company in June 2013, displays confidence that his remodeled stores and a revamped corporate culture can beat rivals in Pinehurst and across the Carolinas. “We’re very pleased with where we are.” One reason for optimism is the distinctive store design created by Danish branding consultant Martin Lindstrom. “People hate going into a supermarket today. It’s really boring,” says Lindstrom, who appeared in Time magazine’s 2009 list of 100 most influential people. “We needed to make it fun again to go out and shop.”
Lowes’ revitalization started with visits to more than 100 homes, examining customers’ pantries and determining what mattered to them. While finding one’s favorite brand of ketchup or cereal remains paramount, the company learned that many shoppers want a more entertaining experience. Lowes hired former Disney employees to train its workers. The chicken dance, which happens every time a batch of rotisserie chickens comes out of the oven, is a central feature, along with a community table for product samplings, cooking demos and children’s events. Lindstrom dubbed the reinvention Project Green Script, after the filmmaking method employed by legendary director Alfred Hitchcock. He filmed with a blue script — the rational way things would unfold — and a green script that dictated how audiences should react emotionally. “Every supermarket has the blue script. Very few, if any, have a green script predicting how people will feel when they walk in. In order to create the perfect green script, we needed to change a lot,” Lindstrom says.
Leading the charge is Lowe, who has spent his career at much larger retailers. Wiry with thin-rimmed, square glasses, he looks the part of the pharmacist he was trained to be. A Texas native, Lowe grew up the youngest of five children and attended the University of Houston. His parents owned a cabinet company, where he learned about running a family business.
After graduation, Lowe took a job at Wal-Mart and, moving out of the pharmacy, rose to become a regional manager. His résumé includes stops with Best Buy Co. and Meijer Inc., a Grand Rapids, Mich.-based operator of large, Wal-Mart-type stores, where he led the general merchandise division. He worked six years in various positions for Eden Prairie, Minn.-based grocer SuperValu Inc., which has 3,420 stores. His last job there was as executive vice president of merchandising before he was dismissed in May 2013. Lowe’s departure came as part of a corporate restructuring, ahead of the sale of five SuperValu chains to New York-based private-equity firm Cerberus Capital Management following years of slumping sales.
He quickly landed on his feet, connecting with members of the company’s founding family, including Alex Lee CEO Brian George. “The whole idea that the organization was looking to redefine itself and they were willing to go on a journey to create something different really appealed a lot,” Lowe says.
The supermarket company’s innovations have set the stage for faster growth, George says. “Over the last three years, [executives have] completely reimagined Lowes Foods stores, planning and executing how our stores should be designed, experienced and branded,” he says.
Lowe says his job is to protect what he calls the two C’s: the compass and the culture. Compass is the organization’s direction and branding, but the other C is more important, he says. “There’s a saying I heard many years ago that says culture can eat strategy for lunch, and I think that’s a very accurate statement. The culture is one we went to work on right off the bat to make sure that as an organization we weren’t just going out and doing brick-and-mortar stores, but we were clearly transforming the organization from the inside out, starting with the people.”
Maybe that’s corporate speak, but a walk through the Pinehurst store suggests Lowe has bonded with employees, or “hosts” in company lingo. Several slapped his shoulder and joked about the chicken dance. Store managers helped develop some of the new in-store concepts.
Jim Lowe, son of the founder of Mooresville-based Lowe’s home-improvement store chain, opened the first Lowes Foods store in North Wilkesboro in 1954. Most of the company’s growth over the next three decades was directed by J.C. Faw, the first store manager who bought it from Lowe and built the company into a chain of more than 60 locations. Faw, 86, who still lives in Wilkes County, sold the business to Merchants Distributors Inc. — later renamed Alex Lee after George family members — in 1984. More expansion followed, with 19 stores added over the next four years. When it bought Burlington-based Byrd Food Stores Inc. in 1997, the company gained 43 stores and a foothold in Eastern North Carolina. It added 13 Hannaford sites in the Triangle and along the coast in 2000. By then, Lowes operated more than 100 stores.
The company has since contracted as shoppers tightened their belts and competition intensified. Most of the stores Lowes acquired from Harris Teeter during the 2012 swap remain closed. “You can’t boil the ocean. At the time we had well over 100 stores,” Lowe says about the downsizing. “We really had to go through an evaluation. Where do we want to operate and play? Any market goes through it — and we’ve all seen it — the center of the market changes.”
Most Lowes Foods stores are clustered around smaller cities or growing suburbs of larger metros. The company is opening its first unit in the Greenville, S.C., market next year with a store in Greer, not far from the BMW auto-manufacturing plant. It plans to add a store in Southern Pines next year, within 10 miles of its Pinehurst site. Earlier this year, it opened a store in Jacksonville, home of Marine Corps Base Camp Lejeune. With six Food Lion and two Wal-Mart stores in the coastal city, Lowes is positioning itself as an upscale option where half of the households have annual income of less than $43,000.
Lowe believes his company can add 20 new stores in the next five years, including some new markets, while it also revamps many existing stores. As one of the few grocers based in North Carolina, Lowes is emphasizing that distinction with its advertising slogan, “You can’t fake local.” It’s part of a new strategy developed with The Variable, a Winston-Salem-based ad agency, and Chief Marketing Officer Michael Moore, who previously worked with Lowe at SuperValu. Cheeky sayings such as “Supermarkets need a kick in the plums” and “Grocery stores should get their heads out of their apples” line billboards. “We had to signal in a strong way we are changing,” says Heather George, senior vice president of brand strategy and Brian George’s sister.
Most grocers stress their local offerings, and Lowes is no exception. It has contracts with more than 250 farmers in the Carolinas, who provide about 30% of produce during the summertime peak. “Lowes Foods has to find a way to differentiate itself,” says Roger Beahm, director of the Center for Retail Innovation at Wake Forest University. “People like buying local and supporting local. That’s an appealing message. When you have stores like Harris Teeter being taken over by Kroger, and Publix coming in, you’re creating an opportunity to position those brands as outsiders and your brand as an attractive local.”
The company also is hanging its hat on hopes that shoppers will appreciate better customer service. In a Consumer Reports ranking this year of shoppers’ favorite supermarkets, Lowes Foods placed 25th among 68 grocers, trailing The Fresh Market, which ranked ninth, and Harris Teeter, 17th. Publix placed second, Food Lion was 52nd, and Wal-Mart was second from the bottom.
Lowes’ new formats clearly aren’t aimed at the most cost-conscious customers, with the open, bright concepts more similar to Whole Foods than Food Lion. The company has a low-cost chain, Just$ave, that now totals about 20 stores. The stores cater to small towns including Louisburg and Roxboro.
Customer acceptance for new supermarket formats usually takes two years or more to mature, Livingston says. Lowes’ ownership structure gives the company flexibility as it changes. “Increased sales come at a price — increased expenses. That’s usually a sign of retreat,” he says. “We have a longer-term perspective. We can think about what we can do for the next two years as well as the next generation,” Heather George says.
While facing stiff headwinds, Lowe believes the changes will ensure Lowes’ survival. “Who would have ever thought you would do a chicken dance in a grocery store, right? That’s not typical. I love to be able to do that.”