Wednesday, June 27, 2012

Olive Oil Franchisers Tapping U.S. foodies for growth

Story published by The from interview with Matt Stermer.
BELLEVUE, Wash. (TheStreet) -- Want to cook like The Food Network's Giada De Laurentiis, but when you try to repeat her Northern Italian recipes your efforts fall flat? Maybe it's the ingredients you're using. For instance, the generic olive oil you bought on sale at the supermarket probably doesn't live up to the extra virgin Italian olive oil that Giada likely uses on her cooking show.
Oil & Vinegar, a Netherlands-based high-end retailer of more than 300 olive oils, aged vinegars and other specialty goods, is looking to fill that niche by appealing to the foodie and "moonlighting" chef who resides in front of many a U.S. kitchen stove top.
With eight stores already in the U.S., and plans to open seven more locations this year, Oil & Vinegar is betting that bringing the charm of Old World culinary art to U.S. customers is its best global franchise growth opportunity.
"We want guests to leave our store saying 'Wow. I just left Europe,'" says Matt Stermer, president and CEO of Oil & Vinegar USA. "We are all about an experience that touches all of the senses. Walk into a store and you are catapulted into southern Europe -- the smell of vinegar and herbs, the tastings throughout the store and the sound element capped off with the music from Mediterranean."
Essential to the experience is a wall lined with large glass containers of oils and vinegars, from which customers can taste and pour products into their own containers. By essentially making the experience as hands-on and as educational as possible with recipes and recommendations, customers will be more likely to purchase the gourmet goods for themselves and equally for their friends and family.
Oil & Vinegar says it doesn't cater to professional chefs. "We cater more to the person that is the food enthusiast and loves to cook, entertain and share," Stermer says.
Founded 13 years ago, the Oosterhout, Netherlands-based company was started by John Blogg. Blogg was on a trip to Southern Europe and saw the way the local markets and shops were selling olive oil and vinegar in large containers and how it created a great social experience. Blogg thought this social retail concept would take off in other parts of the world, according to Stermer.
There are currently 80 franchisee-owned Oil & Vinegar locations globally. In addition to the U.S., countries include: the U.K., Sweden, Denmark, Holland, Belgium, Germany, Portugal, South Africa, Brazil and, soon the company will be opening its first franchise in Canada.
The company implemented its official U.S. franchise program for the stores in 2008 -- the first U.S. location was opened in 2004 -- and so far the stores are doing well.
Oil & Vinegar's comparative U.S. store sales growth for 2011 was 8% higher than 2010. Comp-store sales growth in the first quarter of 2012 rose 12% over the same period a year earlier, according to company data.
Oil & Vinegar is now thinking of its expansion plan in the U.S. more strategically by focusing on markets where there is a strong food culture and consumers have more sophisticated food palates, says Stermer, a former Nike (NKE) executive who is also a franchisee of one of the original four U.S. stores just outside of Seattle. (The other three stores include one in Charlottesville, Va.; Missoula, Montana and Woodlands, Texas.)
New stores are slated to open this year in Alaska, Arizona, California, Florida and Louisiana. The company expects to be able to open eight to 10 stores a year in the coming years, with the hope to reach roughly 200 stores in the U.S.
Another aspect important to the success of Oil & Vinegar stores is foot traffic, one reason why the stores are primarily located in upscale malls: "Our average price ticket is around $38. [We're] not selling $500-$600 items, so we need foot traffic and specifically, we require gift shopping traffic," Stermer says. "We estimate that nearly half of a store's sales are purchases given as gifts."
The company considers Godiva, gourmet tea company Teavana and Williams Sonoma (WSM) to be some of its prominent brand competitors in the gift space.
"What's interesting is we want to be next to them. We share the same consumer and we believe we are able to deliver a higher level of service," Stermer says.
Stermer acknowledges that the original stores were opened without much thought given to strategic location, but rather by passionate foodies who saw the idea overseas and wanted to bring it to their hometowns.
He adds that the formal expansion plan exists now, if a potential franchisee can make a case for a store opening in an area outside of a targeted market, Oil & Vinegar would certainly consider it.
Specialty Food Sector
Research shows sales of consumer goods in general have remained flat over the past two years, but the gourmet gift category increased by double digits. Americans' surging interest in cooking shows, identifying with celebrity chefs and the products they use has likely helped this trend as well, Stermer says.

