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Mark McEwan, who recently opened McEwan, his 22,000-square-foot luxury food store in North Toronto’s Shops at Don Mills. (seed9/© copyright seed9 2009)
Mark McEwan, who recently opened McEwan, his 22,000-square-foot luxury food store in North Toronto’s Shops at Don Mills. (seed9/© copyright seed9 2009)

Retailing

The outlier Add to ...

There's a cockiness to Mark McEwan that might seem a little out of place these days. Just two weeks after opening McEwan, his 22,000-square-foot luxury food store in North Toronto's Shops at Don Mills, the serial entrepreneur, chef to the city's elite and a newbie shopkeeper, is laughing at the rest of the grocery industry.

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“I've had many supposed retail experts – food retail experts who live and work in Ontario – give me all sorts of advice,” McEwan says. “I'm like, ‘Okay, where do you work, and what have you put together that's really interesting?'”

“It's really funny how they come up with all these thoughts that they believe are so invaluable to me.”

McEwan, as this city's big swinging expense accounts should already know, made his name at the stoves long before he turned his attention to retailing. North 44{ring}, his uptown Toronto temple to beautifully executed, if notably safe, exotica (i.e. “crisp laughing bird shrimp with spiced chipotle and yuzu”), has been a high-society favourite since it opened in 1990. In the TD Centre downtown, McEwan's Bymark restaurant (home to the one-pound, $125, whole-roasted foie gras) endures as the financial district's reigning power lunching palace, insomuch as the financial district still leaves its office for meals these days. His newest restaurant, called One, situated in Yorkville's ultra-swish Hazelton Hotel, sold $12.8-million of product in the year after its August, 2007, opening. No more than two or three other chefs in Canada could dream of an opening like that.

McEwan, who turned 52 last May, is prodigiously tanned and fit. His forearms are built like a bricklayer's. His smile, even if only intermittent, is assured, and his shaggy, Malibu-blond hair is swept back off his forehead as if out of submission alone. Mark McEwan looks relaxed, even though he's invested nearly $6-million into his new food store – his only partner is the Royal Bank – and even though he's had to humour all those interloping “retail experts” over the past few years.

Their supposedly invaluable thoughts? Put the produce section near the entrance. “It has been the written rule,” McEwan sighs. But when you walk into his store, the first thing you see is the all-important takeout selection: gleaming refrigerator cases of $14, single-serve truffled mac and cheese, raffia-bowed chicken sandwiches, $8 double-stuffed potatoes and osso bucco shepherd's pie. The meat, cheese and fish departments – “make ‘em hike to it” is an honoured industry maxim – are just a couple easy steps beyond the takeout section, along with the rows of $8 house-made chicken stock and the jars of pickles. Produce goes at the back at McEwan, in spite of what the so-called experts say.

Another rule: Grocery shoppers buy pantry staples and store-brand soups in recession years. Ignoring this, McEwan sports a 10-metre-long display of specialty olive oils. Actual grocery store groceries, although McEwan does sort of stock them (but mostly to keep his clients out of Loblaws – witness the $12.99 Bounce Free dryer sheets), aren't particularly important here. During a recent meeting in the prepared foods section, McEwan's young floor manager, Cheryl Cartwright, gestured toward the grocery aisles and said – joking, but also not joking – “That side's usually empty.”

Which is all pretty much the way Mark McEwan intended it. “Everybody thinks alike in this business. It's a herd mentality,” he scoffs. “And so I've gone against the grain.”

The word “supermarket” conjures visions of hairnets and stubborn buggy wheels for many of us, and aisles so long and jammed with product that finding a can of soup can sometimes take an eternity. Grocery stores are still mostly huge, and resolutely suburban; the industry, in many ways, is a slow-moving beast. Its balance sheets often look that way, too. Many big Canadian grocery retailers net just 1.5 per cent on their sales, says George Condon, a long-time industry watcher. Another analyst sounded excited when he reported that he expects a 3 per cent profit at Metro Inc. in fiscal 2009.

McEwan's approach, though it is unique in many ways, harnesses two of the newer and more promising developments in the grocery industry. The first, often referred to as “baby box” grocery, puts small, smartly edited stores in urban areas, in a bid to pull in price-insensitive consumers who don't need to sort through 41 different varieties of everything as they wander the grocery aisles. Sobeys Inc. has opened 13 of its Urban Fresh stores in Toronto and Edmonton in the last couple of years, many of them 20,000 square feet or less. In Ontario, Longo Brothers Fruit Markets Inc., the independent company that runs the Longo's mini-chain of suburban grocery stores, has moved downtown with two Market outlets in the last year, and the grocer has plans to add a third in the coming months. There is also Pusateri's, the two-location upscale grocer that was the city's gold standard until McEwan came along. (The chef very clearly has Pusateri's clients in his sights.) When they're located properly and smartly operated, these express-format stores have the potential to deliver “immense gross margins,” wrote Perry Caicco, an analyst with CIBC World Markets, in a report in 2007.

