Quick Stats

Quick Stats

    You are here

    COVER STORY: Grocery Business Headlines: The Retail Newsmakers 2007

    PG's best bets for this year's movers and shakers.

    In some years, the big news in the grocery business springs from the executive suite, from inside the war rooms where the key decision-makers make things happen at the big chains. There will be some of that this year, too, but in 2007 grocery business headlines are just as likely to reflect what's happening in the trenches, at the store level, as grocers large and small turn their strategies into action where marketing and merchandising meet the shopper.

    As the year unfolds, we'll see the following operators succeed -- or not -- at this challenge; either way, it's going to be an exciting read. Among the newsworthy retail trends:

    --Abundance and diversity of formats diverging from the traditional. And within these formats, further custom-tailoring based on intelligence gathered on the profiles, trip behavior, and product needs of local shoppers.

    --An uptick in retail marketing sophistication, based on insights again culled from shoppers.

    --Frantic remodeling as many larger operators push on with existing programs they hope will help them maintain momentum, dig them out of troughs, or spin recent acquisitions into gold.

    --A climate still right for mergers, consolidations, and shifting ownership of stores in many markets.

    Ahold USA

    Change is definitely in the wind for the American arm of the Amsterdam-based retail conglomerate. Plagued by sliding sales at most of its stateside grocery banners, and still dealing with the fallout from the 2003 accounting scandal at its U.S. Foodservice subsidiary, Ahold additionally had to endure the persistent urgings of activist shareholders to unload all of its American businesses.

    After an exhaustive companywide retail review, Ahold finally said in November that it would jettison U.S. Foodservice, as well as the remainder of its faltering Tops Markets chain. (The banner had already decided to sell its 46 stores in the highly competitive northeast Ohio market in July.)

    For now, however, the other American businesses remain firmly within the fold, despite some shareholder grumbling.

    Complicating future prospects is the fact that in early January, Ahold lost its arguably most accomplished and admired U.S. executive, Tony Schiano, who announced his retirement from the top post at Giant-Carlisle/Tops in March.

    However, the news from America -- and Giant-Carlisle in particular -- isn't all dire: The banner's October acquisition of 13 Clemens Markets shows that growth is still possible, and brand-new president and c.e.o. Carl Schlicker has the opportunity to build on that momentum.

    --Bridget Goldschmidt and Meg Major

    Albertsons, LLC

    Cerberus-owned Albertsons, LLC's divestment of the 132-store Northern California Division to Save Mart likely signaled the end of the former's crash weight-loss program. And while the Boise, Idaho-based retailer continues to shed small amounts of excess poundage here and there, it's getting close to what it sees as its fighting weight.

    This past summer, Albertsons also shut down its online shopping service companywide, which had covered the San Francisco Bay area, Sacramento, Phoenix, and the Dallas-Fort Worth Metroplex.

    As for the retailer's remaining markets, c.e.o. Bob Miller says he has no plans to sell any more stores -- his focus is on further developing the business.

    The leaner, meaner Albertsons is already starting to see results, according to Miller, who told Progressive Grocer in November, "We are taking the steps needed to get the chain where it needs to be."

    --Joseph Tarnowski

    BJ's Wholesale Club, Inc.

    Natick, Mass.-based BJ's Wholesale Club has plainly had problems keeping up with competitors such as Wal-Mart and CVS -- and the strain is showing.

    Lackluster sales led to the departure of president and c.e.o. Mike Wedge in November, succeeded in the top spot by chairman Herb Zarkin while the company mounts a search for a permanent replacement.

    Early last month the first tangible results of the new order were unveiled: BJ's said it would shut its two ProFood Restaurant Supply locations, along with all of its in-store pharmacies, as part of an ambitious restructuring program, more details of which are due next month.

    The company's change in direction was underscored by the return of several executives from its more profitable past.

    The question this year is whether BJ's can sufficiently beef up its sales -- and what else the retailer may have to sacrifice to do it.

    --B.G.

    Costco Wholesale Corp.

    Costco's something-for-everyone assortment has helped it thrive during good times and bad over the past year -- and its prowess with food puts it in good stead to meet growth and performance expectations in 2007.

