Keeping pace with shopper demand took new meaning for the instore bakery and deli business in 2009. American consumers turned more attention to value, because of the sluggish economy, but also paid closer attention to how products are made and packaged. For that reason, sustainability issues gained great importance for the entire supermarket industry, led by innovators such as Walmart.

This year, InStore Buyer profiles leading instore bakery/deli operators, along with Hy-Vee, our Instore Bakery Operator of the Year, and Wegmans, our Instore Deli Operator of the Year. The following reports showcase a wide variety of approaches to new store development, merchandising and promotions strategies, and product innovation.

Yet there is a common theme: Understanding the consumer better than ever before. That is the ultimate quest for any successful instore bakery and deli operator – to know what shoppers today are looking for and delivering to their needs.

1. Walmart

Annual Sales: $259 billion (U.S.)

Store Banners: Walmart Supercenter, Sam’s Club, Neighborhood Market, Marketside, Supermercado

Total Number of (U.S.) Stores: 2,737 Supercenters, 605 Sam’s Club, 151 Neighborhood Markets, 4 Marketside, 2 Supermercado

Address: 702 SW 8th Street

Bentonville, AR 72716

Web site: www.walmartstores.com

Phone: (479) 273-4000

Key Bakery Executive: Scott Neal, vice president, bakery and commercial bread

Key Deli Executive: David Hall, vice president, deli

Walmart continues to position itself as a retail leader on many fronts: sustainability, innovative store formats, prepared meals, and even Hispanic bakery products. Walmart in summer 2009 opened its first two Hispanic-focused supermarkets – named Supermercado de Walmart – in Phoenix and Houston in remodeled 39,000-square-foot locations that previously were Walmart Neighborhood Market stores. The Phoenix Supermercado location, which opened in June, offers more than 40 traditional sweet breads, bolillos and fresh corn tortillas.

"Our customers can also visit our instore cocina where we will serve traditional Hispanic food like tacos, tortas aguas, frescas, sopes, carnitas, and barbacoa at low prices," says Jose Antonio Fernandez, vice president of business development for Walmart.

Other store format innovations this year included the tweaking of its four Marketside by Walmart stores, all located in the Phoenix metro area. These stores are roughly 15,000 square feet. Walmart has another slightly larger concept called Neighborhood Markets, which offer a quick and convenient shopping experience for customers who need groceries, pharmaceuticals and general merchandise. First opened in 1998, there are now 151 Neighborhood Markets, and a typical store is about 42,000 square feet.

2. Kroger

Number of Stores: 2,481

Annual Sales: $72 Billion

Address:

1014 Vine Street

Cincinnati, OH

Website: www.thekrogerco.com

Key Personnel: Rodney McCullen, CEO

This year, The Kroger Company—whose 16 banners include Ralphs, King Soopers, City Market, Dillions, Smiths and Gerbes—ranked among the top 20 most reputable companies in America, according to the Reputation Institute.

The Reputation Institute, a consulting firm, studied 153 of the country’s largest companies to determine their rank among U.S. residents. The institute gauged consumer trust, esteem and admiration toward a particular company and broke performance categories into products/services, innovation, workplace, citizenship, governance, leadership and performance.

David Dillion, The Kroger Company’s chairman and CEO, thanked the 326,000 associates that work for the grocery giant. "Our associates are the reason customers feel good about Kroger and our family of stores," says Dillion. "We appreciate the efforts our associates make every day in our stores, plants, distribution centers and offices.

As the country’s largest traditional grocery chain, Kroger continually takes the pulse of their customers to determine new programs and product mixes. This fall, as part of their "Quality You Can Trace" program, the company rolled out a new line of fresh, packaged salads. Customers can enter a 16-digit code—found on each bag of salad— into the website of food traceability company HarvestMark to garner information on the salad’s origin, packing location, ingredients and the date and time it was packaged.

