September 10, 2007
Supervalu Remakes Itself
Supervalu knows it has a problem. Too many consumers are choosing to shop at stores other than those it owns.
According to a Star Tribune article, the company has pegged its recent un-Supervalu-like performance on outdated stores. The result is that the company has budgeted $1.2 billion to fast-track remodels and new unit openings to make it more relevant to shoppers currently in its stores and those going off to shop at the competition.
“We want the food to pop,” said Duncan MacNaughton, executive vice president of merchandising and marketing for Supervalu. “We want the store to disappear.”
Supervalu, according to the Star Tribune report, has looked to census information, sales/loyalty card data, consumer research and shopping behavior studies to help it determine the right products and store layouts for the markets it serves.
Supervalu’s primary customers are women with children between the ages of 25 and 54. According to the paper, Supervalu classifies its shoppers into seven groups: “the convenience shopper, the luxury shopper who looks for gourmet products, the cooks, the healthy shopper, the aspiring shopper who wants to cook but doesn’t know how, the deal-seekers and the one-stop shopper who does everything all at once.”
With so many types of customers, it seems to make sense that Supervalu operates a variety of store formats (22 banners total), from upscale natural foods/organics stores to combo food/drug units and a limited assortment price impact concept.
The company is nearly done with the construction of a test store near its headquarters in Eden Prairie, Minn., where it will try out variations in floor plan layouts, interior design/lighting, merchandising and store brand products that may one day be rolled out to stores across the company.
One of the changes taking place at Supervalu is with its Cub format. The company is looking to move from its warehouse format to something more inviting. As others have done, Supervalu is placing a greater emphasis on perishables. The company is also looking to use its butchers and others more effectively to encourage interaction with shoppers.
“You romance the story of where the product came from a bit,” said Mr. MacNaughton. “People have this desire to engage with food.”
Cub customers are also seeking convenience and Chuck Lynch, vice president of operations at the chain, believes the company delivers in this area. “If you want to just come in and grab something and get out, we’re not too big a store to do that,” he said.
Supervalu is focused on taking chances to better serve its customers even though the company expects that not all its experiments will work out that well.
“It’s OK to make mistakes,” Mr. Lynch told the Star Tribune. “If we had home runs every time we’re probably not trying hard enough.”
Discussion Questions: Is Supervalu unique in its need to reinvent its stores? What do you see as the challenges facing the company and where do you see opportunities for success? Are there any particular Supervalu formats/banners that you are especially high (or not) on?
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Supervalu’s Jeff Noddle announced a goal of 80% of all stores to be no more than 7 years old. Supermarket chains are like airlines: when the stores or planes get old, productivity declines. This isn’t the case for all retailers. Some categories (bookstores, home improvement stores) don’t gain much from remodels. But supermarkets do.
I agree; Supervalu is like every other retailer in that it needs to reinvent itself. I also agree with Gene (at least I think I do) that Jeff is likely to be a more visible target for criticism just because he’s the most visible target. But I also believe he’s shown the kind of judgment in the past that signals that he’ll make the right calls in the future.
A loaded question, to be sure. Supervalu is certainly not unique among supermarketers in its need for reinvention. As Doron observes above, the entire industry needs fresh approaches.
The emphasis here should be on the plural. Cookie-cutter formats and standard prototypes are no longer adequate in an era marked by shopper marketing, trip analysis, and overlapping, competitive formats. The supermarket chain that positions against what it thinks to be the “big middle” of its market rarely satisfies anyone today.
Some fundamental truths worth repeating in this context: All shoppers are split shoppers. Trip missions vary. Retailers compete over wallet shares associated with each trip. Considering this shopper behavior reality, the chain that opts for uniformity and pure economy of scale in its store format strategy is destined for mediocre performance – or worse. Rapid expansion may camouflage this temporarily, but with industry sales per square foot heading lower not higher due to overstoring, that’s a losing battle, long-term.
So without knowing the nitty-gritty of Supervalu’s store renovation plans, I’d speak in praise of the idea that formats should be positioned against desired shoppers, trips and shares of wallet. Cookie-cutter format assumptions must be challenged in the context of our improving shopper insights. And retailers must learn to generate improved performance from existing stores, by designing better stores and plans, and positioning and implementing them much better than we do today.
Supervalu, dare to be great. Do new things today,
Be innovative and confident in all that you do.
Reach for the next plateau of supermarket success,
And, Jeff Noddle, to your own principles be true.
Scale new pinnacles, breast the changing tide,
Stay ahead of emerging retailing all the way.
Just don’t climb too high, or race so fast.
Stay focused on serving customers better each day.
So, Jeff Noddle, run your new race, and lead the rest,
Your effort will be critiqued, so make it a good ride.
