Putting Grocery Outlet to the taste (and value) test

Eating on the Edge: A deep-discount grocery chain, Grocery Outlet is loaded with bargains and lots of surprise variety. It's far from hip, like Trader Joe's, but it's a smart place for opportunistic shoppers.

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The familiar, plain facade of Grocery Outlet. This is the 4th Avenue South store in SoDo.

Eating on the Edge: A deep-discount grocery chain, Grocery Outlet is loaded with bargains and lots of surprise variety. It's far from hip, like Trader Joe's, but it's a smart place for opportunistic shoppers.

The one-mile section of 4th Avenue South between the football stadium and the West Seattle bridge is more familiar to craftsmen and contractors than to diners and cooks. People descend here with shopping lists for things like doors, tires, electrical cable, plumbing fixtures, tile, and lumber.

The port is nearby, and the area functions as a depot for the city, a place where the essential stuff of modern life is gathered, stored, and distributed to the populace around it.

It's not a food destination, but there are a few interesting (and a lot of uninteresting places) to eat and buy groceries, although they are not the first places that come to mind when shopping for a gourmet meal. For those with a food fetish, the fantasy really begins at the market, like one of the neighborhood farmer’s markets, or Uwajimaya, the patchouli-scented PCC Natural Market, the Metropolitan Market, or Whole Foods, the Banana Republic of supermarkets.

On 4th Avenue South, food is generally sold in bulk, at Costco at one end or at the smaller and far more prosaic Cash & Carry to the north. And on the same block is a branch of Grocery Outlet, the extreme-discount chain that seems to be spreading all over town. Last weekend, Grocery Outlet opened its 156th store, the new one in Spokane.

Grocery Outlet is part of the deep-discount industry, which has thrived during the current recession. The national chain of 99 Cents Only Stores (Big Lots and Dollar General are competitors) was recently acquired at a 32 percent premium by a private equity firm.

“Certain things have fared well in the recession,” said Richard Johnson, a vice president at the New York-based Greenberg Group, real estate advisors to the retail industry.

Outlet malls, for instance, “are booming,” Johnson said, because of “the very low cost of entry.” Renting space in an outlet mall is cheaper than renting space in a conventional mall. Luxury retailers and discount retailers have done well the past several years, while the middle has floundered, a sign of the economic stratification going on in the country. “The rich keep getting rich, poor are doing poorer,” Johnson said.

Melissa Porter, the vice president of marketing at Grocery Outlet, said sales growth has been strong since the recession took hold in 2008. “We tend to do well when times are tough and consumer confidence is low,” she said.

The Grocery Outlet at 1702 4th Avenue South is one of 24 within 50 miles of Seattle. You'll find others at Crown Hill, Madrona, Lake City, and Bitter Lake, with a total of 24 stores in King, Pierce, and Snohomish counties. The one in SoDo is owned by an Afghani-American couple, Masud and Fereshta Popal. About 90 percent of its stores, Porter said, are run by a husband and wife. The chain seems to attract enterprising couples.

Under the operations agreement between store operators and the corporation, operators pay the expenses of running the store (employees, utility bills, upkeep), while the corporation pays for the building and purchases the inventory. The corporation splits the profits with the store operators.

While the Cash & Carry tries to serve restaurant owners and bulk buyers, Grocery Outlet caters to the individual consumer and appeals most to someone who enjoys the hunt. “Our customers like to shop opportunistically, like we do,” Porter said. “It’s not Whole Foods and it’s not meant to be.”

Traditional supermarkets promise variety and consistency. You can buy 10 brands of salad dressing in five sizes and 30 varieties. That variety is what you pay for at QFC or Safeway. At Grocery Outlet, you might find only a few different kinds of ketchup or mayonnaise, maybe just one, but you will find it at a deep discount.

  Grocery Outlet started in San Francisco in 1946 as Cannery Sales, a distributor of government surplus food, mostly dry and canned goods, the stuff doomsday movies are made of. This basic, unglamorous business plan operated successfully under the radar in the Bay Area for decades under various names and partnerships.