3. Costco

Number of Stores: 563

Annual Sales: $71.4 Billion

Address:

999 Lake Drive

Issaquah, WA 98027

Website: www.costco.com

Key Personnel:

Sue McConnaha, vice president; director, bakery operations

Costco Wholesale operates 563 warehouses in 40 U.S. states, as well as Puerto Rico, Canada, the United Kingdom, Taiwan, Korea, Japan, Australia and Mexico, and it touts 56 million cardholders.

"Costco is able to offer lower prices and better values by eliminating virtually all the frills and costs historically associated with conventional wholesalers and retailers, including salespeople, fancy buildings, delivery, billing and accounts receivable. We run a tight operation with extremely low overhead, which enables us to pass on dramatic savings to our members," Jim Sinegal, Costco’s president and CEO, says on Costco’s investor relations website.

The supercenter concept is one that continues to grow in the U.S. marketplace. As the economy continues to struggle, supercenters offer value to families. "The New Value Shopper," a study released by the International Dairy-Deli-Bakery Association, reports that 66 percent of consumers will stock up on bargains and only 17 percent will buy an item that costs less than they expect.

And research consultants Willard Bishop project that supercenters will gain market share from a 15.9 percent dollar share in 2008 to a 21.6 percent dollar share in 2013. This compares to traditional supermarkets, whose dollar share is projected to decline nearly 5 percent in the same amount of time.

4. Supervalu

Number of Stores: 2,500

Annual Sales: $37.4 Billion

Address:

11840 Valley View Rd.

Eden Prairie, MN 55344

Website: www.supervalu.com

Key Personnel: Craig Herkert, CEO

Supervalu is the country’s third largest grocery chains. The company’s 2,500 retail locations fall under one of 12 banners including Acme; Albertson’s; bigg’s; Bristol Farms; Cub Foods; Farm Fresh; Hornbacher’s; Jewel-Osco; Save-A-Lot; Shaw’s; Shop’n Save; and Shoppers Food & Pharmacy. Supervalu’s diversified formats range from the value-conscious Cub Foods to the upscale gourmet and specialty foods offers at Southern California’s Bristol Farms. An emphasis on customer care has grown the Supervalu pharmacy network to approximately 900 in-store pharmacies around the country.

In March, Supervalu launched the "Simply Good Meals" program of easy-to-make meals at 1,300 locations. Most stores offer the meals in four destinations—two in produce, one in meat and one in deli. Some banners, however, now feature two Simply Good Meal destinations in the deli—one for soup and one for meals. One of the destinations, dubbed "4:15" offers time-strapped families four meal kits under $15. The 4:15 meals include an entrée, such as ready-to-heat pot roast or lasagna, and two sides.

"Research shows that most people don’t know at 4 o’clock what they are having for dinner that night, and in many cases, these hurry-up meals result in less-than-balanced and more expensive food choices," says Jim Smits, Supervalu group vice president. "We wanted to make it easier for our customers to answer that inevitable ‘what’s for dinner’ question by providing them with simple, convenient, affordable ideas for creating a real home-cooked meal."

5. Publix

Number of Stores: 1,016

Annual Sales: $23.9 Billion

Address:

3300 Airport road

Lakeland, FL 33811

Website: www.publix.com

Key Bakery Exec: Jane Pixley

Key Deli Exec: Terry Simpson

At more than 1,000 stores strong, Lakeland, FL-based Publix has seen growth in bakery, deli and prepared foods, as well as seeing store-wide growth. In the fourth quarter of 2009, the company celebrated 13 new store openings in Florida and Georgia.

Products that have experience growth include cookies, pies, desserts and crème cakes in the bakery, according to Maria Brous, Publix director of media and community relations. "We have worked hard to promote these items throughout the year," Brous says. "Our decorated cakes and desserts continue to be a leader for the bakery," she says. "The bakery continues to use skilled associates to make products by hand, baked on the premises in all locations."

In the deli, much of the focus has been on expanding prepared foods and specialty cheeses, as seen in the Publix Greenwise stores.