I predict you’ll win in the end if your faith doesn’t bend,
Despite by the consultants’ fire you will be tried.
With all the respect due to Jeff Noddle and his management team, at least they are thinking more about what the consumer wants, and NOT what the grocer can or will do!
Interestingly, it sounds like the discussion and action is ‘within-the-box’ instead of (thinking) ‘outside-of-the-box’. And not stating anything about consumer research findings and consumer marketing practices…targeted at its defined audience’s wants. So, currently, the shoppers that grocers want find alternative places, even outside the grocery world. Nothing new has been stated; nor noted in the current marketplace to surprise.
Yes, consumers want more perishable and meal products. Yes, consumers want a shopping experience that is an enjoyment and not a chore. And yes, consumers want convenience and the supermarket to change its many ‘outdated’ practices, include keeping the consumer in the store as long as possible.
If I may suggest, the Forbes article on how Tesco and its new business format was created is what our industry needs to embrace! Hmmmmmmm
Supervalu has taken the first step, admitting that their consumer base has grown beyond what their stores offer in their shopping experience. That’s a lot better than some of the other retailers that just band-aid the flaws or ignore the true problems. Let’s see what happens and how quickly they can move. Consumers aren’t going to sit around and wait for the changes to happen. It’s easier to maintain your consumer base than it is to win them back.
The current mood of the grocery world is that whole industry needs to reinvent itself and store formats and layouts are just the beginning. I look at the whole process as the ‘customer experience’ and it starts when they walk through the door and actually never finishes. If Supervalu wants to depart from the pack, they will strive to provide an outstanding customer experience. Starting with reformatting is good, but they need to train their associates to engage the customer on the floor. And that goes for all departments, not just the butcher. Customers are not feeling the love from retailers nowadays and this is a perfect opportunity for SV to step in and fill the void!
Supervalu knew it had to completely re-do its store experience going in to the deal with Albertsons. They also knew they had an excellent vehicle to do so with the new “Premium Fresh & Healthy” prototype design recently constructed in Las Vegas.
My take would be a pedal-to-the-metal run at getting that package completed in as many stores as possible as soon as possible (hence the $1.2b spend). It’s a massive improvement.
The new store is indeed a fresh consumer proposition that, if fostered correctly, should indeed do a lot of good to their bottom line.
Supervalu faces challenges by just being a giant sterile corporation. It could be that they are just too big to compete with the smaller, quick reacting regional chains. They will have to do a lot more than just remodel stores. Average run supermarkets are still average, regardless of the age and condition of the building. Some formats do better than others.
Cub has basically been a flop except in Minneapolis where they have close supervision and the home field advantage. When the competition from supercenters got too difficult, Supervalu quickly exited and shuttered stores–Indianapolis, Denver, Ft. Wayne, Atlanta, and Columbus to name a few. Other banners such as Shaws, Acme, Albertsons, and Jewel are still stuck being plain vanilla grocery stores. Sunflower Market sounded promising but they have disappeared from the media lately. I think Supervalu may have bitten off more than they can chew by buying up a chain of plain sterile stores, even though they were the best that Albertsons had to offer. The word “reinvent” is the supermarket buzz word for “we can’t compete with Wal-Mart.”
Supervalu needs to align its banners with the socio-economic profiles of its trade areas. To me, the question isn’t whether they need to upgrade (sure they do), it’s a question of portfolio management. A low-end banner, traditional format banner, and a higher end fancy-food banner are all needed to compete effectively in today’s market. Fortunately, Supervalu has a healthy assortment of stores and formats, and will assuredly find its way.
Based on visits to three different supermarkets recently, I could readily discern the differences as a shopper. One supermarket had basically what I was looking for but lacked personality and the cashier did not greet or thank me. Another store had lots of fresh products, meal samples to taste, fresh complimentary coffee, great store brands and an engaging cashier who told me about two new products he had recently tried and enjoyed. The last store was huge, provided cost savings, but lacked clear aisle signs or a store directory, and had very long lines at the checkout.
Those are the things that consumers remember after their shopping trip in addition to any store decor. So I’d say Supervalu’s remodels are just the beginning, but a very necessary step to engage customers and keep them coming back.
The Cub stores which are a price driven, bag your own warehouse style are under attack by Aldi, Trader Joe’s, Target and Wal-Mart in the Twin Cities. All four of these competitive chains are expanding rapidly and doing well. With Cub being the market share leader, it is only natural that the Cub stores are feeling a touch of heat. By up scaling their décor package and shopping experience they will be ceding some of their price image to the new players in an attempt to gain increased margins and capture market share from Rainbow, Jubilee, Kowalski and Byerly’s-Lund’s.
