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    2002 PG RETAILER OF THE YEAR: Giant Eagle

    True to its Steel City ethic, the Pittsburgh market leader blends core values, strong family bonds, and plain old hard work to distinguish itself as a key player in an ultra-competitive market.

    The view from the top hasn't clouded Pittsburgh-based Giant Eagle's perception of retailing reality in its quest to perpetually reinvent its brand. Building that brand, and in turn its business, has been the result of a combination of Old World persistence, patience, and attention to customers and details.

    Its talons wrapped firmly around its Western Pennsylvania home turf, Giant Eagle spread its wings over Northeastern Ohio in the mid-1990s and quickly established itself as the dominant supermarket player there as well. For providing a blueprint not just for survival, but for market leadership, in the age of the Wal-Mart supercenter, Giant Eagle is Progressive Grocer's overwhelming choice for 2002 Retailer of the Year.

    "It's been interesting to see Giant Eagle reestablish the combination food and drug format in Cleveland, because when they bought Riser Foods, it had only recently removed pharmacies from its Cleveland Stop-n-Shop stores," says Chuck Cerankosky, a Cleveland-based analyst who follows the supermarket industry for McDonald Investments.

    Through a series of acquisitions commencing in 1981 with the Youngstown-based, retailer/wholesaler Tamarkin Co. and continuing through its 1997 purchase of Riser, the chain also acquired several strong mid-size independents and emerged as the share leader in the Youngstown/Warren, Akron/Canton, and Cleveland marketing areas.

    The company's commitment to double sales has led it into uncharted territories like Columbus and Toledo two years ago, and northern Maryland earlier this year. "We've been very focused on remaining independent and pursuing growth, whether from organic growth, fill-in opportunities, or existing sites," says e.v.p. of retail development John Lucot. "We have this appetite to grow."

    As the industry consolidates, "I like the fact that they have been acquisitive as part of a larger strategy," says Cerankosky, noting the chain's strong distribution arm, significant private label program, and compelling prototype.

    Retail watchers say that while most supermarket chains do well at either a price strategy or providing a unique shopping experience, Giant Eagle succeeds at doing both.

    "Giant Eagle will challenge Wegmans, H-E-B, and Publix for being among the finest and fastest growing retailers in the U.S.," says Burt P. Flickinger III, managing director of Strategic Resources Group in New York City. "Giant Eagle is the perfect balance of professional management and family ownership," says Flickinger, who predicts that the chain "will track with Wegmans in a parallel path to become the two dominant, privately held, multi-regional retailers east of the Mississippi River."

    Moving into Toledo, Columbus, and Maryland, notes Flickinger, "they very quickly and successfully siphoned off sales and share from local competitors."

    Giant Eagle also maintains an edge with what Flickinger calls "the ideal competitive combination of a retail chain and corporate wholesaler that offers the great procurement power and the additional size, scale, and distribution efficiencies of a voluntary wholesaler. And it's that combination that makes it very difficult for others to compete against."

    The retail experts who pay at checkout seem to be in agreement. Christy Tippet, a resident of the high-rent Treesdale community in the northern Pittsburgh suburbs, says, "Although I've visited several new stores which have recently opened up in our area, they just don't measure up, and I always go right back to my Giant Eagle."

    A family affair

    With sales topping $4.4 billion, the chain is one of the nation's largest privately owned food retailers and distributors. It employs some 35,000 people in 124 corporate and 89 independently owned stores that fly the Giant Eagle banner and is ranked No. 19 on the Progressive Grocer Super 50 and No. 29 on Forbes' Top 30 private corporations. Its stores are a diverse lot, ranging in size from 12,000 to 120,000 square feet, though company spokesman Rob Borella says that, these days, "we have found the sweet spot to be in the 60,000-to-70,000-square-foot range."

    Giant Eagle's history dates back to early 1900s when three families—the Goldsteins, Porters, and Chaits—founded Eagle Grocery, a chain that eventually swelled to 125 small grocery stores. They sold to Kroger in 1928 and three years later joined forces with the Moravitz and Weizenbaum families, owners of the OK Grocery chain, to form Giant Eagle.

    As banners like Kroger and A&P exited the Pittsburgh market, Giant Eagle took wing as a powerful local brand and industry leader, thanks largely to the vision of the chain's self-effacing chairman and c.e.o David Shapira, grandson of founder Joe Goldstein. Along with his daughter, s.v.p. of marketing Laura Karet, and a seasoned team of Giant Eagle "lifers," Shapira carries on the company's dual mission to improve the shopping experience for its customers and the work environment for employees.

