May 7, 2007
Burd: Dominick’s Not Putting Out ‘For Sale’ Sign
Many who have seen Dominick’s Finer Foods go from leading the Chicagoland market over the years to now representing about a 15 percent share of market believe the chain would do much better were it owned by some company other than Safeway. Steve Burd, the chairman, chief executive officer and president of Safeway, does not share that opinion and made clear last week that Dominick’s is not for sale.
"We can make money with a 15 percent share," he told the Chicago Tribune.
Mr. Burd said Dominick’s would continue to seek organic growth by renovating existing stores into the successful "lifestyle" format. He said it was not likely the company would look to grow in the market through an acquisition. All Dominick’s stores should be converted to the lifestyle format within four years.
"We’re determined to build that market share by growing the sales in existing stores and then begin the process of adding new stores," Mr. Burd told the Chicago Sun-Times.
Discussion Question: Does Safeway have the right plan in place for Dominick’s in Chicago?
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Dominick’s not for sale? Somebody better tell our pals in Milwaukee. Word on the street is that all their presentations to private equity groups looking to buy the Milwaukee company hinge entirely on buying Dominick’s after opening their first few stores in Chicago. Let’s not be naive and believe everything we read in the paper. Mr. Burd could just be saying this to keep the panic level down. What is he expected to say after buying the company for $1.9 billion and then watching its value drop by nearby $1.5 billion? Just how low will store counts, volumes and market share need drop? All those “Lifestyles” remodels are doing is simply restoring the stores to their original condition but at slightly less volume. Think about it, they bought the stores for $1.9 billion; they are investing millions more in remodels, only to see volumes lower than they were 9 years ago. Is this division profitable? A big company like Safeway can shift numbers a lot of ways to make anything look profitable, for awhile. Don’t forget the past write-offs already taken. Where do you think Roundy’s will be targeting their new stores? Most likely near all of Dominick’s highest volume and highest sales per square foot locations. Who is the better Chicago retailer? Bob Mariano or Steve Burd? Who is wired in better with Chicago politicians and real estate developers? My money is Bob. I’m not betting on a 15% “also ran.”
Safeway is financially-driven, so if Steve Burd says he can make a profit with Dominick’s, he probably can. Two years ago, Safeway was $20. A year ago it was $25. Now it’s close to $36. Let’s see if they can beat the price of 5 years ago: $45.
Those of us who live in the Chicago area have both observed the demise of Dominick’s under Safeway management and experienced the frustration of shopping in these stores.
Dominick’s was once a highly customer-focused operation that appealed to local tastes and carried many specialty branded items. They offered excellent meats, fresh fish and a wide selection of produce.
Safeway turned it into a monolithic, operations-driven concern that carried a limited set of choices and tried to force customers into buying their private label or pay a premium for regular branded merchandise. The meats became pre-packaged and the fresh seafood disappeared.
Safeway destroyed a strong Dominick’s franchise and many of the shoppers have turned to Whole Foods or other specialty grocers.
They will never recover this under the yoke of Safeway.
In many respects, this the grocery version of the Federated fiasco with the Marshall Field’s department stores.
As a grocer for more than 30 years, I have watched many store management teams, operations divisions & corporate execs get the “store volume down to a level that they can handle.” That’s what Safeway has done to all of the chains they own. I see it daily with the Vons in Southern California and from all of the comments about Dominick’s, it seems like that is what they have done there.
Burd is able to make money with a 15% market share because his prices are the highest in the area. I always figured that the reason his stores had such a limited variety is that only the biggest vendors with big pockets could afford to buy shelf space in his chains.
I’ve been waiting for Burd to sell Vons to a “neighborhood grocer” but if he won’t sell Dominick’s after losing that kind of money; I bet he’ll never sell Vons either.
When I moved from the Gold Coast to Edgewater Beach two years ago, an old Dominick’s was my only neighborhood choice, one so bad I would take the express bus or el back downtown to shop at Potash Bros. or Treasure Island. The store has since been remodeled to become bearable, but it still has an annoying habit of running out of S. Rosen’s bread and buns. Q: How can a store SO LARGE run out of this product consistently? And why in Chicago, does it even bother to sell anything other than S. Rosen’s? A: Safeway. Safeway may be able to earn a profit with Dominick’s, but I don’t see it growing the chain beyond where it is now. Safeway doesn’t quite understand how seriously we take our buns here.
Time has proven (at least to me) that in the Chicago market, long time, successful businesses that were born here, grew up in the market, understand the market, contribute to the community, and subtly evolve as the city does, generally do fine. This is true whether they are grocery stores, department stores, appliance stores, or banks. Outsiders may see dollar signs on the balance sheets and ways to cut costs but often those dollars do not flow as expected once the new owner takes over and customers see what has been lost.