    Some of Costco's greatest growth has come from fresh food: The category has seen double-digit growth throughout 2006 in its clubs. An enviable sampling strategy helps support this success.

    Another factor in the retailer's growth was its strong performance in private label offerings, which now comprise approximately 15 percent to 16 percent of sales.

    This success has allowed Costco to expand its global operations by "27 net new locations" during fiscal 2006.

    Now the wholesale club plans even more aggressive growth for fiscal 2007, for which it forecasts 37 new units.

    --J.T.

    Food Lion

    The market renewal project at Delhaize Group's star U.S. performer, Food Lion, will continue in 2007, heading next for Norfolk, Va. and Myrtle Beach, S.C. These projects should help Salisbury, N.C.-based Food Lion energize market share and continue growing comps.

    Food Lion will also continue to convert traditional stores to its newer formats: modern, service-centric Bloom, and low-cost, more limited-assortment Bottom Dollar Food.

    Meanwhile the retailer will again make news on the environmental front: In a revolutionary partnership with the Environmental Protection Agency and Hill Phoenix, dubbed GreenChill, Food Lion is promoting the use of retail food refrigeration technologies that reduce emissions of ozone-depleting and greenhouse gas refrigerants.

    Look for Food Lion to continue to grow, in absolute terms such as sales and market share, as a more important factor in its markets, as well as in less tangible, but no less important, ways as an industry thought leader.

    --Jenny McTaggart

    Great Atlantic & Pacific Tea Co.

    Last month Montvale, N.J.-based A&P reached an important milestone on the road back to financial health: "A return to net profitability" in the third quarter of 2006 has placed the company on track to achieve sustainable profitability for fiscal 2007.

    However, the grocer is a long way from being able to rest on its hard-won gains. President and c.e.o. Eric Claus promised a "new and even more exciting fresh prototype" in the first quarter of 2007, noting that A&P would maintain a "constant state of evolution" in developing its fresh concept.

    This year, continued rollouts of fresh, gourmet, and discount formats, plus ongoing cost-cutting, should continue to generate press for A&P. Industry observers will also be waiting to see whether the company will cease its coyness about possible consolidation opportunities in its core Northeast markets.

    --B.G.

    H.E. Butt Grocery Co.

    Even amid an elite class of successful regional retailers, H.E. Butt Grocery Co. will stand out this year, especially for its command of the personal touch in service, merchandising, and marketing.

    In 2007 the San Antonio, Texas-based grocer will roll out an unusually personal ad campaign that will tie it all together -- without the spin of a high-priced agency.

    Perhaps taking a cue from reality television, HEB is running TV commercials that let its shoppers speak for themselves about "My HEB." The chain is urging customers from across Texas to submit their own "My HEB" ads to run on the grocer's Web site.

    On the merchandising front, HEB has taken its ethnic marketing strategy a step further with the launch of Mi Tienda, a new concept tailored exclusively for the many Latino shoppers in the state.

    HEB's alternative formats -- namely HEB Plus! and the upscale Central Market -- go head to head with two of its most formidable competitors, Wal-Mart and Whole Foods. Expect the competition to continue, especially as Whole Foods is planning to open a whopping 80,000-square-foot unit in Dallas.

    --J.M.

    Kroger Co.

    Despite the intensely competitive climate that continues to bear down on profit and market share growth, you've got to hand it to the Kroger Co. Its laser-focused plan of keeping prices low and shopping appeal high has rendered 12 consecutive quarters of positive same-store sales, with more of the same likely in 2007.

    Chairman and c.e.o. David Dillon undertook a secret shopping expedition over the holidays -- visiting Krogers and rival stores alike -- that afforded him a look at how his stores stack up in terms of cleanliness, pricing, employee attitude, and customer impressions.

    His conclusion: tactics like faster checkouts, a greater number of natural foods, and more attractive stores are paying off.

    Expect Cincinnati-based Kroger to expand its Marketplace format, which builds on the traditional grocery concept, with more emphasis on specialty departments and general merchandise, as well as other customer-focused store-level solutions.