    Through four decades of measured growth, the chain has employed just four advertising campaigns, remarkable in an industry littered with the skeletons of abandoned positioning strategies. Moreover, the company has continued to thrive with features such as video and supervised child activity centers since forsaken by other chains. And Giant Eagle's deft utilization of the database fed by its eight-year-old Advantage loyalty card is a clear illustration of the way it gains an upper hand over competitors.

    "It's imperative for us to continue finding ways to differentiate ourselves from the competition," says Karet. "The key is being able to find ways that make people want to make a left turn into our parking lot instead of a right turn into someone else's."

    Senior v.p. of merchandising John Tedesco concurs. "We can differentiate ourselves all we want and it can have absolutely no meaning. But when it's done with a true understanding of what's important to customers, we are able get out in front of the trends and start helping customers determine what it is they really want."

    When she joined her family's company in 2000, Karet wasted no time putting her classical brand-building skills to work. "I knew coming in that we were blessed with this tremendously powerful brand that had been really well attended to since its inception," says Karet, a Procter & Gamble-trained brand manager who left her job as a director of marketing at Sara Lee to join Giant Eagle. "The main opportunities revolved around taking what was already so powerful and just going with it." Karet concentrated heavily on "getting the right tools in the toolbox," she says.

    Enter Giant Eagle's current "Make every day taste better" advertising campaign, which Karet says embodies the total focus for the chain's marketing efforts since its launch in August of 2001. Giant Eagle stores had always provided the backdrops for TV spots, but the new campaign focuses on the home experience after the shopping trip. In one spot, a mom unpacks her groceries and produces something special for everyone in the household—except her preschool-age son, who is forlorn. Seconds later, the clever mom turns the Giant Eagle grocery bag into a "superhero" vest.

    "We think about the role we play in our customers' lives—not just as the place they buy their milk, but where they might host their children's birthday party," says Karet.

    She credits Giant Eagle's team of outside analysts, recruited from the region's leading universities, with enabling the chain to home in on shoppers on an individual store basis, "which may not be the case with the store three miles down the road."

    Working at luck

    Giant Eagle has successfully battled a variety of formidable formats such as the omnipresent Wal-Mart and still-emerging players like Whole Foods, Costco, and Festival. That hasn't daunted Giant Eagle or David Shapira, who is as committed to being at the forefront of change as he is to the old adage that competition makes you better.

    "We continually seek to improve our products, services, and business practices," says Shapira, whose deep roots in the community are reinforced by service on the boards of 14 corporate or community organizations. Among other posts, he is vice chairman of Carnegie Mellon University's board of trustees; chairman of both the Pittsburgh Regional Alliance and the Pittsburgh Symphony boards; a director of the United Jewish Federation; and a member of the boards of both The Mellon Bank NA and Mellon Financial Corp.

    Shapira downplays his role in shaping the business. "Whatever it is, we've been lucky.

    "We place a very strong emphasis on technology and we have invested heavily into it to help us gain an edge with the single biggest opportunity before us: the changing lifestyles of consumers," says Shapira. "Taking costs out of the system while simultaneously improving services cannot be accomplished by guesswork."

    Shapira, who holds a master's degree in economics from Stanford University, says the company's strong capital expenditures program has been "a major focus of our efforts through the years, and an important reason for our success."

    Shapira derives the most satisfaction from the high standards his company has set in providing a first-class shopping experience for customers and a valuable working experience for associates. "I am very proud that our company provides many challenging and diverse career opportunities for our employees," he says.

    And there figure to be more and more of them joining on. Shapira says Giant Eagle will continue to expand into contiguous markets, all the while acknowledging the challenges presented by potential acquisitions. "The further you get away from your home base, the harder it is to manage," he says. But exposure to those challenges, he adds, can be minimized by "looking for prudent, wise candidates that are the right fit."

    Shapira was guided by the same right-fit mentality when assembling his inner circle. President and c.o.o. Burgo, who began his career in 1970 as a produce manager, is now responsible for coordinating operations of all the operating companies (see box below).

    Burgo spent considerable time developing formal associate training programs as well as the independent retailer program, begun in 1984, which today contributes over 40 percent of the chain's total sales. "Whether independent or corporate, the ownership of our stores should be transparent to customers," says Burgo.

    The company's culture, integrity, and longevity in the marketplace have created "an extremely loyal workforce that believes in Giant Eagle," a remark that is enthusiastically seconded by Lucot.

