Carving Out a Niche in Upscale Edibles : Gourmet Grocery Stores Find They Appeal to Range of Shoppers

Some call it yuppie food, others describe it as good, wholesome food that costs a little bit more. Whatever the description, a growing number of stores are competing for consumers who will spend a bit more for upscale food items and better service.

Often called ranch markets or specialty or gourmet stores, the relatively small establishments offer a wealth of fantastically fresh fruit, specially cut meats, alluring beverages and tastefully displayed foods that are decidedly high-end.

Even the area’s largest grocery stores have discovered that some customers--and not just upscale ones--will spend a bit more for service and quality.

Many Have Failed

That discovery comes despite the failure of Irvine Ranch Farmers Market, which last year entered Chapter 11 bankruptcy proceedings, and Christian’s, another Orange County-based farmers market chain that has been dogged by growth-related financial problems. (The former Irvine Ranch market in Horton Plaza continues to operate under new ownership.)

“It’s still an attractive business for people, an easily identifiable niche,” said Sarah Stack, an industry analyst with Bateman, Eichler, Hill Richards in Los Angeles. “But a lot of companies fail on the basis of execution. They’re not able to make money, given the relatively high labor costs.”

“Service is the distinguishing factor, along with quality,” Stack said. “It’s a competitive business and growing more so because more people are entering the business.”

“Irvine was undercapitalized, and they tried to expand way too fast,” said Gene Kemp, general manager of Fashion Valley shopping center in Mission Valley, which in the past has considered adding an upscale food market. “But there’s a need for these type of (outlets) throughout the county, and not just in the affluent areas.”

“You have to have the personnel to help you run them, and you can’t open them too fast,” said Gilio Mattera, a retail food store veteran who, along with John Bolinger, owns the Harvest Ranch Markets in El Cajon and Encinitas. A third store will open soon in Renaissance Town Centre, a shopping plaza in the Golden Triangle.

Two Years to Make a Go

“With any location you go into, it will take a couple of years to get established,” said Mattera, who co-owned a small, San Diego-based food store chain that merged into the local Big Bear grocery chain nearly 20 years ago. “You’re kidding yourself if you expect to go into a location and turn a profit the first year, because it takes two years to get off the ground in this market.”

Unlike full-service grocery stores that sell everything from brooms to can openers, specialty stores typically sell only items that customers can eat or drink. The markets are also smaller than full-scale grocery stores.

Harvest Ranch’s stores are 12,000 square feet or smaller, and Daniel’s Market, which will open later this month in Del Mar Plaza, will have only 9,000 square feet.

But some of the smallish stores can have magnetic personalities.

“They attract the locals,” Kemp said, “but they also attract people who will drive 10 and 15 miles. They’re (going to grow) in the future because there’s a certain element that wants to buy the things they have.”

Saying No to Hormones

That is the case at Greentree, a Clairemont-area store that often attracts shoppers from as far away as Orange County and El Centro, according to Tom Adams, president of Greentree Gourmet Grocers, a partnership that in July purchased the 11-year-old store.

Greentree, which plans to open two more stores, features organically grown produce, chemical- and hormone-free beef and a wide selection of vitamins. “We have gourmet natural foods,” Adams said. “That is the accurate way to describe us.”

The company hopes to open a second store, in the La Mesa-El Cajon area in about six months. A third location is planned for North County.

Despite the financial problems that entrapped the Orange County-based ranch markets, Mattera and others believe that specialty grocery stores can prosper if they stick to their niches.

“We can’t carry everything,” Mattera said. “But we can get our share of the market. . . . We’re not doing anything more than what the textbook calls upon us to do. We’ve got a nice, lean operation and we treat people with a smile.”

Catering to Both

When Daniel’s Market opens later this month, the shelves will be lined with upscale produce, meats and beverages. But the store also will cater to nearby homeowners who simply need a roll of waxed paper or a box of tissues.

“We wanted a market that would serve the residents of Del Mar,” said David Winkler, a general partner in the firm that developed Del Mar Plaza. “We wanted to have a unique market, but we never intended to have one which would have the high prices associated with the gourmet market.”

The decision to stock both upscale and down-to-earth items was made several years ago after local residents protested that Del Mar’s downtown, which has no grocery or convenience stores, didn’t need another retail plaza.

Winkler and his partner, Ivan Gayler, thought they’d found the perfect market-style store in 1987 when they contracted with Christian’s, an Orange County-based farmers market chain. But the chain was soon bogged down in financial problems similar to those that felled Irvine Ranch, industry observers say.

Winkler and Gayler subsequently teamed up with Daniel Vengler, a longtime grocery operator who owns Sun Valley Market in Ramona, Village Station Market in La Mesa and Alpine Creek Market in Alpine.

In addition to competing with each other for customers, the specialty grocers face competition at the other end of the spectrum.

“Some of the groceries have a Price Club image with massive displays and warehouse shelving,” Mattera said. “They try to put the gourmet section at the other end of the store, but I don’t know if you can do it all, because a lot of people don’t want to go to a 60,000-square-foot store.”

“The major chains are putting in bulk food bins, salad bars and the like,” Winkler said. “They’re tending to pick up on things, so you have a certain degree of competitiveness with Vons and Big Bear.”