ABT appliances is a native Chicago company that sells TVs and appliances. It has been going strong since the 1920s and has moved three times over the years. Still family owned it has taken on, and held its own, against every big box competitor that has come to town.
The ruined wrecks of Dominick’s, Marshall Field’s and the First National Bank of Chicago, stand in sharp contrast.
I am sure other cities’ experiences are similar. In the words of an old folk song from the 60s, “when will they ever learn…when will they ever learn?”
A few thoughts. Circling the Chicago area in many Midwestern states are regional grocery chains such as Meijer (Midwest), Strack and Van Til (NW Indiana), Wiseway Supercenters (NW Indiana), D&W Fresh Market (Grand Rapids), Byerly’s & Lund’s (Twin Cities), Kowalski Markets (Twin Cities), and Pick and Save/Roundy’s (Wisconsin). These local chains still thrive and prosper and know their customers well. Many of these stores provide exciting, well designed atmospheres that many times surpass the decor and merchandising of the big 3 grocery chains including Safeway.
I recently shopped at a Wiseway Supercenter in Chesteron, Indiana and was pleasantly surprised to see they carried specialty Microbrew beer, carried a large organic health food department, and many local color SKUs. The store design and layout itself represented and surpassed one of the Big 3 chains in terms of product display, lighting, and decor.
Of the other chains:
Meijer is known for an energized shopping experience with open loft ceilings, bright colors, cross merchandising and innovative systems. Prices are extremely reasonable at Meijer, but without an Aldi or bare bones feel. Meijer still provides a grocery store of the caliber of Safeway or Supervalu with in-store Starbucks, organic groceries and high end lables, with low prices….
D&W clearly beats out the BIG 3 grocery chains and follows the same path of the former Dominick’s of the Chicago area…which catered to the local consumers needs and provided an upscale experience with many specialized local SKUs.
Strack and Van Til’s gain is Dominick’s loss. Strack’s has moved into a few of the former Dominick’s spaces and created mid to upper scale grocery stores with local flavor. Strack’s is known for catering to the NW Indiana communities it serves and offers fair pricing and exciting product mixes. In fact Strack’s is venturing into the Chicago market by taking over an old Cub Foods on Elston Avenue…which should be an interesting venture into Chicago if planned correctly. Its sister division, Ultra Foods, currently has taken over many of the former Cub Foods stores and they offer prices below that of Dominick’s and Jewel.
Byerly’s and Lund’s are amazing stores with rich histories, extremely good service and wonderful store decor and layout. In fact, I was out in Schaumburg, Il last night and stopped at a former Byerly’s converted into a Dominick’s and WOW, I was disappointed. I have shopped at Byerly’s in the Twin Cities and the converted Dominick’s was dismal with leaky ceiling tiles, ugly VCT tile, wall graphics coming apart and a boring decor package. I must say the store was dead, not more than 10 customers in the whole store. This seems to be common with most suburban Dominick’s as opposed to Meijer and Jewel which are always busy.
Why doesn’t Dominick’s have a way of expanding? Any healthy company usually has an expansion mode and a way of gaining market share! Dominick’s is supposed to be a Chicagoland grocery store, but it has moved out and closed in many divisions it once thrived…such as the South Suburbs and NW Indiana. Why hasn’t Dominick’s found a way to compete in the South Suburbs or NW Indiana with a discount chain similar to their former Omni Superstore Division? They have pretty much just given up and jumped ship and what I heard from an insider there, is that they just can’t compete with price impact retailers such as Food4Less, Meijer or Ultra Foods. Giving up is not an answer to success!
To conclude, until Dominick’s provides an experience that is unique and excites consumers as much as Byerly’s, Lund’s, D&W, Wiseway, Strack’s, Meijer, etc. their stores will be boring and bland!
Two different issues. Is Dominick’s still a good profit maker for Safeway, the corporation? I tend to take Steve Burd at his word that even with a 15 percent share; the chain can make money for Safeway. However, in terms of whether or not a different owner could cause Dominick’s to recapture a more dominant position like what it had in its heyday, I suspect this is probably true, given that a different owner would also recapture the local flavor and also the more liberal variety of product assortment that Dominick’s and its consumer base once enjoyed in the Chicago marketplace. Since Dominick’s is indeed owned by Safeway, it’s product assortment is mostly limited to what Safeway carries in its own programs which from my point of view, tend to be mostly the top UPC ranked brands in many categories, but not some of the more exciting niche brands carried by so many other retail chains that consumers covet and enjoy, particularly in personal care and HBC products. This was once an area of strength for Dominick’s prior to the Safeway ownership.
Before the Safeway acquisition, Dominick’s was a company led by a leader who valued everyone’s judgment, and prided himself on allowing his core management group to “think-‘outside-of=the-box’.” Hence, the Fresh Store and many other neighborhood formats were adapted to the neighborhood.
