Retail Hero

20.October 2011

Cornering the Market

San Francisco Magazine, reprinted here as this article is no longer available on the internet.

Sam Mogannam’s tiny neighborhood grocery has become one of the most influential markets in the nation. The big guys will be watching as he opens his second Bi-Rite early next year. But don’t start thinking that this is the next Whole Foods. He still insists that the future of food is small.

It’s six o’clock on a Tuesday morning, and Sam Mogannam is running up 22nd Street with a friend. The hill is steep, but that doesn’t seem to bother him. At the moment, Mogannam, the 43-year-old owner of Bi-Rite Market—and one of the most imitated grocers in the nation—is more concerned with dry-farmed tomatoes.
“Dude, you’ve got to try them. We only have them for a few more weeks. They’re the perfect tomato,” he insists as the two men continue their run.
Mogannam has been running hills and doing pushups with the PacWest Athletics BootCamp twice a week for more than seven years, “with a few blue periods,” he admits. He has vowed to get in shape this fall, when he’ll be on the road promoting the store’s first cookbook, Eat Good Food, and getting ready to open a second location of his market early next year.

Once boot camp is dismissed, Mogannam heads to work, where he showers and swaps his tee for a Bi-Rite shirt—which resembles something a mechanic might have worn at a gas station in the 1950s, with a beacon logo sewn above the heart. He takes a swift tour of the aisles—snatching up a stray sugar packet, straightening the cookies next to the cash registers, adjusting a salumi label in the deli case. “That’s going,” he says, pointing to the olive bar. “Sales have stagnated for a couple of years now. We’re not sure why, but we’re putting in prepacked olives and giving the space to something else.”

Out on the loading dock, Mogannam rips open the first shipment of pink pearl apples from Devoto Gardens in Sebastopol. “Fucking gorgeous,” he says, admiring the opalescent skins and, as he bites into one, the hotpink flesh.

“This is my ritual after a weekend,” when business peaks, he says. “To see how the store has been maintained. It looks fantastic.”

“Hey Sammy, dinners start next week?” Simon Richard, Bi-Rite’s longtime produce buyer, asks. Richard is unpacking more dry-farmed tomatoes from Tomatero Farm.
“Yup, Monday. Did you sign up?” Mogannam runs his hands over the tomatoes. Every fall, he cooks harvest dinners for his staff and serves them at 18 Reasons, the food-based community center he cofounded in 2008.

Mogannam crosses against the light on 18th Street. He likes to support neighborhood businesses, so he heads to Fayes Video & Espresso Bar for his daily soy café au lait.

Anyone hoping to do well in the grocery business would be advised to take notice of Mogannam’s actions during his ten-minute morning tour of his store. The secrets are there in his hands-on grooming of the deli case, in his ditching the low-performing olive bar for more profitable stock and tasting the produce before it goes on the shelf, and in the dinner he cooks for his staff. That relentless editing and a razor-sharp focus on hospitality account for much of Bi-Rite’s extraordinary success—making it one of the most-watched markets in the country.

The store draws the kind of buzz usually reserved for the latest pop-up restaurant just announcing its location on Twitter. But Bi-Rite’s success is no fad. In the 14 years since Mogannam took over, sales have grown by $1 million every year. The market, along with Bi-Rite Creamery & Bakeshop, which he opened in 2006 with his wife, Anne Walker, and their partners, Kris Hoogerhyde and Calvin Tsay, are local institutions and guide book–touted destinations. Bi-Rite’s enduring popularity may surprise some observers, considering the market’s tiny size and its reputation for being an overcrowded, overpriced magnet for affluent bohemians. And then there’s the fact that there’s no parking lot, so customers sometimes return to their cars to find an envelope addressed to the SFMTA on the windshield.

Bi-Rite may sell groceries but Mogannam runs it like an anti-supermarket. Rather than grow his business, he constantly refines it: limiting his selections and turning down countless offers to expand his brand. In many of his decisions, he comes off as a reluctant entrepreneur.

When Mogannam was 15 years old, the market was owned by his father and uncle. The Mission district hadn’t yet been discovered by a generation of tattooed 25-year-olds happy to stand in line for a $3 latte. Just up the street, Mission Dolores Park was popular with unemployed men who spent their days drinking fortified wine, some of which they bought at Bi-Rite. Though he was not yet old enough to drink, in 1983 Mogannam asked his father if he could remerchandise the wine department. He got rid of the Night Train Express, MD 20/20, and Ripple, and on the advice of the store’s wine reps brought in their strongest sellers—Sebastiani, Robert Mondavi, and Beaulieu Vineyard. The drunks found someplace else to shop, and Bi-Rite’s wine sales soared.