Sales of specialty foods from 2009 to 2011 rose 19.1%, currently topping $75 billion, and compared with all food sales growth of 5.1%, according to The National Association for the Specialty Food Trade .
Specialty foods represent just shy of 14% of all retail food sales. Eight years ago that number was significantly less, says Ron Tanner, vice president of communications at NASFT.
It's not only the expansion of products, but increased visibility of specialty goods at venues like Bed, Bath and Beyond (BBB), Target (TGT), and even supermarkets that are trying to upscale their selection of products that makes for greater demand, Tanner says.
"There are a lot of companies that are really seeing great potential in going into the industry. You have companies like Whole Foods (WFM) and Traders Joe's, small specialty food stores that are beginning to open up second and third locations, and you have a lot of creative entrepreneurs who are opening specialty food shops," Tanner says.
Olive oil is the third most purchased category for specialty foods behind chocolate and coffee, he says.
Oil & Vinegar is not the first to come to the U.S. with the idea of selling gourmet oils and vinegars. Indeed, it's an up and coming sub-sector of the gourmet food industry. Names like Oliovera of Los Angeles and Oilerie of Fish Creek, Wisc., have also figured out how to franchise a store that sells olive oil.
And one way to keep the costs down for owners is having them buy product in bulk and not pay for all the added necessities -- like labeling and bottling, Tanner says.
Typically, "the cost of the oil in that bottle is not the main cost of what you're paying for. By buying in bulk, it takes all that [added] cost away. From the consumer's view, they're getting a better product at a lower price," he says.
Curt Campbell, who founded Oilerie with his wife Mary Jo in 2004, has 7 franchise stores. After a trip to Europe where the couple saw an Oil & Vinegar store and noticed that even delis in Poland were doing a similar thing with liquors and honey, Campbell couldn't understand why the concept wasn't in the U.S. Beyond the high-end foodie factor, Campbell also thought about olive oil's myriad of health-related benefits as a substitute for butter.
The couple trademarked the olive oil bar concept and business took off from there. Last year, the company combined did $750,000 in retail sales (excluding wholesale and web sales).
"There is this real hunger for olive oil knowledge in America," Campbell says. "We understand that our opportunity is to educate the customer ... What we're doing at the Oilerie is just taking them by the hand and showing them this is what olive oil is all about."
Campbell says in order to bring in the highest profit, the company keeps square footage of the stores to a minimum. Sales areas are only 325 square feet. He also uses only one bottle size.
Stermer says it comes back to the experience customers receive while in the stores. "A big part of which is our broad product selection plus the service we supply. We believe the international d├ęcor, the quality of our products, and this unmatched experience produce a 'Wow' factor translating into a massive differentiator for our concept in the market," he says.
Whether it's a tasting bar or gift purchase, new and different ways are opening up for consumers to shop and purchase olive oil -- and for franchise-minded business owners and investors, it could be a concept worth tapping into.
-- Written by Laurie Kulikowski in New York.

Tuesday, June 5, 2012

Interview with Franchise Chatter

An Interview with Matt Stermer, CEO of Oil & Vinegar USA: “Our Mission is to Be the Consumer’s First Choice When Looking for a Unique and ‘Tasteful’ Gift for Any Occasion” 

Franchise Chatter (FC):  For the benefit of those unfamiliar, what is the concept behind Oil & Vinegar?
Matt Stermer, President and CEO of Oil & Vinegar USA
Matt Stermer, President and CEO of Oil & Vinegar USA
Matt Stermer (MS): Oil & Vinegar brings together a wide range of international food and cooking products in alluring, Mediterranean-style surroundings. Our mission is to be the consumer’s first choice when looking for a unique and “tasteful” gift for any occasion. The focus is not only on the attractiveness of the gift, but ultimately its flavor and ability to accent both the palate and table.
Our product lines and everything we do at Oil & Vinegar reflect our focus – being “passionate about taste”. We pride ourselves in offering the best local specialties from Italy, Spain, Greece, France, South Africa, Australia, and other international food destinations.
One will find an assortment of imported delights with a distinct Mediterranean flair, like bottled and “on-tap” oils and vinegars, mustards, sauces, salad dressings, olives, grilled vegetables, sun-dried tomatoes, honeys, fig spreads, fondue chocolates, dried herb mixes, spices, and a variety of flavored pastas.
To accent our gourmet tastes, a fine selection of ceramic table wares, cruets, kitchen accessories, salt and pepper mills, international cookbooks, and other culinary accessories fill the shelves.
FC:  What is the origin of the brand?  What are some of the key milestones in the company’s history to date?
MS:  Oil & Vinegar was founded in the Netherlands in 1999. By 2002, the company had expanded the concept internationally to the United Kingdom, Germany, and Belgium. We entered the U.S. market in 2004 and today you can find over 90 Oil & Vinegar stores in 9 countries spanning three continents.
After receiving awards in the Netherlands for Best Food Specialty Chain and Gift Shop, Oil & Vinegar received recognition upon the launch of its first store in the U.S. in 2004, including Grand Prize in the Food Retailer category of the National Association of Store Fixture Manufacturers’ (NASFM) 2005 Retail Design Awards. In addition, the retail executive magazine Chain Store Age awarded Oil & Vinegar the 2004 Retail Store of the Year Award in the Specialty Food category.
FC:  How has the concept been received by American consumers so far?
Oil & Vineger Muehlheim Store FrontMS:  We have had tremendous success in the U.S. market, appealing to all age groups by delivering an unmatched shopping experience.  In recent years, the American consumer has become more educated and discerning about the oils and vinegars they consume and there is a real positive trend with gourmet food gifting.