Upgrading the stores is a needed step. It worked for Walgreens. It seems like every corner has a nice, newly remodeled Walgreens, CVS or Rite Aid. Upgrading the store is definitely an incentive for customers to come in and check it out. The trick is making them want to come back. A clean store is important, but so are quality selections and good service. If they can use the upgraded stores to drive them in, then they have the opportunity to create loyalty where none exists. They will need to follow through with both in order to see a long term improvement.
It’s really quite a simple question:
Do you want your business to be shopper centric, following the Stew Leonards and, more recently, the HEB Central Market concept, and others–Safeway Fresh to an extent? Or do you want your business to be brand manufacturer centric? And keep your number one source of profits–cash from manufacturers?
I don’t say Sam Walton expressly thought in these terms, but by blowing all that trade money out of his stores, in return for rational, realistic manufacturer prices, he grew the world’s largest business. Seems pretty simple to me. You can hang on to the old model and let the rest of the world eat your lunch, or you can change. Fortunately, the change doesn’t have to be total, but it does have to be immediate. In five years, it could very well be too late for a lot of people futzing around with this decision.
Supervalue is not unique. Consumers, by and large, don’t like to go grocery shopping. They want the shopping trip to be efficient and pleasant. Not many grocery stores are set up so consumers can come in and find what they want quickly in a pleasant and enjoyable atmosphere. The definitions of quick, pleasant, and enjoyable will vary by customer base. Each store needs to define those terms for their customers, meaning everyone needs to reinvent stores.
Supervalu has far too many banners and there is one that is always forgotten, the Foodland banner, which they acquired from Charley Brothers years ago.
Foodland is an independently owned and operated franchise chain primarily operating in western PA, eastern Ohio and West Virginia. Their “close to home” slogan has been successful for a number of years. They also operate Foodland Fresh stores which focus on produce, flowers, prepared meals, etc.
What also hurts Supervalu is its far flung formats and banners. Star markets in Massachusetts should be combined with Shaw Markets.
Also they need to take a lesson from A&P which now concentrates on three formats, fresh with their A&P/SuperFresh/Waldbaum fresh market formats, discount with soon-to-be acquired Pathmark and its existing EDLP banner, Food Basics, and their gourmet/finefood/liquor headed by the Food Emporium markets.
SuperValu also has to shore up its various private brand labels, to integrate the various banner private brands into a three tier approach.
SuperValue definitely has a lot on their plate.
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Supervalu’s Jeff Noddle announced a goal of 80% of all stores to be no more than 7 years old. Supermarket chains are like airlines: when the stores or planes get old, productivity declines. This isn’t the case for all retailers. Some categories (bookstores, home improvement stores) don’t gain much from remodels. But supermarkets do.
I agree; Supervalu is like every other retailer in that it needs to reinvent itself. I also agree with Gene (at least I think I do) that Jeff is likely to be a more visible target for criticism just because he’s the most visible target. But I also believe he’s shown the kind of judgment in the past that signals that he’ll make the right calls in the future.
A loaded question, to be sure. Supervalu is certainly not unique among supermarketers in its need for reinvention. As Doron observes above, the entire industry needs fresh approaches.
The emphasis here should be on the plural. Cookie-cutter formats and standard prototypes are no longer adequate in an era marked by shopper marketing, trip analysis, and overlapping, competitive formats. The supermarket chain that positions against what it thinks to be the “big middle” of its market rarely satisfies anyone today.
Some fundamental truths worth repeating in this context: All shoppers are split shoppers. Trip missions vary. Retailers compete over wallet shares associated with each trip. Considering this shopper behavior reality, the chain that opts for uniformity and pure economy of scale in its store format strategy is destined for mediocre performance – or worse. Rapid expansion may camouflage this temporarily, but with industry sales per square foot heading lower not higher due to overstoring, that’s a losing battle, long-term.
So without knowing the nitty-gritty of Supervalu’s store renovation plans, I’d speak in praise of the idea that formats should be positioned against desired shoppers, trips and shares of wallet. Cookie-cutter format assumptions must be challenged in the context of our improving shopper insights. And retailers must learn to generate improved performance from existing stores, by designing better stores and plans, and positioning and implementing them much better than we do today.
Supervalu, dare to be great. Do new things today,
Be innovative and confident in all that you do.
Reach for the next plateau of supermarket success,
And, Jeff Noddle, to your own principles be true.
Scale new pinnacles, breast the changing tide,
Stay ahead of emerging retailing all the way.
Just don’t climb too high, or race so fast.
Stay focused on serving customers better each day.
So, Jeff Noddle, run your new race, and lead the rest,
Your effort will be critiqued, so make it a good ride.
I predict you’ll win in the end if your faith doesn’t bend,
Despite by the consultants’ fire you will be tried.
With all the respect due to Jeff Noddle and his management team, at least they are thinking more about what the consumer wants, and NOT what the grocer can or will do!