It would prove to be the quintessential Mogannam decision: eliminate a popular item that makes you uneasy and take a risk on a product that you can feel better about. Everyone benefits—customers, vendors, and the market itself, what Mogannam has come to call the Bi-Rite triangle. “It was the beginning of understanding how decision making can really impact a business,” he recalls.

More recently, Mogannam made a similar choice when sales in his fish department started to stagnate. Mogannam attributed the slump to confusion about sustainable seafood. “Conscientious eaters avoid what they’re not sure of,” he says. “At least, that’s what we guessed, since our guest count wasn’t going down. So we decided to take some stands.”

At the time, 42 percent of Bi-Rite’s fish sales were from salmon, one third of which came from a leading sustainable source, Loch Duart in Scotland. But the producer couldn’t offer assurance that none of its fish escaped and bred with wild salmon, which wreaks havoc on the gene pool. “They weren’t green,” says Mogannam, so he stopped selling it. Tuna accounted for only a little more than 7 percent of the department’s sales, but because of environmental issues he stopped selling yellowfin and kept the more sustainable Pacific albacore.

Mogannam had an idea about which types of fish people would need, educated his staff to guide customers through the new offerings, and listened to customer feedback. He swapped out the farmed salmon for wild sockeye and king salmon. Bi-Rite’s fish is sourced through local suppliers—Monterey Fish Market, All Seas Wholesale, and Kenny Belov’s Two X Sea—and a single salmon fisherman operating out of Alaska. Sales for 2011 are up by 27 percent.

Mogannam’s ideas may appear counterintuitive, but he clearly knows what he’s doing. Sales have grown from $1.25 million in 1998 to $13.8 million in 2010. To put that figure in perspective, consider that over the course of the last year, Safeway averaged $500 in sales per square foot. Bi-Rite’s figure for that same time period hovers close to $4,000.

Yet Mogannam insists that he’s not in it for the money. “I like to feed people,” he says. “I like to have fun. I like to do things that make a difference. Money is secondary. It’s always been secondary, and I think that’s why we’ve been able to do so well.”

The specialty-foods business is a highly competitive and often secretive industry. Rivals can go to great lengths to guard their ideas and keep the competition out of their stores, yet Mogannam regularly welcomes other grocers to Bi-Rite.

“They announce themselves; they bring a team,” he says. “It’s a good thing if they try to get closer to our model.” As a result, Bi-Rite’s influence is felt nationwide.

Since Mogannam took over in 1997, more and more major grocery retailers have started adopting Bi-Rite–esque ways to bring a cozier, more personal feel to their operations. Safeway is now creating what it calls Lifestyle stores, with woodlike floors and softer lighting. And every Whole Foods Market employs a local forager whose job is to promote community businesses. Mogannam can’t claim credit for all of these innovations, but retailers across the country cite him as a key influence for the new direction the industry is taking.

Sabrina Meinhardt, general manager of Brooklyn’s Greene Grape Provisions, once cooked in Bi-Rite’s catering department. She says she tries to emulate the lushness of Bi-Rite’s produce displays and has called Mogannam for advice more than once; her sales have soared from “almost nothing” three years ago to $3.3 million last year. Krista Anderson, the prepared-foods director for the chain New Seasons Market in Oregon, brings her coworkers to Bi-Rite when she comes to town for the Winter Fancy Food Show. Cleetus Friedman, who opened his deli, City Provisions, in Chicago in 2010, was thrilled to have the opportunity to trail Mogannam for a day. “Sam’s passion speaks clearly in his shop, and his growth has been insane. I’m definitely watching what he’s doing.” Even Whole Foods has sent staff members in to see how Mogannam does it.

Because of his sway, Mogannam is the only retailer on the board of the National Association for the Specialty Food Trade (NASFT), which sponsors the Fancy Food Show. Ann Daw, NASFT’s president, says, “He is always on the forefront of trends; he’s always on the forefront of what is good food and how this industry plays a role in it.”

“Stores like ours are like an heirloom vegetable,” says Mogannam. “We’re a thing of the past, but there’s been a resurgence to bring small markets back, because they have meaning. They have a story; they have history.”

Supermarkets nationwide have good cause to pay attention, as customers grow more interested in buying better ingredients. According to the National Grocers Association’s 2011 Consumer Survey Report, which polled 1,718 shoppers between November 2010 and early January 2011, a whopping 91 percent said that one of the most important things a store could offer was best-quality fruits and vegetables, a five-point jump from 2009. Interestingly, not all of those who emphasized quality produce are high-income shoppers—fully 30 percent of them earn between $25,000 and $65,000 a year. As Chicago’s Friedman puts it, “People want to know where their food is coming from.”

