Behind the checkout counter: The Fresh Market's slip in same-store sales won't spoil the grocer's expansion plans.

• Author: Dunn, Erin
• Position: FEATURE - Company overview

Craig Carlock doesn't mean to come across as a Pollyanna. The 46-year-old CEO of The Fresh Market Inc. knows there are challenges facing the Greensboro-based specialty grocer. The company's stock took a beating after same-store sales slowed during the holidays. Its westward march also faces perils: introducing a new brand to new customers, finding the best locations, establishing distribution networks. Still, it must be hard for him not to take the long view.

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When he joined Fresh Market as a marketing executive in 1999, it had 25 stores in six states. Not bad for a family-owned business that opened its first location in the early 1980s with no idea if it would last a week. But the company has been transformed during his 14 years there--and not just from private to public. It has 130 stores in 25 states and 10,000 employees. Net sales topped $1.3 billion last year. Carlock believes in Fresh Market's brand. He preaches customer service and thinks it--combined with top-shelf, fresh products--will make the grocer a national name. "Our job is to deliver a great store experience, provide great food, and then customers will come. The stock will take care of itself. Day in and day out, that's what motivates us."

The notoriously competitive grocery-store industry is navigating a sea change. Traditional chains such as Matthews-based Harris Teeter Supermarkets Inc. and Salisbury-based Food Lion Inc. face more competition as the sector becomes increasingly fragmented. On one end, specialty grocers such as Fresh Market and Austin, Texas-based Whole Foods Market Inc. attract higher-income customers and those more discerning about the origin of their food. On the other, dollar stores and Bentonville, Ark.-based Wal-Mart Stores Inc. offer low prices to bargain hunters, many struggling in the aftermath of a recession. "I think the whole makeup of what a supermarket is and what the shopping experience is will change," says Phil Lem pert, an industry expert who contributes food-trend analysis to NBC's Today Shaw and edits the Supermarket-Guru.com website. "The traditional store needs to wake up."

Natural and organic products account for between 9% and 13% of the country's $584 billion annual grocery-store sales. That slice narrows further if you add convenience, drug and dollar stores to the mix. But though U.S. food sales rose 4% in 2011, those of natural products increased 10%, and organic offerings gained 9%, according to Natural Foods Merchandiser, a trade publication. That tailwind is pushing Fresh Market forward. This year, it plans to open a record 19 to 22 stores, including four in Houston--its first foray into Texas. It's expected to add several more in California after making its debut there last year. "We want to grow on the East Coast and grow on the West Coast. If we have the ability to look at potential sites east and west, then we can continue to be selective and pick the best of the best. For us, it's a matter of widening the funnel so we can see more and more [real-estate] deals and continue to be selective about the ones we accept," Carlock says. "We want to be a national retailer, so the sooner we start poking and looking around the West Coast, the better off we'll be."

The store on Lawndale Drive opened March 5, 1982. Its owners, Ray and Beverly Berry, were from California, but he had been vice president of stores for Dallas-based Southland Corp., running about 4,000 7-Elevens before leaving after a disagreement with management two years earlier. They set their...