Chris Foltz is leading the innovation charge for Heinen’s as it gears up for its second century in business. Foltz, the Chief Innovation Officer at the Cleveland-area grocer, discusses how forging new paths has helped the family-owned company truly differentiate itself with consumers. Among other accomplishments, Chris has helped Heinen’s shape its 23 supermarkets into wellness destinations of the future.
To stay ahead of the curve, Heinen’s has opened in-store Personalized Nutrition Centers. Each offers expert nutrition guidance and fee-based tailored health and wellness services, including a proprietary blood panel developed under the direction of the retailers’ Chief Medical Officer in collaboration with Cleveland HeartLab. Heinen’s Club Fx is a free wellness program offering education, nutrition tips, recipes, incentives, and inspiration for customers. These programs enable Heinen’s to offer holistic, industry-leading wellness services unheard of anywhere else in grocery.
In this episode
President & Chief Revenue Officer, Shelf Engine
Kane is the President and Chief Revenue Officer at Shelf Engine. Kane joined Shelf Engine because in his nearly 20 years in consumer technology he has yet to encounter a more distinguished group of teammates and investors, and because he believes its technology will permanently improve retail supply chains while benefiting the environment and eliminating food waste.
Chief Innovation Officer
Chris Foltz is the Chief Innovation Officer at Heinen’s Grocery Stores, a 23-store chain in Cleveland and Chicago. Prior to this role he was COO for 15 years, and managing partner in a consultancy, The Performance Engineering Group out of Orlando, Florida for 10 years. There he worked closely with grocery and other enterprise customers. He has a BS in business and computer science, both from the University of Kansas, and an MBA from Oklahoma State University.
Welcome to Fresh Thinking, the video podcast where we explore the latest developments and trends influencing the future of the fresh foods business.
We’ve got Chris Foltz with us today, who’s the Chief Innovation Officer at Heinen’s grocery stores. Heinen’s is a 23 store chain in the Cleveland and Chicago area. And one of the things they’re doing that is most interesting around innovation is a focus on wellness.
They’re tackling this with an investment in resources that very few other stores are doing. And so I’m incredibly excited to have Chris to tell us a little bit more about that today. Chris, welcome. And to start off, could you tell us a little bit more about your role at Heinen’s? What does being the Chief Innovation Officer actually entail?
A great question. So a Chief Innovation Officer is not really an uncommon role in most organizations, but it’s very uncommon in grocery. And here at Heinen’s, it’s not necessarily a formal role; it’s really been more of an evolution of what I’ve been doing for 20 years here.
For many years, I ran operations. And within operations, you need to be innovative in how you lead people. Obviously, you’re involved in product decisions and certainly the service that you deliver. So as I evolved in my position and as I transitioned my roles to more capable people – my day-to-day roles to more capable people – I really evolved towards just keeping the parts of the business that needed maybe a little bit more innovation.
Can you say a little bit more about how you and others convinced the company to prioritize innovation, particularly around your comment that it’s not historically a role or a function that’s prioritized in grocery?
Yeah, yeah. I’m not so sure I had to convince the organization. We’ve been in business since 1929 and we were founded by a butcher who believed that you needed to sell more than just meat and started selling produce and grocery items, and really was the first supermarket in Cleveland.
So I think it’s kind of genetically been in the family. And we’re into the fourth generation now. I think one of the reasons why I joined Heinen’s was because of that way of thinking. I think the thing that’s most innovative about Heinen’s, and where they’ve been and where they want to be, is on how they lead their people and how they build their culture, which is why I joined.
And so really, from the beginning, even though I had day-to-day operational tasks, there was always this bend towards, “We’re going to be different in how we lead our people. Our culture’s going to be different, the experience we deliver is going to be different.” So it wasn’t so much convincing as just joining a company that kind of had that mindset to start with.
Can you walk us through some of the historical insights and initiatives that you’ve focused on in innovation? How did those come about?
As I said, our company, and I think our culture, and I think ultimately how we differentiate, starts with how we lead our people. And in the supermarket industry, it’s traditionally been this command-and-control sort of an environment where the bosses know best.
An example I’d like to give you where I think we’ve been innovative and really differentiated in the space – in the grocery space – is with seafood. We have overnight seafood from Alaska, Hawaii, New England, a few other places as well, but I’ll just stick with those three for now. And so what happens is our seafood manager is able to order – I’ll use Hawaii as an example – is able to order from Hawaii at 10 in the morning – it’s 5:00 AM in Hawaii – order what they want to fulfill for the next day. They call the fishermen that we’ve contracted with, place their order. The fishermen go out and, to the best of their ability, they fish to fill that order. Then they clean it, they package it, they sign it, and they FedEx it to us.