    "The thing that is important to understand about our company is that we have an involved board of directors who really care about our people. Their integrity, character, and community permeate the whole company," says Lucot. "It amazes me to think about the many long-term employees here. I myself am going on 29 years. It's a special place where people give of themselves at all levels, and it's really representative of how we've grown as a company."

    Lucot offers particularly high praise for the company's front-line associates. "People sometimes don't fully appreciate what store associates contend with. The only reason we're here is that we run retail stores and we need to have an obsession to support their efforts. I truly believe our store associates have the toughest jobs, and the most difficult responsibilities. They don't have the luxury of saying, 'I'll get back to you Monday.' They have to make decisions instantaneously. Many others get credit and the accolades, but they really are the true stars of our company. I'm very proud to be associated with them."

    Among Giant Eagle's most recent employee retention initiatives is an intense retail operations training program developed to expose the company's various departmental "star performers" to every aspect of the business to facilitate their knowledge and talent for continued advancement.

    Milestones

    In recounting the ascension of Giant Eagle, executives called attention to key developments along the way:

    •Absolute Minimum Pricing. This campaign born in the early 1980s was "very, very key to getting us on the trail to becoming a dominant player in Pittsburgh," recalls Lucot. "We were so singularly focused on that for several years, and it really changed who we were by providing a solid foundation for us to grow."

    •"Destination Store." The company's code name during the late Eighties when "we started to think about having a strip center consolidated under one roof with a series of individual businesses," says Lucot. "That was the beginning of what has evolved today with our prototype as destination in and of itself."

    •Pharmacies and video rental. Iggle Video, the chain's store-within-a-store home entertainment business, is considered in a league of its own by industry observers and consumers alike, says merchandising chief Tedesco. "Not only did we not exit the video rental business, we are in it in a major way. In most markets, we're the share leader." Ditto for Giant Eagle's in-store pharmacies, which have morphed from impersonal counters to customer-friendly operations amid well-stocked HBC departments. Drive-through prescription windows were recently added.

    •Category management. As an early adopter, Tedesco says, "we were able to change our focus from buying products to selling goods that are important to the customer." Aside from its "indisputable reputation for produce," Giant Eagle's other perishable departments will continue to focus on catering to individual tastes and needs, "with a greater emphasis on new points of difference in every business line."

    Community service at Giant Eagle tends to focus on hunger, education, and family. Since commencing its Apples for Students program 15 years ago, the chain has provided schools with more than $20 million in computer equipment and other materials. It also has long-standing associations with food banks, United Way, and The Race For The Cure.

    Giant Eagle places a marketing priority on being visible at major sporting events. It is the official grocer of the Pittsburgh Pirates and Steelers, the Cleveland Indians and Browns, the University of Akron Zips, and the National Hockey League's Columbus Blue Jackets.

    What's next for the Pittsburgh phenom? Can it continue to work its varied-format game plan as Wal-Mart, Target, and Costco increase their full-court press on the grocery business? The biggest issues, says analyst Cerankosky, are the dubious economy and the challenges associated with non-union competitors, "which represent both low-end competitors and high-end operators alike," he says. "Like every other union chain, Giant Eagle must be extremely aware of store labor productivity issues going forward."

    Eagle's eye view

    Going forward. That's a two-word phrase that fairly sums up the guiding ethic of Giant Eagle. One of the company's real strengths, says Lucot, is its aversion, to "spending too much time on what we've accomplished. We're very much focused on the future, on remaining independent, and on continuously learning because we know each and every day we have to continue to work hard to stay in the game."

    Tradition and a sustained commitment to Giant Eagle's long-established principles also figure into the chain's plans for the future. Retail consultant Flickinger, himself the product of a grocery retailing family from western New York, says it's a logical conclusion to envision Laura Karet as the heir apparent at Giant Eagle. "Where there are potential succession challenges for H-E-B and Publix in the U.S., and Loblaw's and Sobey's in Canada, Giant Eagle, Michigan-based Meijer, Inc., and Wegmans are the only three large successful family-owned and operated business with strong plans of succession."

    Flickinger describes Karet as "brilliant, very professional, and also very nice. She cares about people and the shopping public and, while her peers at other chains are all running around looking for tee times and letting Wal-Mart steamroll their businesses, Laura is very much like her grandmother, grandfather, and father in just working the business as hard—if not harder—than anybody out there."

    By demonstrating its competence, enthusiasm, dexterity, endurance—and above all, focus—Giant Eagle appears fully prepared to stay in the game.

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