Over the years, Mogannam has had countless opportunities to build on his success and expand his brand. There was an invitation to open a Bi-Rite Market in Florida and another to open one in Los Angeles. Gareth Kantner, who used to live in San Francisco, is the chef and owner of Café Stella in Los Angeles, and a passionate developer of L.A.’s Silver Lake neighborhood. He succeeded in bringing Chicago-based Intelligentsia Coffee to one of his properties, and several years ago he tried to get Mogannam to bring a Bi-Rite Market to another.

“Getting people out of their cars is really important to me,” says Kantner. “Bi-Rite allows people within a three-quarter-mile radius not to have to get into their cars for anything. I just thought it would be a good fit.” Mogannam had other ideas, but Kantner says the offer still stands.

There was also an offer to open a prepared-foods counter at the Ferry Building, but Mogannam said no.

“To me, Bi-Rite is not just a deli, not just a produce market, and not just an ice cream store. It’s all of it,” he says. “We wanted to be a full package, so we passed.”

In his first press release after he took over the market, Mogannam claimed that his goal was to become the Balducci’s of San Francisco, referring to the landmark New York City gourmet grocery. But when the Balducci family sold the business in 1999, after 23 years, and the new owners expanded, all of Mogannam’s instincts about what to avoid were confirmed.

“I adored Balducci’s, because it symbolized how beautiful retail could be. And that family did an incredible job. They grew a business and did great. Then the new owners started opening more stores, and once they expanded, they overextended, and then it was over. Now Balducci’s is nothing more than a name. That was really poignant to me. I don’t want to lose the integrity of what we’ve established, nor lose any sense of our ability to improve on what we already have.”

At 8:30 a.m., half an hour before the market opens, Mogannam blitzes through email at his desk, which is just off the market’s cramped prep kitchen. A few feet away, one cook mixes a batch of chipotle-lime mayo and another stuffs sausages.

Mogannam presses the phone to his ear to block out the din. “Do you think it’s OK?” he asks. “You’ve seen my signature, that big ‘O’? I can sign with that?” An online cookbook seller has asked him to sign 100 nameplates for his book. The “O” stands for Osama, his Arabic name, which means “lion,” an apt descriptor for his powerful personality. The Mogannams are Palestinian Catholics; Sam’s father, Ned, emigrated from Ramallah in 1961. Sam, born in 1968, is the oldest of four children and started sweeping floors at Bi-Rite when he was six. (He used to complain to his father that too many of the products they sold contained preservatives.)

But while Mogannam was working at the family store, the grocery industry was undergoing a change, and corner markets like Bi-Rite started to disappear.

“Grocery retail changed completely with the proliferation of cars and supermarkets,” he says. “People stopped walking and started driving to these massive acreages to buy food to put in their huge new refrigerators. There was a push for processed food that could last for weeks, cheap food and lots of it. We stopped knowing where our food came from. We relied on brands like Kraft and General Mills, instead of the curatorial abilities of the neighborhood vendor.”

Despite his success in revamping Bi-Rite’s wine department, Mogannam wasn’t interested in joining the family business. At the top of his class at Saint Ignatius, a Jesuit high school that he credits with encouraging his independent thinking, he wanted to be a lawyer or an accountant. On career day, when the school partnered seniors with people in their preferred professions, Mogannam hoped to visit a law firm, but got stuck with his third choice, a human resources manager for the Palace Hotel.

“She was amazing,” he recalls. “She let me spend time in the kitchen, the laundry, the front office. Hotels are fascinating. They’re like cities; they take care of people 24 hours a day.”

Mogannam came home hooked and told his father that he wanted to apply to Cornell University’s hotel school. But the tuition was out of reach, and Mogannam ended up at City College of San Francisco’s culinary arts program instead. It was there that he discovered that he wanted to be a chef.

After graduating, Mogannam worked in restaurants in Switzerland. Europe opened his eyes not only to the pleasures of local produce but also to the power of smaller food markets. In Basel, he became a regular at a store called Globus. The shop’s slogan, Savoir vivre (“Know how to live”), resonated with Mogannam’s own business ethos. He saw that shoppers there made better choices because they had fewer choices.

“Europeans don’t have the space to put down 100,000-square-foot stores with 10-acre parking lots,” he says. “They’re more sensible. They only need one cereal, not the 120 a typical supermarket carries. All that variety confuses people, making it difficult to make good decisions. They begin to question their instincts and fall back on the jingle that they heard or the coupon that they clipped. Or the placement on the shelf.”