It gets to our store the next day, and we’re offering it to our customers that afternoon. Now we have five of those programs, as well as the normal wholesaling operation. And so our seafood managers might have to order – and we want to do it every day. Why have an overnight program unless you’re using it every day, right? Instead of ordering two or three times a week. So a typical supermarket seafood manager might order three times a week from two or three people. Our managers have to order every day, and in the course of a week, may order 45 times.
To ask your people to do that, which is not easy, they’ve got to be engaged, they’ve got to be excited about what they’re doing. And so we get them excited about having the best seafood market in the country – and it’s totally up to them – and we make sure that they feel valued and recognize that we can’t deliver that sort of differentiation without them.
Have you seen things in the data and in your customer retention that gives you further confidence to invest in these types of innovations?
Yeah, I think it comes with the feedback we get on a regular basis through whatever media that we use. We use a customer satisfaction survey that is real time and we’re gaining perspectives every day. And that data is available to our people real time as well.
And so for seafood – the example I use there – our seafood we measure on a scale of one to five, with five being highly satisfied. So 80% of our customers are highly satisfied with our seafood. And when we bench that, benchmark against that with others in the industry, we’re significantly higher.
Super interesting. And obviously that corresponds to… I’ve got to imagine you see that show up in your data in terms of repeat shopping and loyalty from your consumers, as well.
Yeah. I think one of the things that’s interesting about Heinen’s is our customers tend to skew more. I mean, we operate in a world today where everybody’s fragmenting everywhere, right?
There’s so many different kind of channels within food anymore. But as we compare the loyalty of our customers, in terms of their basket size – as an example – in terms of their frequency of how often they shop us, we skew way higher than others. I mean, our basket size, as an example, is $55.
And then I have to assume that the nature of your store – your box, so to speak – probably does skew more fresh, more perishable, more healthy types of items than maybe your traditional grocery store chain.
One, can you confirm that’s true? And two, do you have any statistics or metrics that you guys focus on, at least that you’re able to share with the market as examples for folks that are evaluating the industry, or frankly for consumers who might be interested in checking out your store? How is the assortment different along those lines?
Yeah, so that’s a great question. So it’s changed over the time I’ve been at Heinen’s. But certainly over the 20 years, we’ve evolved towards having more of our square footage allocated towards perishables. You can’t really… It’s difficult to differentiate with packaged goods and grocery and dairy.
I mean, we can a little bit – we do within wellness, as an example – and we do with specialty food. But beyond that, the opportunities to differentiate are with produce, meat, seafood, prepared foods: the way you source and then offer those products.
Our footprint is, on average, about 40,000 square feet. So that’s significantly smaller than the typical supermarket. Of that square footage, we allocate much more towards the perishable side. And as a result, our sales – you asked about metrics – tend to demonstrate that.
So for example, 18% of our sales are produce. The industry standard is closer to ten. 8% of our sales are prepared foods. The industry standard is closer to 2 or 3%. So by allocating square footage to those products where we can differentiate, that gives us an opportunity, I think, to grow – well, maintain market share is important these days – but also grow it.
Totally. And then maybe one last follow up on this topic, in terms of assortment: I assume that you probably see, at least from a certain set of your customers, a higher trip frequency – which of course all retailers, really, whether they’re omnichannel, e-com, or brick and mortar are searching for, but particularly brick and mortar. Is that the case? Is that assumption accurate that with those higher percentages of fresh and perishable, that you’re seeing a more frequent trip, perhaps around things like prepared foods, as well?
Yeah. I mean, we tier our customers and our top tiered customers, who represent 80% of our sales – 20% of the customers, 80% of the sales, the old Pareto rule of thumb – they tend to not only skew with higher basket sizes, but with more frequent shopping and shop two to three times a week.
I suppose one other related question around this topic of innovation at a high level: Everybody seems to talk “innovation” these days, but it seems that there’s a lot more talk about it than perhaps action. You’ve talked about what makes Heinen’s unique with your smaller format and your smaller footprint.
What is your point of view around the level of, kind of, noise to action that’s out there in the industry, so to speak. And maybe related, what do you think causes other organizations – perhaps stereotypically larger organizations than yours – to fall down on innovation, to talk a lot about it, but maybe structurally or strategically they struggle to implement it?
Well, that’s a fascinating question, really. And I’m not sure I have a great answer, but I have a perspective. And I didn’t grow up in the grocery industry, which frankly, most leaders in our industry grew up in that industry. I came from a technology background and a consultancy background and just joined this industry a little bit by happenstance.
So I’ve been in it about 25 years. One of the things I found interesting and really confusing when I entered the industry was the lack of innovation. The, kind of, the standard way of identifying how you’re going to be differentiated is to go visit the competition and identify what you think they’re doing that makes sense, and then mimic it. And I mean, that’s not innovation at all.
