Store no longer just an island of misfit foods?

SEATTLE -- Deborah grabbed a package of Walker’s shortbread and tossed it in her basket along with some Lindt chocolate. She was cruising Grocery Outlet on Martin Luther King Jr. Way, looking for deals on imported treats.

“I always find something when I come here,” she said.

Guava-mango Pop Tarts, bottles of drinkable mango soup; you never know what you’re going to find at Grocery Outlet, only that it’s going to be cheap. Like, $1.17-for-six-packets-of-Bare-Naked-granola cheap.

The trick, Deborah said, is to shop early and, as the recorded voice on the PA system says, “Buy it fast, it won’t last.”

Organic produce and fine wines now line the aisles of Grocery Outlet, but the odd discontinued stuff still prompts some to see the store as “the island of misfit foods.”

Treasure hunting’s not for everyone. One Yelp reviewer found the Madrona store “soul-crushing,” and said it “reeks of desperation.” 

Founded in the 1940s, Grocery Outlet’s early inventory consisted of “huge pallets of cans that were dented or off of the train wreck,” said Melissa Porter, vice-president of marketing.

Though much has changed since then, the image of dented cans and expired milk, “That’s what we battle,” Porter said.

Right now Grocery Outlet appears to be winning. While many in the industry are anticipating the pinch of rising unemployment, the Berkeley, Calif., company has annual revenues of more than $700 million and is opening new stores, each of which is operated independently.

The privately-held, family-owned business is debt-free and pays in cash, so it hasn’t been hit by the credit crunch hindering other companies. There are nine stores in the Seattle area and 11 around Portland.

In January, Grocery Outlet started running television ads in the Seattle area touting its organic offerings. The company began emphasizing organics two years ago by forging relationships with major manufacturers like Amy’s and Hain Celestial Group.

Porter said the ads were also designed to give customers a peek inside the update stores.

The signage is new, too. The rainbow has been replaced with “bargain market,” to emphasize the fresh foods, Porter said, “So people know it’s not just a dry food market.”

Beats three-buck Chuck?

Wine flows (almost) freely at Grocery Outlet. Leucadia Cellars, a high-end wine importer that specialized in selecting and introducing small-batch European wines to the U.S., failed due to the economy. But it was a bumper crop for Grocery Outlet, which bought out Leucadia's inventory and sells the bottles for 20 cents on the dollar.

There’s also something to pair it with. Quotas on imported cheese often flood the market with excess product, so bargain wedges have long been a staple in the stores, Porter said.

Many customers don’t care about that stuff, she added.  “They care about protein for a family of four.”

About 10 percent of customers spend the bulk of their grocery budget at the store and visit up to five times a week. The company’s challenge, Porter said, is to continue to serve working-class families while attracting the newly frugal.

Vintage Peach Propel

I was delighted to discover bottles of peach-flavored Propel fitness water at the Madrona store.

Something as simple as a minor change in packaging can send an item to Grocery Outlet’s shelves, Porter said. Gatorade, which makes Propel, changed the bottle and added fiber and mango flavor to the peach formula. I prefer the original peach Propel, and after searching everywhere, I scored some for $2.49 for a six-pack—about 50 percent off.

It’s not all lapsed packaging. Since factories are most efficient when operating at or near full capacity, they often produce more than anyone has ordered. Grocery Outlet pays cash for what’s left over. For example, I found pumpkin spice and iced gingerbread Clif bars (last season’s flavors) for 59 cents each.

An approaching sell-by date is another reason products end up in the store, and the most controversial one. Porter said Grocery Outlet doesn’t buy or sell anything expired. However, there might be items stamped with a “best if used by” date six months in the future in the manufacturing channel. To manage inventory, the manufacturer may decide to sell the product to Grocery Outlet.

Despite coding and computer tracking, the system isn’t ironclad. I found several items in the store stamped “best by March 2009.”
Porter asked me what kind of products they were -- it was candy-- and said it was probably scheduled to be pulled from the shelf.

It was almost certainly still safe to eat. Manufacturers build a safety factor into the dates when they set them, Porter said. Nevertheless, Grocery Outlet tightened time frames for what can be sold and has store operators audit for out-of-date merchandise.

Even when there’s no threat to health, the company’s image is at stake, Porter said: "Consumer perception is very important to us."

After all, even a “misfit food” has got a job to do.