Cannery Sales became US Markets, before absorbing another supplier of surplus food called Big Bonus Foods. After acquiring another supplier, Globe of California, it became simply Canned Foods in 1970. Canned Foods sold just that — surplus, closeouts, and discontinued products that could be stored easily and sit on shelves indefinitely.

In the 1980s, Canned Foods added frozen and fresh foods to their product lines and opened scores of retail stores all over the West, changing its name in 1987 to Grocery Outlet. Grocery Outlet now has 150 stores, mostly in California, Oregon and Washington (with a few in Idaho and Arizona and Nevada), many in rural areas.

The store’s discount philosophy remains intact although its products are now much more varied, and nuanced: guava nectar, bacon-wrapped tenderloin, and turnip greens. It is not dissimilar to Trader Joe’s. Both are small, folksy, idiosyncratic, discount grocers that make up for variety with surprise.

Trader Joe’s, which started as a chain of convenience stores in the 1950s, has more than twice the number of stores as G.O. all over the country. It has become the grocer of choice for hipsters all over, with its kitschy, tropical theme. The checkout line in the chain’s Union Square store in Manhattan routinely snakes around the entire store.

If G.O. falls short of Trader Joe’s, it is in the promotion of its image. While Trader Joe’s is uniformly viewed as a high-end, neighborhood amenity, opinions about Grocery Outlet vary. On Yelp, it is playfully referred to as “Gross Out.” But in general the reviews are positive. Most expressed initial apprehension, followed by pleasant surprise.

My experiment at Grocery Outlet went something like this: For $20 or less, excluding the cost of wine, I would attempt to buy the ingredients of a multi-course, gourmet meal for two. (I did not purchase basic pantry items like oil, spices, herbs, and butter.)

“We’re not necessarily selling the cheapest products for the cheapest price,” Melissa Porter said. “People are often surprised what they find at our stores. We carry quality produce, specialty imported cheese.” So I put this to my informal test.

For my surf-and-turf entrée, I found two 6-ounce beef fillets (antibiotic and hormone-free) wrapped in bacon for $4.99, and a pair of similarly sized tuna medallions for $3.29. Both were vacuum-sealed, the tuna frozen. I seasoned the fillets with salt and pepper and grilled them. I marinated the tuna medallions and seared them in a skillet. Meat, it turns out, is kind of a loss leader for G.O., which does not make much profit from it, Porter said, but it gets customers into the stores.

G.O.’s magic is complicated and, Porter said, does not simply rely on selling food about to expire, a common assumption. It takes advantage of the supply chain, creating efficiencies for its suppliers who in turn sell their products at a deep discount.

G.O. sells items that are discontinued, or mislabled. Sometimes a manufacturer changes the packaging and has to get rid of everything in the old packaging. Sometimes special, promotional packaging is created for a product — for example, a boxed cereal is timed to the release of a popular movie — and then the promotion expires.

For the vegetable course, I found a one-pound bunch of asparagus, and a one-pound bag of brussel sprouts for $1.99 each. I grilled the asparagus and roasted the brussel sprouts with garlic and red pepper flakes.

I bought a box of linguine for 89 cents, and tossed the noodles with garlic, baby spinach ($2.99) and par-boiled, crushed tomatoes ($1.99 for a half dozen, still on the vine). Grand total: $18.13 with plenty of leftovers. It might not have been the greatest meal I’ve ever made, but I’ve eaten far worse after spending far more at a restaurant.

I also found a bottle of Chilean pinot noir for $16.99, a 2005 Casa Marin that seems to go for anywhere between $25 and $60 on various wine websites. At $50, it would not have been worth the gamble, but for $16.99, it only had to be good not great.


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About the Authors & Contributors

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Hugo Kugiya

A former national correspondent for The Associated Press and Newsday, freelance writer Hugo Kugiya has written about the Northwest for the Puget Sound Business Journal, The Seattle Times, the Los Angeles Times, and The New York Times. His book, 58 Degrees North, about the sinking of the Arctic Rose fishing vessel, was a finalist for the 2006 Washington State Book Award. You can reach him at hugo.kugiya@gmail.com.