FC:  Who is the target customer for Oil & Vinegar stores?
MS:  We appeal to consumers looking for premium products to use in their cooking or entertaining, as well as gift shoppers.  We find that our core consumer is not a chef, but a discerning foodie who demands quality in their gourmet ingredients and values the ability to sample and receive recommendations for using the products prior to purchasing.
FC:  Can you describe some unique elements of the store experience?
MS:  At Oil & Vinegar, customers are referred to as guests, and the guests are invited to smell, taste, and touch products before purchasing.  The retail philosophy revolves around three key aspects of a consumer visit:  Experience, Service, and Taste.
Guests are encouraged to sample products at their leisure and receive advice on product use, recipe ideas, and recommendations for that one-of-a-kind gift that is tastefully gift wrapped at no extra charge.
The focal point of the store is the “amphora wall,” where an international selection of over 40 estate-produced oils and vinegars are suspended in glass containers (amphoras) on a dramatic rock wall or stored in stainless Italian Fusti drums. Customers can sample the varieties, select from over 15 different shaped and sized bottles to have filled, or bring bottles in from a previous purchase to have refilled with an “on-tap” product of choice.
The Oil & Vinegar shop ambiance reflects this philosophy. Products are attractively presented, the music is carefully selected to reflect the cultures of product origin, and lighting brings the stores to life.
FC:  Can you give us an idea of the sales mix (by product category) of a typical Oil & Vinegar store?
  • Oil & Vinegar Shop InteriorDried Herb Blends and Sea Salts:  16.0%
  • Household Ceramics and Accessories: 10.0%
  • Appetizers, Tapenades, and Pestos:  5.0%
  • Oil and Vinegar Pre-packed:  13.0%
  • “On Tap” Oil and Vinegars:  44.0%
  • Pasta and Risotto:  2.0%
  • Sauces and Dressings: 5.0%
  • Sweets (Honey, Jams, and Chocolate): 3.0%
  • Cook Books: 2.0%
FC:  What do you look for in a prospective Oil & Vinegar franchisee?
MS:  We are seeking food-crazy entrepreneurs who share our passion and commitment to operating a retail shop in a professional and profitable manner. The individual’s personal or soft skills are just as important to us as direct business skills.  We look for such things as prior retail experience, customer service skills, people management, solid business acumen, upstanding community involvement, ability to meet financial qualifications, a desire to succeed by following a proven operating system, and last but not least, a clear passion for our products.
FC:  What is the ideal location and geographic territory for an Oil & Vinegar store?
MS:  Given the gift appeal of our store, we target locations with a significant amount of shopping footfall. So upscale shopping centers (enclosed or outdoor/lifestyle) tend to be where we look first in a market we are entering.  Our ideal geographic market is one which is influenced by an educated consumer palate and holds a population base (local and tourism driven) which will draw over 50,000 unique visitors to the store a year.
FC:  What kind of training and support do you offer your franchisees?
Oil & Vinegar Amphora WallMS:  We are in the process of expanding our training program to include a 2-week initial training focused on developing the business competencies, product knowledge, and systems and operational capabilities of the franchisee. This will take place 3-4 weeks prior to store opening. Then, a hands-on training and support program is delivered once the store buildout is complete, which spans approximately one week prior to opening for business and a week following the first cash register ring.  Ongoing support and training follow-up is provided on a case by case basis.  Merchandising guidance, new product education, and marketing support are provided monthly.
FC:  What can you tell us about the estimated initial investment, royalty fees, and profit potential for an Oil & Vinegar store?
MS:  What we disclose in our FDD are the following details:
  • Startup investment range:  $202k to $356k (includes all initial costs and working capital provision)
  • Initial franchise fee for a single unit/territory: $25k
  • Ongoing royalty fee:  5% (based on gross sales)
  • Profitability is impacted by numerous factors and we suggest prospects contact similar profile/market store locations to determine potential outcomes.
FC:  Can you name a few franchises (inside or outside your category) that you admire, and why?
  • UPS Store – They have a system that is extremely well aligned with corporate identity and runs like clockwork.  I believe they have done an amazing job connecting the retail brand to the corporate brand to leverage that universal identity.  I suspect that most people are not aware that UPS store locations are franchisee owned/operated.
  • TCBY – This brand was the pioneer in their market and have had to continually re-invent their model over time to maintain or recapture market share from new/innovative brands.  When I go into a new TCBY store, I really get the brand experience via a fresh new look that conveys the work this franchise has put in to stay relevant with their consumer.
FC:  What are your growth plans for Oil & Vinegar in 2012 and beyond?  How do you plan to achieve these targets?
Oil & Vinegar Tasting TableMS:  We are on target to open 5 more stores in 2012 and our plan is to open an additional 8 in 2013 in various markets, including an expansion to Western Canada.
We are seeing a significant number of new prospects surfacing after visiting one of our stores and becoming enamored with the uniqueness of our concept.   Our newest (3rd generation) store design is extremely compelling and a key to our continued success in this market.
There is a trend in the retail market going on now for “on-tap” oil and vinegar tasting bars.  We believe our concept stands out amongst our competition given our product selection and the vertical integration of our brand for the vast majority of our products.  Our goal is to have 95%+ of our line carrying our own Oil & Vinegar brand, which identifies the product as premium quality and connects back to the service we provide when shopping in our stores.