Heritage Grocers COO: Regional Grocery Consolidation, Fresh Theater & From-Scratch Tortillas

Hello, everyone.

This is Omnitalk Retail.

I'm Chris Walton.

And I'm Anne Mazinga.

And we are coming to you live from the Fusion Group's podcast studio at Grocery Shop.

And I am pleased to introduce our next guest, Prabhash Khaskwati, the COO of Heritage Grocers Group.

Prabhash, welcome to omnitalk.

Thank you very much for having me.

I appreciate you guys doing this.

We already kicked off a fiery chat right as soon as you got in the room, so I'm excited for this conversation.

I'd love to hear from your perspective, though.

First, Prabhash, a little bit about your background, and then if you can share with our audience who might not be familiar about Heritage grocers, too.

Absolutely.

So, Prabhash Kaswati, chief operating officer for Heritage.

I grew up in technology.

I would say both started in retail almost 18 years ago.

Told myself, I'm probably gonna be here for six months.

Ended up spending eight and a half years at my first retail organization that was 99 cents only stores.

Okay.

Then grew from there.

Technology was my passion and always been in technology.

Once I got to what was at that point, Cardenas Markets, which we still are, Cardenas Markets in California, Arizona, and Nevada, I was given the opportunity to keep going in the organization.

So I grew from just being an IT guy to being chief administrative officer.

I took over real estate, construction, maintenance, administration, loss prevention, and then ended up taking over operations and became chief operating officer.

Role has changed a little bit.

So I've given up real estate and I've given up loss prevention, but I've inherited manufacturing.

We do have a manufacturing plant that we produce baked goods in Texas.

And then I also own warehouse and logistics.

And I have to say, I have an amazing team that what makes my life easier, you know?

And then, you know, maybe I'll grow my hair back.

If you figure that out, let me know.

Let me know how many.

So what are all the banners that Heritage Group operates?

So we have four banners.

So we are here in Vegas.

Vegas.

We operate in Cardenas Vegas, California and Nevada, we operate under the Cardinal banner.

And in Arizona, we operate on the Los Altos banner.

In Chicago, we are Tony's.

And in Texas and one lonely store in Kansas, we are a ranch of supermarkets.

Oh, wow.

So I'm curious, as coo, how do you balance, like, the back office streamlined scale efficiency with, you know, everything that those.

Those different banners need?

Yeah.

And I think two.

Two parts, right.

To answer that question, I think every retailer, whether it's us.

Anybody else, hopefully, should be just thinking about the customer first, right?

At the end of the day, that's who pays your paycheck.

And every decision you do and you make, how does it affect that customer and what drives them back into your store?

Number two is every other function that I mentioned outside of my stores should be working to support the stores, right?

That is the bread and butter.

That's who then keeps the customer happy.

And I always say, hey, look, we need to make sure the team members are happy because they set the vibe in the store, if you will, and that gets everybody excited.

If you're coming into a store where everybody's like, oh, I don't.

What time do I get off?

I want to go home.

That's not exciting.

We want to keep it exciting and energetic and people to come in.

And our stores are, I call them grocerants, right?

We have a restaurant, it's full theater.

We are majority fresh, right?

We lead with produce.

That's the tip of our sphere.

When you walk into our stores, you'll see a fresh breakery.

You'll smell the bolillos.

You go into seeing fresh cakes, the pasta ria, you go into a full butcher and meat market where we break down the meat in our stores ourselves.

And then in most of the stores, especially in Cardenas, we go from the corn kernel all the way to masa to the tortilla and sometimes the chips the next day in the store.

Hungry.

In the store.

In the store.

So it's amazing.

It's exciting.

And then the kitchen, I started with that, but, you know, the kitchen is important.

So it's, you know, we go for in some.

Some things are from scratch, some things are not.

But it does not help me trying to lose my weight.

But Taco Tuesday is amazing.

$25 tacos.

Oh, wow.

All right.

$tos if you're in Texas.

Oh, my gosh.

All right, well, Prabhash, I'm curious how you track then, like you.

You oversee four, five, four banners.

You're looking at operational metrics across all of those of those banners.

What are some of the most important ones that you're tracking and how do they vary based on each of those banners or locations?

So I think the metrics tend to be somewhat standardized as you grow, what they need to be.

But I would say high level, obviously, sales items for basket, what the basket composition is average item price.

