America’s Favorite Cult Grocer Tries Its Magic in New York City

(Bloomberg Businessweek) -- Most 60-year-old men don’t go food shopping every day, but Tommy Mule does. Mule (pronounced Moo-LAY), a morning radio host in Rochester, N.Y., pops into his local grocery store daily for some Vietnamese spring rolls, a rotisserie chicken, or just a coffee and some chitchat with Jimmy, his pal in the produce department.

The broadcaster likes the place so much he hired the supermarket to cater his wedding. He often takes out-of-town guests on a tour of the place. “They say, ‘It’s a goddamn grocery store, how good could it be?’ ” he says. “But I say it’s the best shopping experience you’ve ever had.”

Mule’s retail nirvana is Wegmans Food Markets. If you haven’t heard of it, you’re not alone. The privately held, family-run chain based in Rochester has only 98 stores scattered across six eastern states, fewer than Walmart operates in New York state alone. But it punches well above its weight, combining the product breadth of a Walmart, the quality of a Whole Foods, and the quirkiness of a Trader Joe’s.

While its sales of about $9.2 billion are puny compared with supermarket giants such as Kroger Co. and Safeway Inc., Wegmans has proved adept at solving the most intractable problem facing U.S. retailers—giving shoppers a compelling reason to visit its stores. Wegmans has been ranked as the nation’s top grocery store for the past three years, according to a survey of shoppers by researcher Market Force Information. Sales per square foot at Wegmans are higher than those of any other supermarket chain save for Whole Foods, according to Creditintell, a retail credit consulting firm. It’s become a harbinger of hope for a retail industry that’s reeling from store closures, the proliferation of discounters like Germany’s Aldi, and Amazon.com Inc.’s encroachment into all things retail. “The entire U.S. grocery sector is hurtling towards a day of reckoning,” says Neil Saunders, an analyst at GlobalData Retail. “There is simply no avoiding this pain, and ultimately the battle will be about surviving rather than thriving.” Wegmans, though, is doing more than surviving, Saunders says, as it’s “head-and-shoulders above most U.S. grocers.”

While many grocery stores have folded—think onetime industry leader A&P or Chicago’s Dominick’s—Wegmans is going all out in one of the biggest and most competitive markets in America: New York City. This fall, the chain will open its first big-city location, a 74,000-square-foot facility at the Brooklyn Navy Yard, in a long-ignored tract of the former military base called Admiral’s Row, where officers’ residences once stood. The move will be a big test of whether Wegmans can duplicate the phenomenal success it’s had in smaller locales in the crowded New York market.

In 2015 the Brooklyn Navy Yard Development Corp. (BNYDC)—a not-for-profit that manages the yard on behalf of its owner, the City of New York—handed the Admiral’s Row development contract to Doug Steiner. His television and film production studio complex at the Navy Yard is the largest outside of Hollywood. Wegmans, Steiner says, “is the best supermarket in the country,” and “instills a corporate culture that’s almost like a cult.”

Key to that reputation is the grocer’s 49,304-strong staff, a quarter of whom have been with the company for a decade or more. Wegmans is known for flying employees to Sicily for a week to learn how to make ricotta. When Wegmans’s workers say the company is like a family, it’s not just public-relations spin: About one-fifth of its staff are related.

The enthusiasm extends to its most-loyal shoppers, known as Wegmaniacs. When Buffalo Bills offensive lineman Richie Incognito renewed his contract to remain with the team a few years ago, he tweeted, “Not gonna lie ... Wegmans was a big part of me re-signing in Buffalo.” And when Wegmans in 2011 opened its first store in Massachusetts, a local high school staged a musical about it.

Feeding the obsession is the store’s range of exclusive offerings, like its extensive assortment of take-home meals, developed in part by celebrity chef David Bouley. There’s also the cheese counter, with 350 varieties—including esquirrou, a hard sheep’s milk varietal from the French Pyrenees named the world’s best cheese in 2018—that are perfect for pairing with one of Wegmans’s 2,200 wines. Beyond such specialties, the store also carries everyday items like Cocoa Puffs and Coca-Cola, at prices no higher than at other local markets.