    --M.M.

    Nash Finch Co.

    With the reshuffling of its executive deck nearly complete, and a new strategy in place to yield better value in the marketplace, Minneapolis-based Nash Finch Co. has its sights set on boosting business with independents.

    Nash Finch's new chief executive, Alec Covington, says the company doesn't plan to dramatically expand its geographic footprint, so it seems clear that securing new business with independents and small regional chains in its existing Twin Cities geographical region will be job No. 1 in the near future.

    Meanwhile look for Nash Finch to begin converting some of its 70 corporate stores operating under the existing Econofoods and Sun Mart Foods banners into niche formats, one for budget-conscious shoppers and another for upscale urban dwellers. Once those formats are up and running, Nash Finch might have another important carrot to attract retail customers.

    --M.M.

    Pathmark Stores, Inc.

    Carteret, N.J.-based Pathmark has not only managed to steadily improve its financial performance by streamlining expenses and revamping its merchandising, it's also in the process of effecting some exciting new changes.

    A new prototype store that will "look and feel much different" from current standard units is on the way, with certain prototype features slated to be incorporated into existing stores starting this year.

    The prototype itself is scheduled to debut late in 2007, but exactly what it will consist of, no one's divulging -- yet.

    Also, a "Healthy Steps" bilingual dietitian program, rolled out at the end of last year, promises even greater involvement with the Hispanic community.

    Now, if the company could just make a definitive statement on its chances of merging with market competitor A&P or any other supermarket operator...

    --B.G.

    Publix Super Markets, Inc.

    There's no sign of a slowdown for Lakeland, Fla.-based Publix, which will stick to what it does best: providing stellar customer service, and successfully executing corporate initiatives at store level.

    The grocer will later this year launch the Publix GreenWise Market, a standalone, organic/all-natural concept originally slated to debut in 2006. "We have a team invested in this project, and they've been taking the time to do it right," explains director of media and community relations Maria Brous.

    The first store, a ground-up prototype in Palm Beach Gardens, Fla.,"will have a different look, and we'll be able to offer services and products that we haven't been able to put in other stores," says Brous. "There will be a heavy concentration on prepared foods, too."

    Publix will also continue to roll out in-store health clinics licensed by Little Clinic, confirms Brous. "By the end of 2007, we'll have more than 20 clinics in Florida stores."

    --J.M.

    Safeway, Inc.

    A tour of Safeway's new Lifestyle store in Boulder, Colo. would probably persuade any skeptic just how effective the Pleasanton, Calif.-based chain's new format can actually be in making the grocery shopping experience exciting again.

    But while the Lifestyle format is a great merchandising platform, a merchandising microstrategy at each store might prove the key to longer-term success. Safeway aims to provide products uniquely suited to each consumer set it serves, and will pursue a new category management strategy using club card data and other intelligence as a guide to what its most loyal shoppers want.

    Still, it'll take nerve to extend this strategy chainwide.

    Already, 40 percent of its 1,700-plus stores in North America now follow the Lifestyle format, and the retailer will spend $1.7 billion to bring its total Lifestyle store count by year's end to over 1,000.

    --J.T.

    Save Mart Supermarkets

    Modesto, Calif.-based Save Mart Supermarkets has found the primary resources it will need to grow in 2007: namely Albertsons, LLC's Northern California Division.

    "We had the ability -- in terms of money, technology, and people -- to grow faster than we were able to," Save Mart c.e.o. and chairman Bob Piccinini told Progressive Grocer after the grocer announced the deal this past November. "New stores are hard to come by in this market."

    The Albertsons stores purchase will double the size of Save Mart to 256 units and 20,000 associates, making it a more formidable regional player. The retailer expects to begin operating the new stores as soon as the end of this month. Beyond obvious likely improvements such as a greater emphasis on fresh, 2007 will be worth watching to see how else Save Mart attempts to make the best use of these newly acquired raw assets.

    --J.T.

    Stew Leonard's

    For some retailers, a new store opening is news, but nothing earth-shattering. For Norwalk, Conn.-based Stew Leonard's, though, the debut of a new location is just that.

