Sunflower Market figuring out niche, opening new stores

FORT COLLINS – When he was head of the health-food grocery Wild Oats, Mike Gilliland would show up at stores dressed in an apron and ready to work. He would stock produce, move dairy crates – whatever it took to help his employees.

“He’d work alongside us and ask a lot of questions,´ said Peter Waldmann, who started as a dairy clerk at a Wild Oats in Santa Fe, N.M., and moved his way up to store manager. “People have always been really important to Mike. He’s always led with his heart.”

Gilliland is now chief executive officer of Sunflower Farmers Market, a new kind of health-food store started in 2002 after Gilliland left Wild Oats, a company he started in Boulder in the late 1980s. Sunflower recently announced it would open its first Boulder store. The 25,000-square-foot store will be in The Village shopping center replacing the United Artists movie theater and a few other storefronts on the west side of the McGuckin Hardware complex.

SPONSORED CONTENT

Sunflower was founded in Longmont, although the administrative offices recently moved to Boulder. In four years, Sunflower has grown to 11 stores in Colorado, Arizona, New Mexico and Nevada. The Colorado stores include one in Fort Collins and one in Denver. Two more stores in the Denver area, the one in Boulder and one in Albuquerque are scheduled to open in 2007.

Gilliland calls Sunflower a cross between a traditional farmers market and Trader Joe’s, a specialty food store with locations in 22 states.

“It took a few years of experimentation for us to figure out exactly what was going to work,” Gilliland said. “Now that we’ve figured out our niche, we’re starting to grow the company.”

Sunflower is also competitive with Wild Oats, Whole Foods, conventional supermarkets such as Safeway and King Soopers – even Wal-Mart.

Newspaper advertisements and in-store promotions for Sunflower boast, “Serious food, silly prices,” and “Better-than-supermarket-quality at better-than-supermarket prices.”
The store looks and feels nothing like Whole Foods or Wild Oats. There are no expensive fixtures, no full-scale salad bars, no in-store cafÇs.

Instead Sunflower focuses on simplicity. The produce section makes up about half of each store. Sunflower also sells bulk food, herbal remedies and other nonperishable items shoppers would typically find at a health-food store.
“It’s a down-to-earth atmosphere that’s easy to navigate and easy to shop,” Gilliland said. “We want to make it simple for people to get in and out quickly.”

Gilliland started as a grocer after graduating from the University of Colorado at Boulder and operating a couple of different businesses, including a crepe stand in New Orleans and a parasailing business.

Gilliland opened the first Wild Oats in Boulder in 1988. The company went public in 1997 and grew across 28 states and Canada. When he left in 2001, the company had nearly $1 billion in sales.

“We did a lot of fast growth and acquisitions to pander to Wall Street,” he said. “It was becoming too much for me to handle.”

He signed a two-year noncompete with Wild Oats when he left. Six months before that ended, his business partners started Sunflower.

Wild Oats sued Gilliland in Colorado for violation of the noncompete. Because he owned a few other businesses with his partners, Wild Oats claimed Gilliland was involved in the management of Sunflower. Wild Oats later dropped the lawsuit.

Gilliland’s partners include his brother Pat, who builds the stores, and Bennett Bertoli, vice president of real estate. He said he aims to do differently as CEO of Sunflower Farmers Market than he did at Wild Oats.

“I don’t see us doing any acquisitions,” Gilliland said. “We want to grow intelligently. We won’t be growing just for the sake of growing.”

Five percent of the profits at individual stores go quarterly to the on-site store directors. Another 10 percent is divided among those who work as assistant department managers and above.

“If you can make more money for the store, you will receive the direct benefits,´ said Waldmann, now director at the 21,000-square-foot Fort Collins store. “It makes us feel like we own the company.”

Creating a following

Sunflower’s customers are people who care about eating healthy food, but they don’t have as much expendable income as typical Whole Foods or Wild Oats customers. They may be senior citizens, college students or families on a budget.

“We don’t want to be known as a store that sells cheap food. We sell reasonably priced great food,´ said Waldmann, among the 80 percent of Sunflower managers who used to work for Wild Oats. “I always say let Wild Oats and Whole Foods promote the idea of quality food and eating right, and we’ll just sell it cheaper.”

Call the prices reasonable, cheaper or silly, but on a recent shopping excursion to Sunflower, $15 bought two cantaloupes, a pound of peaches, a head of lettuce, four tomatoes, a cucumber, a red pepper, a pound and a half of grapes and a half gallon of milk.

While Sunflower pays attention to the prices at Whole Foods and Wild Oats, the store shies away from comparing itself to the two or even using the terms natural and organic in its advertising.

“People associate those words with high-end stores,” Gilliland said. “We call it healthy food instead.”

Sunflower doesn’t offer nearly the variety of organic food available at Wild Oats and Whole Foods. Sunflower’s ratio of conventional to organic is about 80 percent to 20 percent, which mirrors what’s now available at Safeway and King Soopers. The ratio at Wild Oats or Whole Foods is about 30 percent conventional, 70 percent organic, Gilliland said.

But Gilliland’s goal is for Sunflower to develop a customer following through its private labels, much like Trader Joe’s has done.

“Everyone has a product they can get only at Trader Joe’s,” he said. “We want to create that same kind of following.”

Private labels are products that have an individual store’s label, but the food is manufactured elsewhere. For example, an Italian company makes Sunflower’s private-label jam. A jar costs $1.99.

Handling the competition

Sunflower’s most competitive prices are in produce and meat. Nearly 30 percent of the store’s sales come from produce alone, about 20 percent higher than the percentage of sales from produce at conventional grocery stores, Gilliland said.

Sunflower compares its prices each week to produce and meat prices at other stores. In a recent week Sunflower beat Wild Oats by 32 percent, Whole Foods by 28 percent and Wal-Mart by 5 percent. It also beats grocery chains based in Arizona, New Mexico and Nevada.

How does Sunflower do it? Instead of working through vendor distributors like other grocers, Sunflower buys products by the pallet and truckload. The company also pays the producers right away, Gilliland said.

Produce and meat go from grower or producer to Sunflower’s warehouse in Phoenix. From there, the food is transported to the stores. “It takes 36 hours to go from truck to shelf,” Gilliland said.

The company keeps its overhead at about 3 percent to 4 percent of its sales. Sunflower also spends less than other grocers to build stores. For example, the Fort Collins store took over existing space vacated by the old Toddy’s supermarket on Drake Road at Lemay Avenue.

“It goes back to simplicity,” Gilliland said. “Everyone is rushing to the top, to appeal to the high-end customer with fancy fixtures and other things. All of that makes the food more expensive.”

Since Wal-Mart’s recent announcement it wants to expand its assortment of organic food, some Sunflower customers have wondered whether the store will continue to compete with the retail giant’s prices.

Gilliland isn’t worried, and neither are his store directors. “I tell my customers, ‘Don’t worry. We’re making money,'” Waldmann said. “All people have to do is keep shopping here, and we’re going to be fine.”

Sunflower Farmers Market

Founded: 2002

Headquarters: Boulder

Owners: Mike Gilliland, CEO, Pat Gilliland, vice president of construction and Bennett Bertoli, vice president of real estate.

Number of stores: 11

Locations: Fort Collins, Denver, Arizona, New Mexico, Nevada

Number of employees: 1,000

Annual sales: $120 million projected for 2006

New stores: Two in Denver, one in Boulder and one in Albuquerque, N.M., opening next year.

Web site: www.sfmarkets.com

on Facebook on LinkedIn