But you benchmark it to the banner, right?

You benchmark it to the geography.

So you can compare El rancho To Cardinals, to Tony's, because those are different concepts and how we go to market in those concepts are different.

But then you also got the within the store labor metrics that you would look at, you know, items per minute, self checkout utilization, you know, stocking rates, receiving how, receiving accuracy, we'll look at.

But I essentially, that gives you a high level dashboard to look at and say, how well are we operating?

Where are the opportunities?

What should I focus on from an operator perspective?

What do I need the merchandising help from?

On how we go to market?

What do we need to change?

So it gives you a really good sense and a pulse of what we need to do.

But from a metric perspective, we don't track banner level or geography specific metrics because those metrics tend to be overall, because you're usually benchmarking yourself against somebody.

Right, right.

So that helps kind of say, hey, and in stores, all stores, I think all retailers, we're very competitive.

Not only retailer against retailer, but just a banner against banner, store against store.

Yeah.

This morning, one of my favorite things to do every morning, every Monday morning is by 6 o', clock, I've committed, depending on where I am, 6 o', clock, East Coast Time, getting the, getting a report, getting an email out to the whole company.

So I sent an email summarizing a sales recap for the banner.

How did we perform overall at Heritage?

How do we do as Cardinals?

How do we do at Tony's?

And then double clicking in and saying which stores are spotlight?

Like, hey, how did you know?

Did one store do exceptionally well and they got called out.

And at first when I started doing this, I thought, I'm like, maybe nobody's reading it.

Then I started going into stores and they're like, oh my God, Prabhash, I want to be the store that's on that email that you sent out.

I want to beat out that person.

So that's exciting.

And I'm like, wow, this is good.

Number one, people are reading my email.

That was exciting.

Number two, they care and they want to compete.

So.

So those metrics, I think when you're standardized, it levels the playing field a little bit.

And we, you know, as grocers, I think those are some of the basic metrics.

Now I'm not even going into like warehouse metrics, you know, cases, shipping, all that stuff.

But from a grocery store perspective, I think those are some high level, you know, you want to control the controllables, if you will, and you want to measure the controllables.

If you Want to control them.

Yeah.

And as a store level executive, your point about the stores being incredibly competitive is dead on.

And so, yeah, I could see them getting very excited to see that email arrive in their inbox, especially if they're the ones that are called out.

Right.

All right, so you mentioned you have warehousing and logistics under your purview too.

How are you thinking about that?

You know, because there's, I mean, you're here at this conference, there's a lot of conversation about the evolution of grocery last mile delivery.

You know, how do you think about supporting your stores as well as, you know, creating the fulfillment network of the future for you.

Yeah.

So we are fortunate enough, we started the journey about three years ago to do CGO with the focus primarily on optimizing store level inventory.

So we want to make sure, hey, look, if you have shelf items sitting in shelves, how do you make sure that it's productive?

Because that's capital that you could, you know, that's cash actually, you can free up, put into use.

Right.

That's number one.

So then we take it upstream into the warehouse and said, okay, what is the optimal inventory level that we want to have inside the warehouse?

Inside, within the four walls and how do we optimize that?

We have done a tremendous job of, you know, what do we keep within the warehouse?

What do we give it to our wholesalers?

We partner with both UNFI and AWG as a wholesalers.

And then, you know, also.

Right.

Sizing what the store can handle.

We are, we have stores that are 60,000 square feet.

We have stores that are 30, maybe, no, 25, maybe a little bit less square feet.

So you can send the same level of inventory.

You can have this.

It doesn't sometimes justify the same number of frequency of delivery.

So you adjust and adapt to optimize kind of your delivery schedules.

We're actually changing our delivery schedule in Texas, like next week, for example.

We're trying to do that.

You're not just thinking about.

And again, this goes back to my comment early on.

If you're doing something, how are you focusing on the store?

So we thought about the store and said, hey, you know, Texas wasn't getting a delivery on Monday.

We sell out, you know, over the weekend.

It's busy weekend.

Right.

You're coming into Monday.

And if you don't have enough inventory, how does the store team member know fresh and fresh, what to order to last you through Monday to get a Monday night delivery?

So we are making that adjustment.

So those are kind of tweaks that we constantly keep making.

And we'll continue to adjust and evolve as we, you know, learn more.

So, Prabhash, I'm curious with the.

