Cooking up Zagara's comeback The new owner wants to lure old fans of the specialty shops. Concocting Zagara's comeback

Posted: November 13, 2002

The first day Jim DeGilio walked into Zagara's gourmet food store in Marlton more than four years ago, he fell in love - not with someone, but with the concept of what he calls "a restaurant inside a grocery store."

DeGilio, the former director of food service for Genuardi's Family Markets, may need to summon that emotion again for the task he has just taken on.

As a new owner of Zagara's, one of the region's pioneering chains of high-priced specialty and natural-food stores, DeGilio knows he needs to find ways to bring once-devoted customers back to his stores.

Zagara's, say customers and the new ownership, languished in recent years, suffering from a reputation for diminished service and food quality since its parent, Genuardi's, was bought in 2001 by supermarket giant Safeway Inc.

DeGilio is president of Fresh Markets L.L.C., which last month bought three of the four Zagara's stores from Safeway Inc. for an undisclosed price.

When he was at Genuardi's, he found Zagara's an appealing change of pace. "This is the place I used to come when I got tired of the supermarket business," he said during a recent walk past counters in the Mount Laurel store, where Zagara's roasts its own coffee and where customers can make their own peanut butter.

DeGilio and two other former Genuardi's executives operate Fresh Markets, using money of their own and from private investors to make the purchase. The other Fresh Markets managers are vice president and chief operating officer Joseph Scarnaty and chief financial officer Ray Fuentes. DeGilio declined to identify other investors.

Zagara's will continue to specialize in rare and organic products and prepared restaurant-quality food. Also, under the new ownership, it will focus again on the fresh produce and attentive service both Zagara's and Genuardi's were once known for, DeGilio said.

Genuardi's, in particular, "had customers who were generationally loyal," he said. "I think people today are just dying for a better level of service."

A comeback will not be easy. While Zagara's once was practically alone in South Jersey in offering exotic fruit, French ham, hormone-free beef, and hundreds of kinds of cheese, today the stores face competition from numerous other specialty grocers, fine restaurants with takeout counters, and supermarkets that have improved what they offer.

A veteran of two decades in corporate food service, DeGilio was hired by Genuardi's in 1998, when the supermarkets were still family-owned. Two years after he developed programs to improve the quality of the prepared food, Safeway bought the company, laid off dozens of management employees, and made changes that lowered the service and quality levels at Zagara's and at Genuardi's stores, he said.

At Genuardi's stores now, he said, "there's nothing to be loyal about anymore."

Genuardi's spokeswoman Maryanne Crager said the company had no response to DeGilio's comments.

Safeway, based in Pleasanton, Calif., acknowledged that the Zagara's stores did not fit well in the corporate mold of a supermarket mega-chain.

"Safeway's strength is in operating traditional grocery stores," Safeway spokesman Greg Teneyck said at the time of last month's sale. "Zagara's are specialty stores with a heavy emphasis on fresh food. That's not our core business."

Many longtime customers of Genuardi's 40 other supermarkets have been on a rant lately, saying the stores have slipped in quality and service since Safeway bought the chain. Last month, Safeway started a print and broadcast advertising campaign, using the tag line "Genuardi's is back," that apologizes for making too many changes too quickly.

The Zagara's purchase included two locations in New Jersey, on Route 38 in Mount Laurel and on Route 73 in Marlton, and one in Glen Mills, Delaware County.

A fourth Zagara's store, in Jenkintown, will be closed, Safeway officials said. That store suffered from a poor location, in the back of a former Wanamaker's department store, and from competition with other nearby specialty grocers, DeGilio and customers said. The Marlton and Glen Mills stores were profitable, while the Mount Laurel store was not, DeGilio added.

Zagara's new owners bought a business with a rich history.

Brothers John and Joe Zagara opened a single farmer's market in 1970 in Marlton. The store's popularity soared in the 1990s as the area around it grew in population and affluence. Customers willing to pay its higher prices jammed the store, to the point that just before holidays, a security guard had to be stationed at the door to let customers in as someone else came out, patrons recalled.

"The pastries were magnificent, they had a salad bar where you never saw a brown piece of lettuce, the fruit looked as if they'd polished it . . . and the service was incredible," said Marlton resident Lisa Naronzanick.

"They had so many fun, and different, things," she said. "When it was owned by the Zagara family, you could see there was such a pride in ownership."

In 1997, the Zagara brothers sold the Marlton store to Genuardi's, which opened the three additional stores.

Today, South Jersey abounds with upgraded supermarkets, many of them selling some of the products that once were Zagara's exclusive province. The Marlton store is across Route 73 from the region's first Trader Joe's specialty store and two miles south of a Whole Foods Market (formerly Fresh Fields).

More tough competition is expected to come from Wegman's, a Rochester, N.Y., chain with stores that are a hybrid of a standard supermarket, a gourmet store and a restaurant. Wegman's will open a store on Quarry Road in Downingtown next year, and it plans to build stores over the next couple of years at the site of the former Garden State Park racetrack on Route 70 in Cherry Hill and in Washington Township, Gloucester County.

Supermarket-industry observers are wishing the new owners of Zagara's well, but say that small, high-priced chains are a challenge to make profitable.

"There is no question this is a risk," said Jeff Metzger, publisher of Food Trade News, the regional industry newspaper. "The [Zagara's] stores generally were struggling."

Some longtime Zagara's customers who have shopped at the stores in recent weeks say they already can detect improvement.

"I didn't like it when it was Safeway. The quality of the products had slipped," said Linda Zieman, a Mount Laurel resident who was picking up a few items in the Mount Laurel store. Now, "it has a feeling like it used to."

Matt Zarcos, a Cherry Hill resident who has shopped at the Marlton store since the mid-1990s, said he had seen a recent improvement in service.

"People seemed much friendlier," he said the day after a shopping trip. "It was a nice surprise."

Contact Tom Belden at 215-854-2454

or tbelden@phillynews.com.

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