As we know, there are some very successful supermarket leaders who have mastered this key skill. And, importantly, have been noted. The leader who says “we have a lifestyle format” and energizes it daily, “top down, and bottom up” isn’t necessarily found in the national chain operations.
And the other part of the story is the determination to have many formats that speak to the shopper’s needs. A major business direction that few supermarket leaders understand! Hmmmmmmmmmmm
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Dominick’s not for sale? Somebody better tell our pals in Milwaukee. Word on the street is that all their presentations to private equity groups looking to buy the Milwaukee company hinge entirely on buying Dominick’s after opening their first few stores in Chicago. Let’s not be naive and believe everything we read in the paper. Mr. Burd could just be saying this to keep the panic level down. What is he expected to say after buying the company for $1.9 billion and then watching its value drop by nearby $1.5 billion? Just how low will store counts, volumes and market share need drop? All those “Lifestyles” remodels are doing is simply restoring the stores to their original condition but at slightly less volume. Think about it, they bought the stores for $1.9 billion; they are investing millions more in remodels, only to see volumes lower than they were 9 years ago. Is this division profitable? A big company like Safeway can shift numbers a lot of ways to make anything look profitable, for awhile. Don’t forget the past write-offs already taken. Where do you think Roundy’s will be targeting their new stores? Most likely near all of Dominick’s highest volume and highest sales per square foot locations. Who is the better Chicago retailer? Bob Mariano or Steve Burd? Who is wired in better with Chicago politicians and real estate developers? My money is Bob. I’m not betting on a 15% “also ran.”
Safeway is financially-driven, so if Steve Burd says he can make a profit with Dominick’s, he probably can. Two years ago, Safeway was $20. A year ago it was $25. Now it’s close to $36. Let’s see if they can beat the price of 5 years ago: $45.
Those of us who live in the Chicago area have both observed the demise of Dominick’s under Safeway management and experienced the frustration of shopping in these stores.
Dominick’s was once a highly customer-focused operation that appealed to local tastes and carried many specialty branded items. They offered excellent meats, fresh fish and a wide selection of produce.
Safeway turned it into a monolithic, operations-driven concern that carried a limited set of choices and tried to force customers into buying their private label or pay a premium for regular branded merchandise. The meats became pre-packaged and the fresh seafood disappeared.
Safeway destroyed a strong Dominick’s franchise and many of the shoppers have turned to Whole Foods or other specialty grocers.
They will never recover this under the yoke of Safeway.
In many respects, this the grocery version of the Federated fiasco with the Marshall Field’s department stores.
As a grocer for more than 30 years, I have watched many store management teams, operations divisions & corporate execs get the “store volume down to a level that they can handle.” That’s what Safeway has done to all of the chains they own. I see it daily with the Vons in Southern California and from all of the comments about Dominick’s, it seems like that is what they have done there.
Burd is able to make money with a 15% market share because his prices are the highest in the area. I always figured that the reason his stores had such a limited variety is that only the biggest vendors with big pockets could afford to buy shelf space in his chains.
I’ve been waiting for Burd to sell Vons to a “neighborhood grocer” but if he won’t sell Dominick’s after losing that kind of money; I bet he’ll never sell Vons either.
When I moved from the Gold Coast to Edgewater Beach two years ago, an old Dominick’s was my only neighborhood choice, one so bad I would take the express bus or el back downtown to shop at Potash Bros. or Treasure Island. The store has since been remodeled to become bearable, but it still has an annoying habit of running out of S. Rosen’s bread and buns. Q: How can a store SO LARGE run out of this product consistently? And why in Chicago, does it even bother to sell anything other than S. Rosen’s? A: Safeway. Safeway may be able to earn a profit with Dominick’s, but I don’t see it growing the chain beyond where it is now. Safeway doesn’t quite understand how seriously we take our buns here.
Time has proven (at least to me) that in the Chicago market, long time, successful businesses that were born here, grew up in the market, understand the market, contribute to the community, and subtly evolve as the city does, generally do fine. This is true whether they are grocery stores, department stores, appliance stores, or banks. Outsiders may see dollar signs on the balance sheets and ways to cut costs but often those dollars do not flow as expected once the new owner takes over and customers see what has been lost.
ABT appliances is a native Chicago company that sells TVs and appliances. It has been going strong since the 1920s and has moved three times over the years. Still family owned it has taken on, and held its own, against every big box competitor that has come to town.
The ruined wrecks of Dominick’s, Marshall Field’s and the First National Bank of Chicago, stand in sharp contrast.
I am sure other cities’ experiences are similar. In the words of an old folk song from the 60s, “when will they ever learn…when will they ever learn?”