Brooklyn presents a huge opportunity for Wegmans: the 2.8 million people who live within 5 miles of the Navy Yard, with an average household income well above $100,000. But there are serious challenges, too. Big, crowded cities aren’t conducive to Wegmans’s sprawling stores. The Navy Yard is isolated, a food desert abutting a public-housing project, and is cut off from most of the borough by the Brooklyn-Queens Expressway. And New York City’s grocery scene is a hypercompetitive mix ranging from bodegas and street-corner produce stands to local chains like Fairway and D’Agostino that have more experience with the hefty and rising operating costs that have eaten away at area grocers’ margins.

“The business has changed,” says John Catsimatidis, owner of a company that operates 35 local grocery stores under the Gristedes and D’Agostino banners. “When you’re being attacked five different ways, everyone takes a percentage, and you’re f---ed.”

Brooklyn is a decidedly different kind of project for Wegmans, presenting plenty of design challenges. The new building will house several floors of light-industrial manufacturing above the store, so an elevator shaft had to be installed for those businesses that wouldn’t infringe on the store’s layout, which includes a mezzanine cafe and wine bar that will seat more than 100. A bigger concern is climate change: Hurricane Sandy in 2012 flooded the yard, so the site has been raised by an average of 5 feet to reduce the risk of a repeat.

“All this was new for Wegmans,” says Navid Maqami, co-founder of architectural firm S9, which designed the Navy Yard store’s exterior. “Things are a little different here.” Take the windows: Most grocers use tinted glass to lower energy costs, but this Wegmans will install low-iron glass that’s more typically used by luxury retailers and easier to see through. For Wegmans to be a destination, Steiner figures, shoppers need to know what’s inside.

The grocer has adapted to new environments before. Last year it opened its first mall-based location in the Boston suburb of Natick. Wegmans built a shopping cart escalator for its two-level store and a skywalk that connects to an 1,800-car garage.

Parking has been a sticking point in Brooklyn. Steiner thought the store needed only about 250 spots since many New Yorkers don’t own cars, but Wegmans executives, expecting shoppers to drive from up to one hour away, insisted on more. So a parking garage with 429 additional spots is going up next to the store. There will also be dedicated spaces for Uber pickups—a New York necessity.

Still, perhaps the biggest challenge will be convincing New York’s notoriously finicky shoppers that Wegmans, unfamiliar to many locals, offers something unique. “I’ve been to Wegmans in Rochester,” says Ariel Lauren Wilson, editor-in-chief of Edible Brooklyn magazine. “Did I feel it was anything I couldn’t get in New York City? No.”

Wegmans isn’t planning any big changes to its product assortment for Brooklyn, according to Chief Executive Officer Colleen Wegman. “There are all different types of customers there, so we will offer the best of what we have,” she says.

The chain seems poised to take sales from supermarket rivals, according to Earnest Research. Since Wegmans entered Natick, for example, customer visits and spending at the nearby Whole Foods have declined by more than 20 percent among shoppers that visit both stores. “Whole Foods could be in real trouble in Brooklyn,” says Michael Maloof, Earnest’s senior grocer analyst.

The Navy Yard store’s 500 employees will include many local residents. Of the 4,000 applications Wegmans received in January, 741 have come through the Navy Yard’s employment office. Of those, 30 percent are residents of Farragut Houses, a city housing project adjacent to the site, and two other local housing projects. New hires will work alongside lifers like store manager Kevin Cuff, who started with Wegmans as a teenager 21 years ago. He’s not unique: More than half of store managers started with Wegmans as teens, then stayed in part because of perks such as college scholarships, which totaled $5 million last year.

Unlike Amazon, which scrapped plans for a headquarters in Queens after opposition from some local lawmakers, Wegmans so far has received a warm welcome from New York City’s politicians and activists. But there are no guarantees in the big city. Colleen’s father, Chairman Danny Wegman, whose grandfather and grand-uncle founded the chain in 1916, admits as much. “We have no idea what’s going to happen,” he says. “But if you like people and you like food, that’s what our business is. It’s no more complicated than that.”

To contact the editor responsible for this story: Dimitra Kessenides at dkessenides1@bloomberg.net, James Ellis

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