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Sunday, 16 October 2016 18:59

Fresh Thyme Farmers Market as Meijer skunkworks?

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Public filings show common ownership; Experts say brand separation likely a marketing tactic

With increasing demand for fresh, specialty groceries, Walker-based Meijer Inc. has started to look outside the big box retail format it’s known for, even if the retailer doesn’t like to admit it. 

The West Michigan retailer speaks publicly about being a passive investor with a financial interest in Downers Grove, Ill.-based Fresh Thyme Farmers Market, a growing regional specialty grocery chain positioned to tap into the niche of consumers focused on healthy, fresh foods. However, the notoriously buttoned-up Meijer corporate office has long denied that the relationship was deeper than a financial investment. 

But through a review of public documents from multiple states where Fresh Thyme operates stores, MiBiz has learned that Meijer — along with a veteran specialty grocery executive — created the 48-store chain, which it owns through a subsidiary. 

Moreover, the specialty chain appears to serve as a skunkworks division apart from the larger Meijer organization, according to multiple sources familiar with corporate law, liquor license regulations and Meijer’s own operations.

By giving autonomy to the well-capitalized Fresh Thyme brand, which plans to have 60 stores and employ 5,000 people by 2019, Meijer likely hopes to learn how to attract customers in the growing specialty segment without going through the struggle of implementing it within its own legacy retail operation, according to one local expert. 

“When you say ‘Meijer,’ you get a certain image,” said Bonnie Knutson, interim director in the School of Hospitality Business at Michigan State University. “But when you look at today’s trends, that image doesn’t fit with a certain niche. Fresh Thyme has a brilliant name. Like Whole Foods, it says something. If they said ‘Fresh Thyme by Meijer,’ you’d get a different image, so it stands to reason that they’d want to separate those brands.”

Local attorneys say Meijer could be capitalizing on some esoteric tax advantages with its relationship to Fresh Thyme, but the overarching reason for the business structure — and the Meijer-Fresh Thyme brand separation — was primarily as a marketing strategy.

The reasons for creating the perception of a passive investor relationship are many, sources said. For one, Meijer has long been known for having a bureaucratic corporate culture that struggles to implement innovation, according to multiple executives who have consulted with Meijer in the past and who spoke on the condition of anonymity. 

Fresh Thyme, which operates a store at 2470 Burton St. SE in Grand Rapids, offers a range of fresh meats and seafood, bulk foods, and minerals and vitamins, as well as organic, gluten-free and dairy-free options. The company’s stores are also a fraction of the size of a 200,000-square-foot Meijer superstore, with most clocking in around 30,000 square feet.

Meijer, which Forbes reported generates more than $16 billion in annual revenues, has good reason to diversify its offerings into the lucrative U.S. specialty grocery market, which the Specialty Food Association Inc. estimated at more than $120 billion last year.

While grocery industry experts insist that Meijer’s name brand continues to grow and expand to new geographic markets like Wisconsin and Minnesota, there’s a certain segment of shoppers immediately turned off by aspects of the company’s business. 

“Perhaps the group of shoppers you’re trying to target with a company that is more focused on local and fresh food are people that inherently have a dislike or are not as hot at going to shop at a humongous box store because they feel that is not the type of shopping experience they want,” Dr. Marcel Zondag, an assistant professor of marketing at Western Michigan University, said in an interview with MiBiz. “At that point, you plaster a different name on it. … There’s a reason Shock Top (beer) is called Shock Top and not Budweiser.”

Zondag’s research focuses on consumer trends within the food industry. As such, Zondag said he’s done considerable research on behalf of Meijer but doesn’t speak for the organization. 

KEEPING QUIET

For its part, Meijer largely declined to discuss specifics regarding its relationship with the Fresh Thyme brand. 

Frank Guglielmi, Meijer’s senior director of communications, repeated the statement that Meijer maintains an undisclosed financial interest in the specialty brand, but later clarified the company’s ownership of Fresh Thyme. 

“We own a majority of Fresh Thyme, but not 100 percent, which is why we call it an investment interest,” Guglielmi wrote in an email. “We’re privately held and don’t discuss financial business, and our ownership stake in Fresh Thyme is just that.”

But according to a string of state filings, Meijer and the company that does business as Fresh Thyme Farmers Market (Lakes Venture LLC) share a common parent company: Meijer Companies Ltd. 

In applying for retail liquor licenses, companies need to disclose their ownership with the state. In Michigan, Fresh Thyme Farmers Market stores and Meijer Inc. branded stores list their sole stockholder as Meijer Companies Ltd., according to licenses MiBiz researched for this report. 

The same holds true in other states where Fresh Thyme is expanding. Meijer Companies Ltd. is listed as the “sole member (and 100% owner) of Lakes Venture LLC,” according to the liquor license for a Fresh Thyme store in West Des Moines, Iowa. 

Additionally, Meijer co-chairman and CEO Hank Meijer is listed as the vice president and secretary of Meijer Companies Ltd., according to regulatory filings with the city of Lincoln, Neb., where Fresh Thyme opened a store earlier in 2016. 

FINDING SYNERGIES, OR NOT?

Fresh Thyme Farmers Market began its life as a Delaware corporation headquartered in Arizona in 2012, according to its articles of incorporation. In 2015, the company reportedly moved its headquarters to suburban Chicago. Despite their headquarters being separated by about 195 miles, the connections between Meijer and the specialty retailer run deep. 

Officers of Lakes Venture LLC include the entity Meijer Companies Ltd., plus three top Meijer executives: co-CEO Mark Murray, senior vice president of finance and CFO Daniel Webb and Meijer General Counsel Janet Kelley. 

Another officer is Christopher Sherrell, a veteran executive of other specialty grocery chains, and the current CEO of Fresh Thyme. Sherrell did not respond to requests to comment for this report. 

By all indicators, the Meijer and Fresh Thyme organizations share ownership, but operate autonomously, which is the point of forming the skunkworks organization. 

“We are completely separate businesses, with completely separate operations,” Hank Meijer told Progressive Grocer, a grocery industry trade publication, in 2015. “We see our role as part of an organic experiment to learn, but not to smother, to gain knowledge, but not to stifle creativity.”

In the phone interview, Guglielmi noted that Meijer and Fresh Thyme stores will compete with each other in some markets. However, grocery industry experts contacted for this report say that the type of consumers attracted to Fresh Thyme don’t mind shopping at multiple stores for their purchases. 

Moreover, Meijer and Fresh Thyme share a similar, regional footprint, although the latter has already expanded into markets such as Nebraska, Iowa and Missouri, where Meijer does not operate. 

According to reports, Fresh Thyme operates its own distribution centers around its 10-state footprint, including a 320,000-square-foot facility in Bolingbrook, Ill. But with ambitious expansion plans for the Fresh Thyme brand, it’s unclear whether that autonomy will last. Fresh Thyme plans about a dozen new stores this year alone, according to a Chicago Tribune report in May. 

However, depending on Meijer’s long-term goals with the Fresh Thyme chain, it may make sense for the parent company to maintain separation between the two brands, according to grocery industry experts. 

“You would expect eventually to use some synergy,” WMU’s Zondag said. “But to be honest, the moment you commit to that … you’re losing a lot of the flexibility that you have.” 

Read 19899 times Last modified on Monday, 17 October 2016 10:30
Nick Manes

Staff writer

nmanes@mibiz.com

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