Sonoma County’s grocery stores adapt as tastes evolve

When John and Kim Lloyd bought a market in Healdsburg a quarter-century ago, the farm town reminded John of a small Orange County community he'd lived in as a boy.

And the grocery business was known for such small margins that it used to be called “penny profit,” he said.

Today, Healdsburg hosts an upscale Wine Country lifestyle and the Lloyds' business, Big John's Market, reflects the tastes of its residents and vacationers. Following last year's $11.25 million expansion, the store now allows shoppers to sample pastries from a Costeaux French Bakery located inside, buy sustainably raised beef from Healdsburg's J Brand Cattle and feast on items from the deli, sushi bar and pizza and burrito bar.

“Healdsburg today is not what it was,” said John Lloyd. “We're beyond gentrified.” Bay Area communities like San Francisco have undergone gentrification, he said, but “Healdsburg's got them beat by 120 percent.”

Sonoma County's grocery business has witnessed a number of developments in the last year, including the doubling of the floor space at Big John's Market. Cotati- based Oliver's Markets, a pioneer in highlighting natural and local products, opened a new store in Windsor that includes its own tavern.

Woodland-based Nugget Markets, known for never laying off an employee in 90 years of business, purchased two existing markets in Sonoma and Glen Ellen. And G&G Supermarkets, a landmark family-owned business here for over half a century, in November announced the sale of both its Santa Rosa and Petaluma stores to Pleasanton-based Safeway Inc.

The county grocery business includes a wide range of options. They include value-oriented stores like FoodMaxx and Smart & Final, mid-level chains like Safeway, Lucky and Trader Joe's and premium places like Whole Foods and Oliver's. The landscape also features everything from small corner markets to ethnic-flavored stores like Lola's Markets that cater to the North Bay's growing Latino population.

Over the decades, residents here have shown they care where they shop for food, said Robert Eyler, Sonoma State University economist.

“People in Sonoma County have become more discriminating,” Eyler said. As more consumers sought local, natural and organic products, a wide variety of stores have paid attention.

Over the years the grocery business increasingly has provided a wide range of prepared foods that once might have been purchased in restaurants or other eateries. The offerings include salad bars, fresh soups and a range of hot food items.

The grocers have combined food manufacturing with retail, and have found busy consumers will pay for such convenience.

“Now that you provide both, people can shop in the same place.” said Eyler, who has studied for Oliver's Markets the economic impacts of buying local products.

The rise of prepared fresh and hot foods is just one significant change that retail research company IRI identified in a presentation to grocery store executives this winter at a national conference in Scottsdale, Arizona. Other trends include growth in fresh fruit and vegetable consumption by consumers seeking healthier lifestyles and the strong interest of shoppers in buying local products.

Also there is the rise in demand for “non-GMO,” “cage free,” sustainable and other specialty products that reflect shoppers' social values. Food makers seek to distinguish these products from conventional items based upon how the food was produced, on the welfare of animals or on some other impact to a community.

Most of these trends play out at Oliver's four stores in the county.

Sales of grab-and-go prepared foods last year amounted to 17 percent of total sales, or roughly $23 million, said owner Steve Maass. That figure includes meals bought at the Windsor store's tavern, but not alcohol sales there.

More than a quarter of the $138 million in total sales last year were for local products, Maass said.

And the company, which more than two decades ago began to consciously add more natural products, now counts more than half of its business in the natural line, including organic products.

Same store sales at Oliver's grew nearly 5.8 percent last year, Maass said. And the new Windsor store has “started out incredibly strong.”

“We must be attracting from other places than just Windsor,” Maass said of the store's shoppers.

In Healdsburg, John Lloyd thought his early years owning a grocery store in the small town might make for “a very meager living.”

Business improved after the Molsberry Market closed there in the latter 1990s and as new homes were built closer to Big John's on the north end of town. Then Healdsburg's ambitious downtown redevelopment brought in new hotels, restaurants and shops, which eventually attracted large numbers of tourists.

“The next thing you knew they weren't just visiting,” Lloyd said of the travelers. “They were buying real estate.”

Home values in the town of 11,700 have climbed steadily, and Healdsburg was the first community in the county to set a new all-time record for home prices after the housing crash. The median-priced home there last year was $858,975, compared to $580,000 for the county.

Last year when the Lloyds expanded their store to nearly 31,500 square feet, they did so with an eye to serving both new residents and longstanding townsfolk in the city of 11,700.

“You can get your kombucha and your Dr Pepper here,” said Kim Lloyd.

Today the store's exterior focal point is a two-story rotunda that serves as the main entrance.

Beneath it sits an expansive cheese counter, olive bar, fresh soup station and nearby the counter for the store's Costeaux French Bakery. The store bakery carries many of the same pastries, cakes and breads as Costeaux's main business about two blocks north of the town's plaza.

“Our customers love it because they don't have to try to find parking downtown,” Kim Lloyd said.

Much of the expansion space was given over to fresh ready-to-eat offerings, including a deli, salad bar, hot food station, sushi bar and pizza and burrito bar.

In addition to the new and expanded stores, a handful of grocery properties also changed hands last year.

Safeway last fall purchased the two G&G stores and offered to hire all the 250 employees at those locations. The chain already owned a number of Safeway stores around the county.

Asked about the purchase, Safeway spokeswoman Wendy Gutshall said in an email that “both G&G stores had a great customer base and were a good fit to add to the Safeway lineup.”

Safeway is pleased with the two stores' performance, Gutshall wrote, and will continue in the county to be “very aggressive” in providing organic, natural and health-conscious products.

Its stores “offer thousands of local items,” she wrote, including dairy products from Clover Sonoma (formerly Clover Stornetta Farms), Petaluma Poultry's Rocky the Free Range Chicken and Three Twins Ice Cream. All three of those food manufacturers are based in Petaluma.

Another acquisition last year involved the purchase of the Sonoma and Glen Ellen Markets by Nugget Markets of Woodland.

Nugget President/CEO Eric Stille said he had long had an interest in buying the two markets owned by brothers-in-law Don Shone and Dale Downing.

“I think I bugged them for about five years,” Stille said.

The stores not only fit well with the Nugget brand but are clearly valued by their community, he said.

The Sonoma Market is “the icon of Sonoma and I just feel fortunate to have the opportunity to acquire it.”

The Sonoma Market still cooks fresh dungeness crab on site, something new to the Nugget brand.

Nugget owns 16 stores in Marin, Sonoma, Solano, Yolo, Sacramento, Placer and El Dorado counties.

The family-owned business for 11 consecutive years has made Fortune Magazine's list of the “100 Best Companies to Work For.” Last year it ranked No. 13.

When asked about trends, Maass said he thinks back to the large number of independent grocers in business when he came to the county four decades ago.

“There's very few of us left,” he said.

To keep Oliver's independent, Maass this spring intends to begin selling a portion of the company to his workers through an employee stock purchase program. The aim is for employees to one day control the company.

The grocery business still operates on thin margins, Stille said. That is true even for organic products as they become more mainstream.

And while online shopping and delivery services will offer alternative ways to shop in the future, he still believes many consumers will continue to choose to visit the local grocer in order to test the peaches for ripeness and rub shoulders with their neighbors.

“They're definitely part of the community,” he said of the Sonoma and Glen Ellen stores. “The town views it as ‘That's my store.'”

You can reach Staff Writer Robert Digitale at 707-521-5285 or robert.digitale@pressdemocrat.com.