You talked about your history of innovation around assortment and merchandising. You’ve done something. I’ve been in the industry for 15, 20 years, so not quite as long as you, but a long time to see a lot of things. Hiring medical professionals, hiring a Chief Medical Officer, this is relatively unheard of in grocery. How did you come to this insight? And walk the audience through exactly what those investments are and how they are creating meaningful difference for your customers.
Yeah. So I use it being a little bit cynical. So if you think about our industry and where they’ve been innovative over the last few years, it’s been selling gas and selling drugs, right? Which is not meaningful. I mean, that’s not meaningfully different at all. It’s different, for sure. But a lot of people sell gas, a lot of people sell drugs.
And the supermarkets sell food. So you need to… Well, our perspective is we need to innovate within what our vision is about, which is about selling food and delivering great service and not just trying to get into gas or drugs. And so drugs, as an example, pharmaceuticals, we always stayed away from that because we said, “Well, we’re about food.”
And we want to be differentiated in food and the experience around food. And so selling drugs made no sense. What made more sense was getting into… Well, was getting into the arena of helping our customers understand and guide them with their food decisions around their needs to be healthier, because that’s been growing, growing, growing, growing.
And so about 10, 12 years ago, we really saw the trend for people coming into our stores, our customers confused about what they should purchase to be more nutritious. There’s lots of surveys out there that say the number one thing on customers’ minds when they shop is, “Is it healthy?” Now they don’t necessarily behave in a way to be healthier for probably a variety of reasons, but one of them is they don’t really understand.
And so at that particular point in time, we thought, “Let’s rely on what Hippocrates said a number of years ago: ‘Let food be thy medicine.’ And let’s innovate by having a doctor in the grocery store.” I mean, that’s differentiated for sure, but in a way it’s very commonsensical, right? I mean, that’s where customers make their decisions around food. If “food is thy medicine,” why shouldn’t there be a doctor in the grocery store? So it was kind of that sort of thinking that led us to the investments in wellness that lead us to our conversation today.
Incredibly interesting. And I’ve got to imagine that for those of us that don’t live in Cleveland and Chicago, and haven’t had a chance to come into the store, we’d love to know, walk us through what that consumer experience feels like. What do they see when they come into the store that’s different? What type of advice are they able to get from your resources that you make available? And if you could say a little bit more about the type of those resources. Because as I understand it, these are resources that are employed directly by Heinen’s, as opposed to consultants or partnered professionals.
Yeah, so let me try to address that in pieces. So our approach to wellness has really kind of been a tiered approach. So the experience that all of our customers would have in all of our stores, is they would be able to find a designated part of the store – square footage, a department – where they can find solutions and advice.
Advice, because we staff it with what we call wellness consultants. And they can be anywhere from registered dietitians to somebody who was working in seafood, who was just very passionate about wellness. Because what we do is under the guidance of our Chief Medical Officer. So we have a Chief Medical Officer, an MD, who’s been on staff for 12 years – just to discuss that for a second.
We felt it really important that if we were going to be serious about being differentiated in giving advice around wellness, we needed some medical advice. And so we hired a Chief Medical Officer. I still haven’t found another grocer who actually has an MD. Now, he actually serves in a consultancy sort of fashion because he has some practices, he has some clinics where he practices medicine. And we prefer it that way because that’s the way he’s always growing and learning.
And so we hired him to kind of guide us in what our methodology was going to be to advise customers. And so over the years, we’ve developed that. We have a Chief Registered Dietitian as well, and so they collaborate on that.
And so we enable each of our wellness consultants under this methodology about eating. And I won’t dive into all the details of that, but believe that we’ve really invested a lot in that. So the experience our customers get is: they’re able to go to a part of the store and find somebody who’s knowledgeable, under the guidance and the training that we’ve delivered to them, and start getting their questions answered.
We talked earlier about assortment. How does having an MD, a Chief Medical Officer, as well as all of his associates, how does that inform the types of products you put in the store? And, for example, do you have examples of certain product ingredients, food ingredients, product types that maybe over the years, consumers were not aware had things that weren’t good for them, and you were able to get those types of items either out of your stores or have a smaller footprint by a result of some of these insights?
Yeah. So I mean, I could answer that in a variety of ways. I’m going to answer it with a supplement example, because I think it demonstrates how an MD has really helped us position that offering. Now first of all, our supplements we focus on – I said we sell food, right? – so we focus primarily on selling whole food supplements, so supplements that really actually are food.