With an experience that is as important as your stores are for your customers, going in person and getting, you know, getting food, the grocerant that you're talking about, how are you looking at technology as a means to kind of create efficiencies there, but then still maintain this experience when you're going in store?

Yeah, I mean, I think technology is important layer today.

So it's enabling.

So two part one is how do you make the associates or team members life easier?

That's a big part of it.

That's the first one.

And then the second part is how do you make the product fresh?

Right.

So we partner with Up Shop.

We have Itasca for inventory.

We're doing fresh item management.

So it's not just to save, shrink and save money, but also you're getting a fresh product for the customer.

Right.

So whenever I've done things like that in my past and we're doing it right now, we actually, you do it for shrink savings and you end up going, wow, my sales had a lift.

Why is that?

Then you're like, oh, the customer noticed that the product was fresh.

Yeah.

So again, I know it's not rocket science, but it's like, wow, it's amazing.

You go into it in a cost savings approach and then you find out, you're like, wait, there is another benefit, but it's to our customers.

And you get, you know, you get, you know, your top side benefit and you get your bottom line benefit as well.

Right, right.

Are there any other infrastructural investments you guys are looking at as you look to start, you know, end 2025 and go into 2026?

So we are working on pricing and promotion right now.

Pricing is very important.

You know, the economy is getting challenged.

I think there was a presentation yesterday, I believe from Nielsen that goes into a lot of the headwinds that are there.

I mean, we're talking about a possible looming government shutdown tomorrow.

Tomorrow.

What does that mean to like.

So we support a lot of consumers who are strapped.

So if you're dependent on government benefits, that might not be there Wednesday morning.

Right.

So what does that mean?

So now you need to stretch your dollar.

How do you stretch your dollar?

What if those government workers don't get a paycheck the next day?

Right.

So everybody, and irrespective of that, people are really watching their spend.

So we want to make sure that we are priced correctly and also with the agility to kind of change.

Right.

And that's fusion comes into play as a result.

I mean that's what we were talking to them just five minutes ago before I walked into this interview, right.

To say, hey, how do I effect change today?

I do my competitive price checks on Wednesday.

I make sure that the KVI is the no lose proposition.

Items are priced competitively the next day, which is Thursday.

But what if I can affect that change Wednesday itself?

I already know what I need to change.

I don't have sometimes in some banners, scan coordinators working on the weekends.

So now I don't need to wait until.

So those are things that we are working on and also promoting.

Right?

Promoting the right items, killing the items that you might be promoting.

You think that has benefit but don't really have a benefit.

So how do you do that?

So pricing and promotion becomes really important for not only driving topside benefit but also protecting your profit.

Well, let's close with this question.

You've been with heritage grocers for a while.

Six years.

Six years.

You've seen a lot.

Yes.

So what do you think the future looks like for regional grocers?

It's a good question.

I mean, I think the regional grocers are definitely challenged in the sense that the larger retailers have a arsenal of weapons, whether it's capital, whether it's technology that's available to them.

So for us we look at, you know, we feel like we're fairly decent size at $3 billion.

But when you look at a Walmart, you know, you know the competitors, the Kroger's, Albertsons, relatively smaller.

Right.

So how do we go to market that becomes challenging pricing.

You look at your profits and you say, okay, where do you invest?

Do you invest in item price to make the customer happy?

Do you invest in technologies?

So I think that's where you need to become really smart and really strategic on where you make the investments.

I do think that there is gonna be some, this is more forward looking theory, if you will, that there'll be some consolidation within the mid tier retailers.

It has to happen.

That's probably the only way forward.

But I don't think that's a bad thing.

I think at the end of the day we're here to serve our communities and our customers.

That leverage and larger size will give the customers a better service, if you will and better item price because you now have better leverage.

So I don't think it's a bad thing.

But as long as whoever the acquirer of those banners, like, that's what we've done as heritage, when we've done our acquisitions, you need to keep what made that banner special still intact.

Right.

There's a reason why that customer decided to shop.

You versus somebody else.

So how do you keep that special thing still going?

And you got to be very sharp in how you invest.

That's my takeaway from what you just said.

Right.

You know, it's not an easy equation to decide all the time.

Well, Pripash, thank you so much for joining us.

Thank you to the Fusion Group for sponsoring our coverage here at Grocery Shop 2025.

And until next time, and be careful out there.