The supermarket’s historic business model of stocking thousands of cheap products offered low margins but high volume. Eventually chains all but abdicated any curatorial role by essentially auctioning off shelf space to the highest bidder—for fees that are now a multibillion-dollar part of the grocery business. “Slotting fees artificially influence the consumer to buy food he shouldn’t be buying,” says Mogannam.

About the time that he came back home, his father and uncle retired from the market and rented out the store. Mogannam went to work as a cook at the Pasta Shop at Rockridge Market Hall in Oakland. “It was the best job of my life,” he says. The Pasta Shop offers samples of virtually every product it sells, a practice Mogannam brought with him to Bi-Rite. “I learned that you can sell anything as long as it tastes good,” he says. “We’ve all had that experience of buying beautiful peaches at Safeway only to realize later that they’re mealy and tasteless. If only you could have tasted them first, you wouldn’t have spent three bucks on something you’re not going to enjoy.”

But Mogannam wanted a restaurant. So in 1991, along with his brother Sal and his sister, Freida (their mother, Mariette, was in charge of desserts), he opened Rendezvous du Monde. The financial district restaurant won praise for its warm service and a Cal-Med menu that sounds a lot like the list at Bi-Rite’s takeout counter, from the sandwiches to the orecchiette with julienned chicken and capers. But in 1997, the landlord insisted that the restaurant pay $150,000 of the cost of an earthquake retrofit, and Mogannam pulled out.

Around the same time that Mogannam butted heads with his landlord, the man who had taken over Bi-Rite asked to be relieved of the lease. Mogannam told his father he would take over the store, but only if he could have complete autonomy. That year Mogannam launched an eight-month renovation, updating equipment and adding a kitchen. Initially, Mogannam says, “we were going to put in a dining table.”

The dining table never happened, and today Bi-Rite looks much like it did when it first reopened. But beneath the surface, the business has been rebuilt many times over.

Shortly after 11 a.m., Mogannam and his cfo, Calvin Tsay, wrap up a meeting with two construction experts to discuss the new store, a 3,000-square-foot space on Divisadero, not far from the restaurant Nopa, in one of the city’s burgeoning culinary centers.

“Gentlemen, can I get you some lunch to take back to the office?” Mogannam asks. After talking them into two turkey sandwiches, with five minutes before his next meeting, Mogannam zooms over to the deli, where a crowd has already begun to form, and grabs a number. Realizing that the line for the checkout is even longer, he steps behind a cash register to ring up the next customer.

“Are you going to see your wife later?” the sandwich cook asks as Mogannam bags groceries and hands a customer her change. “We have her BLT.”

“I’ll run it over. Calvin’s about to come over with two gentlemen; those sandwiches are for them.” Mogannam jaywalks back across 18th Street, BLT in hand.

“Hi sweetie!” Walker greets him in the room soon to be 18 Reasons’ new location. (Mogannam’s standing in the community helped him win a pro bono design for the interior from star restaurant architect Cass Calder Smith.) Walker is polishing an ice cream cart for that weekend’s Street Food Festival. “How was boot camp?” she asks.

“They went easy on us,” Mogannam says as he gives her the sandwich and a kiss.

“Oooh, yum,” Walker says, clutching the sandwich up to her heart like a love letter.

As she goes back to polishing, Mogannam hovers over 18 Reasons’ new sink, marking the marble counter with an X in pencil to show where the soap dispenser should go. “It’s a lot faster if I just do it, instead of telling five people how I want it. My friend’s coming tonight to drill a hole,” he says, somewhat defensively.

With a staff of 94 in his employ, there are surely others who could handle these details, but Mogannam likes to do things himself. Many who work with him describe their boss as something of a kindhearted control freak who only recently learned to take it easy. But some things he’s unwilling to delegate. “I’m the maintenance guy,” he admits later, as he whacks a crooked shelf straight, the joy shining in his face. “It’s a role I’ve always loved. I’ve relinquished some responsibilities, but it’s nice not to have to call a handyman. I’m a scrapper. I learned it from my father.”

At 1 p.m., Mogannam wolfs down a vegetarian banh mi as one of his meat and fish buyers, Chili Montes, heads up the kitchen managers’ meeting. Though it’s only August, Montes opens with the news that they got their first request for a Thanks­giving turkey. He adds that one of their fish suppliers, the marine conservationist Kenny Belov of Two X Sea (and of Fish restaurant in Sausalito), has asked Bi-Rite to participate in a fundraiser for a local wild salmon awareness day in October. “He says he’ll donate the salmon if we donate the proceeds, and he offered to set up a table out front,” says Montes. “Seems like a no-brainer.”

