A health-focused supermarket and a mini version of gourmet brand AJ’s are the next niche stores scheduled to leap from drawing board to reality for home-grown grocery chain Bashas’.
Along with Bashas’, AJ’s and Food City give the Chandler-based company a handful of brands to satisfy different customer needs, said Johnny Basha, vice chairman of the board, senior vice president of real estate, and groomed to be next leader of the family business now headed by his cousin, Eddie.
Bashas’ — 155 supermarkets plus warehousing and distribution operations — is the second biggest grocery seller in the Valley, topped only by megaretailer Kroger, Fry’s parent and the country’s biggest supermarket corporation.
"Our company has the ability to be diverse," Johnny Basha said. "We’re not strangled by layers of corporate bureaucracy. We can identify an opportunity and seize the moment."
Ike’s Farmer’s Market, scheduled to debut in July in north central Phoenix and named after Basha’s father, will focus on selling fresh produce and other healthy and organic food options, he said.
It will distinguish itself from Wild Oats or Whole Foods by keeping prices low, he said. And it will take on competitors such as Sprouts, Sunflower and Henry’s Markets by making the shopping environment "fun," and full of unusual products, Basha said.
"You might find honey in a beehive or organic popcorn," he said.
Look for the first East Valley version of Ike’s in 2007. That gives the company time to see which features, products, departments and characteristics of the prototype work and which need tweaking, he said.
The company takes its cues from customers as to what kind of supermarkets it will build in the future and where to build them, Basha said.
Ike’s was designed to serve those who are focused on healthy eating, especially the aging baby boomers, he said.
So is the next new thing for the company — mini supermarkets about 10,000 square feet — just 20 percent as big as a typical Bashas’ — and designed to squeeze into a condo tower.
Phoenix, Tempe and Scottsdale downtowns expect several downtown residential projects within the next couple of years, mostly high-priced condos and hotel-condo combos.
Bashas’ noticed and, realizing all those new urban residents were going to have to buy groceries somewhere, designed a small supermarket shell, probably to be stocked more like an AJ’s, to serve those new city dwellings.
An experimental 16,000-square-foot market was built in a West Valley masterplanned development, Verrado. Basha said it’s a hit, and a smaller version likely will serve as the condo-complex prototype.
The company’s ability to identify needs and build to suit them has kept it flourishing.
"We look at (niche markets) as bullet-proofing our business," Basha said. "We understand our neighbors and what they want, and if we can give them what they want, we benefit because we sell more groceries."
It is an attitude that has helped the tiny — by national standards — family-run supermarket company grab market share from the national giants in the hugely competitive Arizona marketplace, said national retail consultant Burt Flickinger.
"Bashas’ is one of the three finest grocery chains in America," he said. "They are arguably the best at figuring out three major formats — Food City (Hispanic-focused), Bashas’ (traditional) and AJ’s (gourmet)."
The Shelby Report, a national supermarket industry analysis, figures Bashas’ increased its market share by 2.5 percent in the Valley in 2004, and 2.8 percent statewide. Wal-Mart Supercenters’ share of grocery shoppers’ dollars jumped 1.9 percent in the Valley and 1.4 percent throughout the state last year. Nearly every other chain from Wild Oats to Fry’s lost market share. Fry’s eked a minimal gain statewide and lost nearly 1 percent share in the Valley in 2004.
This year, Bashas’ has made even bigger gains. While the year-end figures are yet to be compiled, The Shelby Report’s September-October stats show Bashas’ leapfrogged Safeway and Wal-Mart into the No. 2 spot in Valley supermarket sales.
Much of the company’s recent surge has been fueled by the Food City chain.
"Hispanic (grocery) growth is absolutely incredible," said Mindy McBain, senior writer for The Shelby Report. Many companies are playing catchup, suddenly recognizing the fastest growing niche in the business, she said.
But Bashas’ has the head start.
Bashas’ saw Hispanic demand happening more than a decade ago and reacted, Basha said. The company’s first attempt to address the needs of the Hispanic shopper was a flop, he said. It was an elegant, Mexican-tiled store the company built in Nogales.
"It probably should have been built in Scottsdale," he said.
Bashas’ dumped the concept but not the niche and looked for a better way to serve Hispanic customers.
The company found it in a 47-year old Phoenix store, which Bashas’ bought in January 1994 from its long-time owner who wanted out. In the dozen years since, Bashas’ grew Food City into a 61-store chain.
Gourmet market AJ’s grew from one to 11 stores in the same time period.
"AJ’s has a saturation point, and we are probably reaching it," Basha said. "With Food City, growth opportunities are unlimited."
As for the namesake chain — Bashas’ — the family leader said the company has virtually turned those into neighborhood niche opportunities, too.
Instead of a formula-store format, Bashas’ has been building new stores — and tailoring older ones — to their surroundings, adding ethnic product lines in ethnic communities, day care centers in family-focused neighborhoods, and trying out various features and departments that match the nearby shopper base, Basha said.
One of the company’s flagship stores is a recently razed and rebuilt Scottsdale Bashas’ at Indian School and Hayden roads. Among the special features of the new store in the old neighborhood are covered parking, elegant stone exteriors, and a variety of prepared food options.
"I don’t think there is another conventional store like that, with such high-quality perishables — produce, quality meats, prepared foods, gourmet bakery, Mexican kitchen, Italian kitchen and a Chinese rice garden," Basha said. "I’m proud of the people who merchandised that store."
The company’ community focus helped earn it the title Retailer of the Year from industry trade publication, Progressive Grocer.
Editor Stephen Dowdell wrote of the publication’s choice of Bashas’ for the honor, "The reasons are many, ranging from Bashas’ status as a formidable, home-grown food retailing power in a very competitive market, to its savvy approaches to merchandising and operations, to its reputation as a nurturer and servant to the community."
Basha said commitment to the community has been a centerpiece of the corporate values that originated with his grandparents, who owned a dry goods store in the 1920s, the first Basha retailers. Their sons, Ike and Eddie Basha Sr., opened the first Bashas’- named store in 1932, near the site where the company later established its Chandler headquarters.
"Our core values come from my grandmother — respect for self and others, building strong communities, putting back into the community," Basha said. "If you want to conduct business you have to ensure you have a healthy community, and you do that by investing in the community."
Besides the company’s many charitable programs and activities, the Bashas interact with customers and employees. It helps the company decision makers learn what they want and need. And it fosters camaraderie and top-of-the-line customer service, Basha said.
He said customer service is the most important product because it — much more than prices or products — keeps customers coming back.
Dorotha Brown, who lived in Scottsdale for 50 years and shopped in the old and new Bashas’ at Hayden and Indian School roads, "for as long as they’ve been here," said that attitude has kept her a loyal Bashas’ shopper for decades.
"I like the store. They have good meat, and the help is nice. And they do a lot for the community," she said. "I like the owner even though I’ve never met him personally. I like that it is locally owned."
Elizabeth and Fred Toth, who have lived nearby for a quarter-century, stop by for coffee and a bagel a few times a week, whether they need groceries or not.
"They always treat us nicely," Elizabeth Toth said. "And the goods are good, and the prices are competitive."
Bob Daniels said he, too, is a long-time Bashas’ shopper, but he is driven simply by convenience.
"This is close to home, and they have what I like," he said.
What Daniels may not realize is finding out what he likes and stocking it is the full-time pursuit of the local company and the key to its niche-driven success.
"Today, grocery competition is so fierce, and it’s complicated and changing," McBain said. "The companies that will survive will give customers what they want. Bashas’ is doing exactly that. They are changing as fast as the market is."