Many of these smaller stores also feature extensive prepared food selections – home meal replacements, or HMR, in industry-speak – that have long heralded an equally transformative effect. The promise of HMR is substantially higher gross margins than the usual grocery categories: Where produce often garners a 15 per cent or 20 per cent gross margin, retail analysts say, HMR can easily grab 45 per cent. McEwan, for his part, says he hopes his prepared food department will contribute fully 40 per cent to his store's bottom line. But even though grocers across North America have spent more than a decade trying to crack the home meal replacement formula – Loblaws, in particular, has flailed at HMR with little success – the reality of the category almost never lives up to the hype.

“It's the holy grail, but it isn't,” says one grocery analyst. “It's easy to have cooked chickens: You can keep them on that rotisserie forever and then fire-sale them at the end of the week. But the minute you move out of that high-volume, high-demand stuff, you've got problems.” Caicco wrote in an e-mail, “Margins always start out looking like 45-50 per cent, but once labour, shrink and packaging are considered, it's usually not profitable.”

The upshot: Instead of grocers stealing customers from take-out restaurants, as they had hoped to do, the traffic is going the other way, says Robert Carter, a manager at the NPD Group, which tracks consumer behaviour. Canadian HMR purchases in grocery stores contracted by 6 per cent in the past year, Carter says, while takeout purchases at casual dining restaurants grew by 14 per cent. Shoppers don't want soggy fries and rotisserie chicken any more, Carter says. They want true restaurant quality and restaurant taste. “For McEwan to open now, the timing is great.”

McEwan is betting that he's immune to many of the HMR problems that have plagued so many storekeepers before him. “Most grocers want to buy salads in buckets so they can scoop them into bowls and put them out. They've not been able to bridge that, nor do I think they ever will,” he says.

This is overstatement to some extent. While many of the bigger grocers outsource their HMR lines and repackage them on site, plenty of others have begun to do better than that. Longo's has hired chefs and installed open kitchens in its new Toronto stores, while Sobeys, too, has moved far beyond stale roasted chicken and prepackaged salads. Toronto's Summerhill Market has a highly respected prepared-food program, as does Whole Foods Market. Pusateri's, meanwhile, has also invested heavily in HMR products, and prepares them in open kitchens at its two locations. But of all of these, only Summerhill Market can truly claim to offer actual “restaurant quality,” whatever that is. Pusateri's premium-priced prepared dishes are, in many cases, only slightly better than airline food.

McEwan has brand loyalty, proven business acumen, talented staff – his empire now counts 540 employees – and, thanks to his restaurant and catering businesses, intimate knowledge of what it takes to produce and serve, and profit from, massive quantities of high-end food. And so he's leveraging all that with McEwan. “For us it's a slam dunk to make this product,” he says. “I'm a chef. That's what I do.”

Restaurants feed the store

The store's grocery lines are impressive: McEwan boasts an exclusive line of (excellent) Belgian chocolates, and gets its macaroons delivered fresh three times a week. You could eat a different imported, bronze-dye-extruded Italian pasta every night for a month from McEwan's grocery shelves. But everybody carries groceries and produce, McEwan says; many retailers around the city do it very well.

McEwan's massive commissary is bigger and better-equipped than most restaurant kitchens around the city. It has its own executive chef, a North 44{ring} alumna, and it runs two, 10-person shifts every day. They keep the store's shelves and refrigerator cases stocked with 180 in-house products, and many of the raw ingredients come directly from the retail floor downstairs. They use fish from the store's own counter and meat from its butcher, so “there's a constant cycle of profit going out the door,” explains McEwan. Anything the store's fresh departments can't sell or send up to the commissary right away is sent out to McEwan's restaurants.

McEwan also sells signature products from across his restaurant empire (the chef calls his restaurants “little mini-factories”). There are the Parmesan bread sticks and cocoa juniper rub from North 44{ring}, cured salmon from Bymark and house-made blue cheese and hazelnut sausages from One.

But McEwan's great trick is that his store is in many ways a restaurant. This is the case even beyond all the prepared foods. The lighting is soft and generous, and it doesn't buzz or flicker, and the music washing over the aisles is distinctly post-Esperantist, caipirinhas on the beach.

