Sustainability is here to stay

Portland Press Herald
October 21, 2007

http://pressherald.mainetoday.com/story.php?id=141892&ac=PHbiz

"Hannaford is building a 49,000-square-foot store in Augusta to showcase its conviction that environmental friendliness, lower costs and higher sales can all go hand in hand."

By Tux Turkel

Hannaford Bros. Co. plans to open a new supermarket in
Augusta next year, built to standards that will make it the most
environmentally friendly in the country.

Will that make area residents more likely to shop there?

Maybe, if the company sets up school tours and store displays to
explain the special features, as it is considering, and invites
shoppers to classes focused on environmental and energy
issues.

"We want to take full advantage of the consumer education
opportunities associated with this store," said Caren Epstein, a
Hannaford spokeswoman.

The 49,000-square-foot store will cost more to build than a
conventional supermarket, but less to operate. Goodwill and
customer loyalty, Hannaford hopes, will be an added benefit.

Hannaford's decision is part of a wider trend in the supermarket
business -- a move toward sustainability. Designing stores
powered by renewable energy; striving to recycle all waste;
working with suppliers to reduce packaging: These are examples
of how supermarkets are embracing sustainability as an
opportunity to cut costs and boost sales.

"It's just a tidal wave in our industry," said Jeanne von Zastrow, a
senior director at the Food Marketing Institute.

Von Zastrow sits on a task force made up of 22 supermarket
representatives, including Epstein, and an executive from
Supervalu, the parent company of Shaw's Supermarkets. The
task force defines sustainability as, "business practices that
promote the long-term well-being of the environment, society
and the bottom line."

The trade group will hold its first Sustainability Summit next
June. Meanwhile, it's developing resources, including a
"sustainability starter kit," to help members make the business
case for sustainable practices and learn how to incorporate them
at their supermarkets.

That business case is critical in the high-volume world of food
retailing, where the average net profit margin is a penny or so
on every dollar in sales. Supermarkets generated nearly $500
billion in gross sales last year, according to institute estimates,
with the average household spending between $62.20 and
$131.40 a week, depending on the number of family members.
So stores are always looking for ways to differentiate themselves
from rivals down the street and attract shoppers. Sustainability
is emerging as the latest buzzword.

It's not clear, though, how meaningful sustainability will be with
shoppers. A study done for von Zastrow's group found that just
over half of people surveyed were familiar with the term; only 5
percent could say which companies supported the values of
sustainability.

Sustainability isn't a totally new concept at supermarkets. High
refrigeration, lighting and trucking costs have led companies to
invest in energy efficient controls and equipment. The difference
now, von Zastrow said, is a commitment from senior
management to integrate these practices across the entire
operation.

WAL-MART SETS PACE

Take Wal-Mart, the country's leading food seller and world's
largest retailer.

Better known for its focus on low prices, Wal-Mart recently set
ambitious goals around sustainability. Among them are recycling
all its waste, getting all its energy from renewable sources and
selling products that help preserve the environment. Within
three years, the company says, all new stores will use 30 percent
less energy and generate 30 percent fewer gases associated with
climate change than those built in 2005. An experimental store
in Texas has solar panels and a wind turbine, and recovers rain
water for landscaping.

In California last month, the large Safeway chain announced
plans to install solar panels at 23 stores. First up was the
55,000-square-foot store in Dublin, Calif., which has a rooftop
solar electric array that provides 20 percent of its average
power, and up to 48 percent at peak hours.

Safeway already is the largest retail buyer of wind energy in
California. The company receives favorable feedback about its
investments in renewable energy, according to Teena Massingill,
a spokeswoman. After a news conference at the Dublin store,
Safeway fielded several phone calls from people interested in
installing solar panels at their homes. They wanted to know the
manufacturer Safeway was using.

LABORATORY FOR HANNFORD

As part of its sustainability effort, Hannaford is installing solar
hot water panels this year at four stores -- none in Maine. It's
also considering a demonstration wind turbine at a warehouse in
New York.

The Augusta store will feature solar electric panels, geothermal
heating and cooling and a vegetation-topped roof to help
manage stormwater. The project also plans to recycle a high
percentage of the old Cony High School building, which now
stands on the site.

These and other extra measures will allow the building to be
certified by the U.S. Green Building Council as a platinum-level
LEED building, the highest designation. Hannaford is the first
supermarket to meet that industry standard.

Hannaford is headquartered in Scarborough. The Augusta
location gives top management a nearby laboratory to test
sustainable practices that could be used in other stores. The
LEED platinum designation also offers the company some
bragging rights, but Epstein said it's too early to gauge the
value.

"We don't know to what extent it will resonate with customers,"
she said.

Some insights may come from a study done for the food
institute's sustainability task force by The Hartman Group, a
consulting firm in Bellevue, Wash. The study concluded that
public awareness of sustainability is low, but increasing. It also
found an intersection between sustainability and health and
wellness, and a recognition that the majority of people relate to
these concerns through their personal and family lives, not
through global issues, like climate change.

Hardly any shoppers are familiar with LEED, which stands for
Leadership in Environmental and Energy Design, suggested
Blaine Becker, marketing and communications director at The
Hartman Group. So the news that Hannaford's Augusta
supermarket will be certified at the top level for a LEED building
is a fine distinction for most shoppers.

"It will really come down to how Hannaford communicates with
its customers," Becker said.

Hannaford, Becker said, has done an excellent job in marketing
its Guiding Stars nutrition grading program, making a personal
connection for shoppers. It will have to make a similar link with
sustainability.

Hannaford received national publicity for its LEED platinum
plans. But the Augusta store won't be the first LEED-certified
supermarket in New England.

PRICE ALWAYS A PRIORITY

Shaw's Supermarkets, Hannaford's longtime rival in Maine,
opened a basic-level, LEED-certified store in Worcester, Mass.,
in 2005. That store features water-saving fixtures, heat-
reflective roofing and a carbon-dioxide monitoring system that
adjusts air flow to shopper traffic.

Neither Shaw's nor Hannaford will discuss specific store
finances, but Judy Chong, a Shaw's spokeswoman, said the
company has gotten positive feedback about the store. One way
the company measures public interest in sustainability is
through the sale of reusable, cloth shopping bags. Across all its
stores, customers have bought 500,000 or so, since sales began
in mid-January.

Shaw's also has plastic bag recycling bins in stores. They have
collected 589 tons of plastic so far this year.

These statistics don't indicate how much of this activity is
coming from shoppers who already are committed to
environmental action. In its surveys, The Hartman Group
identified a vast middle group of shoppers -- 65 percent of all
consumers -- who aren't focused on global issues. For these
shoppers and many others, price is a major consideration when
choosing a supermarket.

At the Augusta store, Hannaford may have to address concerns
that a state-of-the-art supermarket that costs more to build will
charge higher prices.

Epstein, Hannaford's spokeswoman, said food prices aren't tied
to the cost of any one store, but she recognizes that some
people may have that perception.

"That's a risk we're willing to take, and that we'll address in the
education process," she said.

Staff writer Tux Turkel can be contacted at 791-6462 or at:
tturkel@pressherald.com

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