As the Supermarket World Turns

The harsh winter weather that’s given way to a much-needed thaw in many parts of the country sets the stage for the churning upheaval simmering in every pocket of the retail food terrain.

The changes that have taken place in recent years might well seem like a dress rehearsal for those that promise to follow in the next 24 months, courtesy of a riveting series of developments that are bound to have lasting implications for the supermarket supply chain as we know it. A few of the most significant factors include:

• The reawakening of Walmart, whose move to raise the hourly rate for 40 percent of its 1.3 million U.S. workforce is just one of several related initiatives on which the chain is embarking to recapture its alpha-retailer mojo.
• After abandoning its profit-sucking Canadian division, Target has unleashed a string of maneuvers to polish its bull’s eye by focusing on its digital strategy, the linchpin of which is free shipping for online orders of $25 or more.
• A growing sense of confusion and restlessness in the ranks of several banner-group independents struggling to pledge long-term allegiance to existing and/or prospective wholesale distributors, the latter of which has also seen dramatic disruption in the past 12 months.
• Initial micromarket deals that can potentially splinter to more impactful macromarket prominence, such as Sacramento, Calif.-based Raley’s recent GM/HBW warehouse deal with Unified Grocers.
• The final chapter – or yet another new installment? – in the continuing chronicles of A&P, whose fate has hung in the balance for the duration and which has all but vanished from the headlines in the past year.

But the biggest plotlines dominating trade talk of late pertain to Haggen, which is plowing at warp speed through the conversions of 146 West Coast stores acquired from the Albertsons-Safeway merger. Rebranding stores while breathing life into an unfamiliar grocery banner in highly competitive new markets is no easy task, but Haggen’s new leaders are set on their ambitious, if not unprecedented, western U.S. expansion. Time shall tell.

And speaking of thickening plots, the new Albertsons-Safeway era has officially dawned, and with it, a cavalcade of scrutiny regarding what the future holds for the neophyte supermarket giant. While the new company’s leaders have high hopes for an improved, invigorated shopping experience in tandem with an equally audacious plan to preserve the chains’ combined footprints, Dr. Kurt Jetta, CEO and founder of Shelton, Conn.-based TABS Group Inc., is skeptical about the long-range outlook in light of his assessment that “the two organizations couldn’t be more different.”

Among the most significant disparities between the two organizations is their respective corporate procurement strategies. “While Safeway has long adhered to a centralized merchandising function, Albertsons has done the opposite, with a decentralized scheme for as long as anyone can remember,” according to Jetta. And though the combined company is poised to follow Albertsons’ decentralized model to facilitate local appeal, which Jetta says “sounds great on paper,” the reality, he adds, “promises to be far more complex.

“‘Delighting customers’ on a local basis hasn’t always been Safeway’s strong suit,” he notes, pointing to “spectacular flameouts with Dominick’s in Chicago and Genuardi’s in Philadelphia.” Albertsons, meanwhile, has had more local divisional success, “but has also had its share of issues with its decentralized structure,” remarks Jetta, particularly in relation to “a hodgepodge of divisional computer systems and managerial approaches that haven’t always gelled.”

On the other hand, Jetta continues, Safeway “has been held up as a model of centralization, at least from the standpoint of merchandising execution,” which he says has enabled it to “reap major cost savings and lower manufacturer costs for reinvestment to specific marketing programs. However, Safeway couldn’t always convert those investments into additional revenue and, like Albertsons, has been dogged by challenging same-store sales.”

That said, Jetta believes the fused company’s greatest promise is tied to Safeway’s highest concentration of stores along “the booming stretch between Seattle and San Francisco, and further down to L.A., San Diego and Phoenix.” Regarding “Albertsons’ sprawling family of store banners,” Jetta identifies Chicago-based Jewel, Philly’s Acme Markets and Boston’s Shaw’s as the most productive thus far.

Based on his observations, Jetta is convinced that long-term viability for Albertsons-Safeway will require “dramatic, even radical changes,” to amplify efficiencies.

Meanwhile, although it’s too soon to tell what the reconfigured landscape will ultimately look like when turbulence settles , the world of food retailing has never been more fascinating to watch.