A few thoughts. Circling the Chicago area in many Midwestern states are regional grocery chains such as Meijer (Midwest), Strack and Van Til (NW Indiana), Wiseway Supercenters (NW Indiana), D&W Fresh Market (Grand Rapids), Byerly’s & Lund’s (Twin Cities), Kowalski Markets (Twin Cities), and Pick and Save/Roundy’s (Wisconsin). These local chains still thrive and prosper and know their customers well. Many of these stores provide exciting, well designed atmospheres that many times surpass the decor and merchandising of the big 3 grocery chains including Safeway.
I recently shopped at a Wiseway Supercenter in Chesteron, Indiana and was pleasantly surprised to see they carried specialty Microbrew beer, carried a large organic health food department, and many local color SKUs. The store design and layout itself represented and surpassed one of the Big 3 chains in terms of product display, lighting, and decor.
Of the other chains:
Meijer is known for an energized shopping experience with open loft ceilings, bright colors, cross merchandising and innovative systems. Prices are extremely reasonable at Meijer, but without an Aldi or bare bones feel. Meijer still provides a grocery store of the caliber of Safeway or Supervalu with in-store Starbucks, organic groceries and high end lables, with low prices….
D&W clearly beats out the BIG 3 grocery chains and follows the same path of the former Dominick’s of the Chicago area…which catered to the local consumers needs and provided an upscale experience with many specialized local SKUs.
Strack and Van Til’s gain is Dominick’s loss. Strack’s has moved into a few of the former Dominick’s spaces and created mid to upper scale grocery stores with local flavor. Strack’s is known for catering to the NW Indiana communities it serves and offers fair pricing and exciting product mixes. In fact Strack’s is venturing into the Chicago market by taking over an old Cub Foods on Elston Avenue…which should be an interesting venture into Chicago if planned correctly. Its sister division, Ultra Foods, currently has taken over many of the former Cub Foods stores and they offer prices below that of Dominick’s and Jewel.
Byerly’s and Lund’s are amazing stores with rich histories, extremely good service and wonderful store decor and layout. In fact, I was out in Schaumburg, Il last night and stopped at a former Byerly’s converted into a Dominick’s and WOW, I was disappointed. I have shopped at Byerly’s in the Twin Cities and the converted Dominick’s was dismal with leaky ceiling tiles, ugly VCT tile, wall graphics coming apart and a boring decor package. I must say the store was dead, not more than 10 customers in the whole store. This seems to be common with most suburban Dominick’s as opposed to Meijer and Jewel which are always busy.
Why doesn’t Dominick’s have a way of expanding? Any healthy company usually has an expansion mode and a way of gaining market share! Dominick’s is supposed to be a Chicagoland grocery store, but it has moved out and closed in many divisions it once thrived…such as the South Suburbs and NW Indiana. Why hasn’t Dominick’s found a way to compete in the South Suburbs or NW Indiana with a discount chain similar to their former Omni Superstore Division? They have pretty much just given up and jumped ship and what I heard from an insider there, is that they just can’t compete with price impact retailers such as Food4Less, Meijer or Ultra Foods. Giving up is not an answer to success!
To conclude, until Dominick’s provides an experience that is unique and excites consumers as much as Byerly’s, Lund’s, D&W, Wiseway, Strack’s, Meijer, etc. their stores will be boring and bland!
Two different issues. Is Dominick’s still a good profit maker for Safeway, the corporation? I tend to take Steve Burd at his word that even with a 15 percent share; the chain can make money for Safeway. However, in terms of whether or not a different owner could cause Dominick’s to recapture a more dominant position like what it had in its heyday, I suspect this is probably true, given that a different owner would also recapture the local flavor and also the more liberal variety of product assortment that Dominick’s and its consumer base once enjoyed in the Chicago marketplace. Since Dominick’s is indeed owned by Safeway, it’s product assortment is mostly limited to what Safeway carries in its own programs which from my point of view, tend to be mostly the top UPC ranked brands in many categories, but not some of the more exciting niche brands carried by so many other retail chains that consumers covet and enjoy, particularly in personal care and HBC products. This was once an area of strength for Dominick’s prior to the Safeway ownership.
Before the Safeway acquisition, Dominick’s was a company led by a leader who valued everyone’s judgment, and prided himself on allowing his core management group to “think-‘outside-of=the-box’.” Hence, the Fresh Store and many other neighborhood formats were adapted to the neighborhood.
As we know, there are some very successful supermarket leaders who have mastered this key skill. And, importantly, have been noted. The leader who says “we have a lifestyle format” and energizes it daily, “top down, and bottom up” isn’t necessarily found in the national chain operations.
And the other part of the story is the determination to have many formats that speak to the shopper’s needs. A major business direction that few supermarket leaders understand! Hmmmmmmmmmmm