Mogannam takes a personal interest in his vendors, supporting their causes and, if necessary, bailing them out when times get tough. In 2009, Soul Food Farm in Vaca­ville, which supplies pastured eggs to the market, burned to the ground. Mogannam responded by hosting a fundraiser without asking owner Alexis Koefoed first. And in what is their standard operating procedure, he cuts Koefoed a check every few months. She pays him back in eggs. “Sometimes that pays the mortgage,” Koefoed says. “Sometimes it buys enough chicken feed for two weeks.”

This past spring, Koefoed’s friend Nancy Prebilich, of Gleason Ranch in Sonoma County, hit a far rockier patch. In less than 10 months, Prebilich had lost thousands of chickens to heat and excessive rain, her mother and father had both passed away, a distributor who owed her thousands had stopped doing business with her, and now a note on the ranch was about to come due. Koefoed suggested she call Mogannam.

“I placed the call,” Prebilich says. The next day, Mogannam and Montes cut her a check for $15,000, which she could pay back in meat over an indefinite period.

“I put my head in my hands and started crying,” Prebilich recounts, “and looked up and Sam was crying.”

Bi-Rite is not a charity. Mogannam makes a point of noting that he can’t bail out everyone who comes looking for help. He won’t accept products that don’t meet his standards, no matter how much he likes a producer or how dire the producer’s problems are. “If their peaches are breaking down too fast, we can’t buy them. If the crops aren’t good, we can’t always support them,” Simon Richard says.

But, Mogannam says, “in both Nancy’s and Alexis’s situations, they were going to shut down if we didn’t do something, and we need them.”

Elisabeth Prueitt, who owns the neighboring Tartine Bakery with her husband, Chad Robertson, says, “If we were in the Wild West, Sam would be the shopkeeper who would become the de facto mayor if they needed a replacement. I’m surprised, in fact, that he doesn’t own a saloon and a bank. He has a special quality of putting words into deeds.”

When a guest lecturer at City College told Mogannam to start new businesses only with OPM, Other People’s Money, Mogannam hated the idea. “I couldn’t fathom taking any sort of risk with somebody else’s money. So I didn’t.” Mogannam is the sole owner of the 18th Street market, but Tsay will be a co-owner of the Divisadero store.

The two met in 1997 while working for the hotel company Joie de Vivre—Tsay as the general manager of Gracie’s Restaurant and Mogannam for the short-lived Backflip cocktail lounge, just before he agreed to take over the market. (“I wanted to see if I could work for someone else,” Mogannam says. “I loved it, but it wasn’t for me.”) In 2003, with a Stanford MBA and time spent at the Cordon Bleu in Paris, Tsay was looking to start his own food venture and asked Mogannam if he could launch a gift-basket service for Bi-Rite.

“The gift-basket thing never really took off,” Mogannam says, “but we had fun working together.” Mogannam invited Tsay to come on board, and Tsay ended up rebuilding the entire company.

“The big thing we did was to separate Bi-Rite out into two organizations,” Tsay says. “I had worked at Macy’s, which has a similar structure. One organization focuses on buying and one on running the floor. We set it up so that both parts of the operation would work in harmony with each other.”

At 5 p.m., a platter of Burgundy apples awaits Mogannam for his last meeting, a three-hour doozy with the board of 18 Reasons. Rosie Branson Gill, the program director, has laid out the snacks. Mogannam lingers in the doorway, as Tsay munches on his own stash of almonds and Naomi Starkman, of the food politics resource Civil Eats, chats with Rachel Pringle, of the Green Schoolyard Alliance. The board is scheduled to interview a potential new member, as part of a push toward more food education for kids.

Though its mission may change, the organization’s heart seems to be in its events, at which attendees gather around a communal table, often for dinner. Mogannam says the scene most resembles what he had in mind when he first took over the store.

When the new Bi-Rite Market opens sometime early next year, it will include a second branch of the creamery inside the store. Mogannam and Tsay hope to build a 1,000-square-foot greenhouse on the roof, where they intend to grow basil and other herbs year-round. At the moment, there are no plans for a third branch of Bi-Rite. Mogannam is still nervous about a life spent outside the first.

“When I was at my restaurant, I felt like I watched my 20s go by with the traffic on Bush Street. I felt confined. Here, it’s the opposite. I vowed I wasn’t going to do what my dad did, and spend 26 years running this store. But we’re in our 14th year, and I’m looking forward to the next 14. I’m going to be here for 28 years,” he says, “probably more. We want to prove that a small store can make a difference. That it’s possible to run a food retail operation without relying on what the supermarkets say are all the rules.”