    Since its founding in 1969, the company has opened just three stores: the flagship, in Norwalk; a Danbury, Conn. location that bowed over 20 years later; and a Yonkers, N.Y. outlet in 1999. Given that history, the April arrival of the 113,000-square-foot Newington, Conn. location is a big deal indeed.

    Add to that the fact that this store will be the first Stew Leonard's to offer a food court, and it's clear that the independent grocer, known for its determination to make shopping fun, is branching out into new directions.

    The Newington location can't fail to raise the regional player's esteemed profile even higher, perhaps even accelerating its famously deliberate expansion strategy. Pending locations in Orange, Conn. and East Farmingdale, N.Y. could also give rise to headlines in the months ahead.

    --B.G.

    Supervalu, Inc.

    No contest: Supervalu scored the biggest headlines in 2006 for ponying up a cool $12.4 billion -- including $6.1 billion in Albertsons debt -- and morphing from wholesaler to retailer. As a result, it emerged overnight as the third-largest U.S. grocery chain, after Kroger and Safeway.

    The jury's still out on Supervalu's long-term prospects for retaining its robust base of independent retail customers -- many of which resent competing directly with their primary supplier.

    Still, it's clear that the Minneapolis-based retail powerhouse is gaining traction on many important fronts, including double-digit earnings per share growth (when adjusted for charges), improved same-store sales, and progress with its remodeling program.

    A key component of Supervalu's competitive strategy is the ongoing rollout of its "Premium Fresh & Healthy" store-remodeling campaign, which was launched in the fall in many of its newly acquired banners, and emphasizes specialty, natural, and organic foods; expanded deli, produce, meat, and HBC departments; and in-store health clinics.

    --M.M.

    Tesco

    The retailer responsible for one of the biggest news stories of 2006 has since received light news coverage at best, due to the cloak of secrecy it continues to crouch behind.

    What's going on behind the scenes? It's said that Tesco, the London-based multiformat global giant, will open about 150 units in Southern California, Las Vegas, and Phoenix, employing a convenience-oriented format that incorporates elements of the successful Tesco Express concept for an easy-to-shop, small-format store offering high-ticket, high-margin items.

    Since it would need a burst of small units to justify its investments in centralized distribution, Tesco is likely to turn the lights on at as many as 20 stores in the first week, 50 stores in a month, and perhaps 100 stores by the end of the year. And don't expect the rollout pace to slow any time soon.

    --J.T.

    Wal-Mart Stores, Inc.

    Wal-Mart might find this year one of its most challenging. It began 2007 with a national ad campaign intended to salvage its reputation by portraying itself as a good employer and positive community presence.

    At the same time, analysts were questioning the so-called "indecisiveness" of the company's top brass, and as a result they predicted modest growth at best for Wal-Mart in 2007.

    If January is any indicator of what's to come, expect the revolving door to keep moving. Most recently, Wal-Mart said it would reorganize its U.S. marketing and merchandising engines, moving retailing veteran John Fleming, who had been the company's chief marketing officer for almost two years, to chief merchandising officer, and replacing him with s.v.p. of marketing Stephen Quinn.

    Despite its obvious defensive challenges, however, expect Wal-Mart to continue to play offense as aggressively as ever. The retailer will be implementing its new segmentation strategy to position individual store merchandising for one of six specific demographic groups.

    --J.M.

    Winn-Dixie Stores, Inc.

    This will certainly be a year for watching Winn-Dixie, as the retailer, fresh out of bankruptcy, tries to regain market share. It's one thing to start to get the numbers right, and another to get a still-hefty store base up to snuff.

    The Jacksonville, Fla.-based retailer will be supported by a $725 million exit-financing facility as it seeks to make significant investments in its current store base to develop new locations and take other actions to compete effectively in its markets.

    One area of emphasis will be Hispanic marketing. The retailer recently added 55 stores to its "Hispanic Neighborhood Merchandising" program.

    Even given its best efforts, however, Winn-Dixie will have to work overtime to make a dent in its denser markets.

    --J.M.

    Related Content

    Related Content