And the staff? Well, that's another retailing rule he's gone and spurned. Cheryl Cartwright, who supervised the hiring of most of the store's 140 employees, has been a manager at all three of McEwan's restaurants, but she has never worked in retail before. Geoff Lang, who runs the HMR department, was a waiter at several city restaurants before coming over to McEwan. So far, they say, the switch to shopkeeping hasn't been much of a leap.

The staff tasted products, toured other stores and learned a lot of the business on the job. Above all else, they've worked to bring that restaurant feeling to McEwan's store. “When you go into a restaurant, it's a particular experience,” Cartwright says. “It's an adventure. And Mark wanted that same feeling. He wanted this to be a food experience. The way people here talk about food and the way they understand food is the same romance you get in a restaurant.”

There's another benefit, McEwan says. “When you have a restaurant like One, or North 44{ring} or Bymark, people come in and they have expectations. Everybody arrives fancy and at the same time. And they park themselves and they start telling you what they want. It's an animal to deal with,” he says. “The restaurant people I have here are so used to chaos that even when it's busy here, it's not like restaurant pressure.”

For what it's worth, he did hire plenty of experienced people: McEwan engaged Perennial Inc., the Toronto retail consulting firm, to advise him on the project very nearly from the start, and on Perennial's advice, he hired Peter Turcot, a former vice-president from Loblaws, to be his grocery guru. He also raided Bruno's Fine Foods, the five-store Toronto mini-chain, for its meat and produce managers. But for every one of them, there's someone like McEwan's deli manager (and Cheryl Cartwright's younger brother), David Cartwright. David is a former chef, but at McEwan he is, above all else, a gastro-concierge helping customers fill their baskets with the sort of can't-help-myself foodie enthusiasm that often winds up as stomach staples and a 66-inch waist – “You've got bread, you've got meat, and now we need some cheese, desperately!” he's been known to say.

Demand is there, chef says

What the store needs now is babies with overflowing buggies. In the early days, at least, it's been busy on weekends but quiet at key times during the week; on a recent Friday afternoon, when the store's target demographic should have been swinging by to load up on martini olives and all those high-margin double-stuffed potatoes before the trip to Muskoka, the two valet attendants stood idly outside in the sun. (The valet contingent has since been reduced to one.) Though there were customers, just a handful of them were pushing shopping carts, and not a single cart had more than five or six items inside. Is there as much of a market for high-end takeout as McEwan is betting? Was it early-days doldrums or a sign of trouble to come?

McEwan says he's seeing plenty of full grocery carts. The number, he says, is growing every day. They sold 500 of those $14 truffled mac and cheeses in the store's first week, says executive chef Ivana Raca. And the $8 baked potatoes? They ran out almost right away.

He made sure to price key grocery staples competitively, says McEwan, and his produce department, though it isn't cheap, is still priced well below some of the city's other high-end shops. Meanwhile, they continue to work out the pricing in the HMR department; much of it is still determined, he says, by “sticking a thumb in the air.”

But how modest is $10.99 for a single leg of duck confit? “Go make your own,” McEwan answers. “The moment you go shopping to create one of these dinners at home you realize how much you actually spend. I can get you dinner for two and the principal protein costs 20 bucks.”

The numbers, McEwan says, don't give him any cause for concern. The chef expects to sell between $25-million and $35-million of product in his first year. “I can be profitable here at $15-million, so I'm not concerned about the money.”

McEwan, after all, has never gone broke overestimating the consumption habits of the city's moneyed class – he is famous for introducing a $38 hamburger at Bymark (it was scorned at first, and then copied by other chefs), and for being one of the first restaurateurs in the city to break the $40 entree barrier.

And McEwan isn't new to recessions. When he opened North 44{ring} nearly 20 years ago now, his renovation of the restaurant ran way over budget at $1.7-million–an almost unheard-of sum in those days – and then the Bob Rae recession hit. “I survived it, never missed a payment, never screwed anybody, lived up to all my obligations,” McEwan says. He learns from his mistakes, too: Bymark opened under budget, McEwan says, and now operates debt-free. “I'm comfortable with food and I'm comfortable with retail and I'm comfortable with clients. Business is nothing but formulas. It either makes sense or it doesn't make sense. And if you don't know, you find out.”

He's already got his sights on another location – the second of five stores he intends to open in the next five years.

Retailing, McEwan says, is easy if you're smart, and you pick the right spots and you're willing to get away from the herd. “I had many, many nights where I'd sit up and think, What have I forgotten? What am I not thinking of? What's going to hit me? Because something always hits you. You always have one of those holy shit moments at the end where you think, why did that not occur to me.

“What has surprised me most about retail is that I've not really been surprised.”

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