But when we first started to do that, we had what I would call a grocery-store-slash-drugstore kind of an offering, which are just everyday products, right? And so when we went out and started looking for premium whole food supplements, none of the suppliers wanted to sell them to us because we were a supermarket.
They said, “Well, you can’t sell that in supermarkets. It has to be in a health food store or a doctor’s office.” And so one of the first companies that finally, I guess, gave in and allowed us to sell it was a company called Garden of Life. And it was our Chief Medical officer who went to the CEO of that company and said, “We can sell this. This is how we’re going to go do it.”
And so he took a chance on it. And within – at that time, I think we had 14 or 15 stores – and within a year we were selling a million dollars of this product. And he was wowed. So we were able to use that example then to go to other companies and say, “This is what we did.” And so we started lining up these premium companies who had never sold in grocery stores before. And so I think we would’ve really struggled to be able to do that without having the credibility of an MD on our staff.
What’s the next level of collaboration with the medical profession, or with nutritionists, and your stores? Where do you see things moving forward that will impact how shoppers buy food, how shoppers become more educated, how hopefully we make healthier and more sustainable choices moving forward?
To the extent you’re able to disclose anything publicly, we’d love to hear about, maybe, your macro view on where you see mainstream grocery going, as well. But in particular, if you can share any details with things you guys are working on with Heinen’s that your customers are going to enjoy in the years to come.
Yeah. So one of the things I’ll share with you is our most recent investment. What we found by having those wellness centers, and then getting the experience with the communication that we do every week, is that there’s a need that both of those don’t meet: And that need is one-on-one coaching.
And so in January, we launched what we’re calling a “personalized nutrition center” where customers can actually go in and get one-on-one coaching. Now, beyond just the coaching, we’re practicing medicine because in order… For those customers that truly want some personalized direction, we offer blood testing.
So we have a blood panel, a proprietary blood panel we’ve developed with Cleveland Heart Lab in collaboration with Dr. Pesek. We wouldn’t have been able to do it, of course, without Dr. Pesek and his credibility… That we measure seven – and I don’t want to get into the details of this, but just enough to understand – we measure just relative to cardio cardiovascular risk, as an example.
We measure seven different blood markers that, when looked at comprehensively, can identify whether you’re in phase one, phase two, phase three, or phase four of cardiovascular disease, which really is… That’s disruptive technology. That doesn’t exist anywhere, but yet we’re doing it in the grocery store.
And then based on that, offering very personalized suggestions about how to begin changing your diet. Based on where they are, we like… Our philosophy is: meet them where they are.
So here’s… “Your blood is telling you this, what do you want to accomplish?” And “Here are ways of doing that with food,” and then also with supplementation, and then finally, with some vitamin therapies that we offer in both shot form and infusion forms.
So that’s a fairly substantial, giant step forward in getting into the arena of trying to help customers personalize their nutrition program.
What advice would you give to large companies on how to truly weave innovation into the fabric of their daily operations?
Well, I think the only way you can really, truly innovate in a meaningful sort of way is to take chances, to be able to invest in something that may be risky and that won’t give you return on investment. I think so many industries, in general – they need the ROI. “What’s the ROI going to be? What’s the ROI going to be?”
And I think it’s particularly true in our industry. I mean, we don’t have a lot of space for making a lot of mistakes because we’re such a tight-margin, high-labor-cost industry, so that our bottom line numbers are pretty tight. But you have to be able to take that chance and you have to be okay with failing.
And because when you fail, you learn. I mean, frankly, if you never fail, you’re not going to learn a lot. All you – and I said this earlier – all you can really do is go out and copy somebody else, right? And copy somebody who hasn’t failed and then use that. But to truly be differentiated, you have to be willing to take that chance.
That’s why I think our owners, Tom and Jeff Heinen, were so incredible because they believed in that from the beginning. I didn’t have to convince them of that. That was their belief. And I think being a family owned company helps because you can fail and you can do some things that don’t have a return on investment.
I mean, the personalized nutrition center I shared with you, there’s no return on investment on that. As a matter of fact, we’re passing the cost, we’re passing our costs on directly to our customers with no markup, no margin at all. So I mean, we don’t want to lose a bunch of money doing it, but we’re not doing it to make money. We’re doing it to provide a service that currently isn’t available. And we believe that over time by doing that, we will truly be differentiated. We will establish loyalty and our brand will be more successful.
Well, Chris, we’ve talked about everything from the history of innovation, all the way through to you hiring a Chief Medical Officer, and where things are moving in the future. I’m incredibly confident that our listeners are going to find this to be incredibly valuable content. So I really just want to end by thanking you for making yourself available to discuss these important topics with us. We really appreciate the time that you’ve spent with us today.
Yeah. It’s been my pleasure. Thanks a lot.+ Show more − Show less