Interestingly, it sounds like the discussion and action is ‘within-the-box’ instead of (thinking) ‘outside-of-the-box’. And not stating anything about consumer research findings and consumer marketing practices…targeted at its defined audience’s wants. So, currently, the shoppers that grocers want find alternative places, even outside the grocery world. Nothing new has been stated; nor noted in the current marketplace to surprise.
Yes, consumers want more perishable and meal products. Yes, consumers want a shopping experience that is an enjoyment and not a chore. And yes, consumers want convenience and the supermarket to change its many ‘outdated’ practices, include keeping the consumer in the store as long as possible.
If I may suggest, the Forbes article on how Tesco and its new business format was created is what our industry needs to embrace! Hmmmmmmm
Supervalu has taken the first step, admitting that their consumer base has grown beyond what their stores offer in their shopping experience. That’s a lot better than some of the other retailers that just band-aid the flaws or ignore the true problems. Let’s see what happens and how quickly they can move. Consumers aren’t going to sit around and wait for the changes to happen. It’s easier to maintain your consumer base than it is to win them back.
The current mood of the grocery world is that whole industry needs to reinvent itself and store formats and layouts are just the beginning. I look at the whole process as the ‘customer experience’ and it starts when they walk through the door and actually never finishes. If Supervalu wants to depart from the pack, they will strive to provide an outstanding customer experience. Starting with reformatting is good, but they need to train their associates to engage the customer on the floor. And that goes for all departments, not just the butcher. Customers are not feeling the love from retailers nowadays and this is a perfect opportunity for SV to step in and fill the void!
Supervalu knew it had to completely re-do its store experience going in to the deal with Albertsons. They also knew they had an excellent vehicle to do so with the new “Premium Fresh & Healthy” prototype design recently constructed in Las Vegas.
My take would be a pedal-to-the-metal run at getting that package completed in as many stores as possible as soon as possible (hence the $1.2b spend). It’s a massive improvement.
The new store is indeed a fresh consumer proposition that, if fostered correctly, should indeed do a lot of good to their bottom line.
Supervalu faces challenges by just being a giant sterile corporation. It could be that they are just too big to compete with the smaller, quick reacting regional chains. They will have to do a lot more than just remodel stores. Average run supermarkets are still average, regardless of the age and condition of the building. Some formats do better than others.
Cub has basically been a flop except in Minneapolis where they have close supervision and the home field advantage. When the competition from supercenters got too difficult, Supervalu quickly exited and shuttered stores–Indianapolis, Denver, Ft. Wayne, Atlanta, and Columbus to name a few. Other banners such as Shaws, Acme, Albertsons, and Jewel are still stuck being plain vanilla grocery stores. Sunflower Market sounded promising but they have disappeared from the media lately. I think Supervalu may have bitten off more than they can chew by buying up a chain of plain sterile stores, even though they were the best that Albertsons had to offer. The word “reinvent” is the supermarket buzz word for “we can’t compete with Wal-Mart.”
Supervalu needs to align its banners with the socio-economic profiles of its trade areas. To me, the question isn’t whether they need to upgrade (sure they do), it’s a question of portfolio management. A low-end banner, traditional format banner, and a higher end fancy-food banner are all needed to compete effectively in today’s market. Fortunately, Supervalu has a healthy assortment of stores and formats, and will assuredly find its way.
Based on visits to three different supermarkets recently, I could readily discern the differences as a shopper. One supermarket had basically what I was looking for but lacked personality and the cashier did not greet or thank me. Another store had lots of fresh products, meal samples to taste, fresh complimentary coffee, great store brands and an engaging cashier who told me about two new products he had recently tried and enjoyed. The last store was huge, provided cost savings, but lacked clear aisle signs or a store directory, and had very long lines at the checkout.
Those are the things that consumers remember after their shopping trip in addition to any store decor. So I’d say Supervalu’s remodels are just the beginning, but a very necessary step to engage customers and keep them coming back.
The Cub stores which are a price driven, bag your own warehouse style are under attack by Aldi, Trader Joe’s, Target and Wal-Mart in the Twin Cities. All four of these competitive chains are expanding rapidly and doing well. With Cub being the market share leader, it is only natural that the Cub stores are feeling a touch of heat. By up scaling their décor package and shopping experience they will be ceding some of their price image to the new players in an attempt to gain increased margins and capture market share from Rainbow, Jubilee, Kowalski and Byerly’s-Lund’s.
Upgrading the stores is a needed step. It worked for Walgreens. It seems like every corner has a nice, newly remodeled Walgreens, CVS or Rite Aid. Upgrading the store is definitely an incentive for customers to come in and check it out. The trick is making them want to come back. A clean store is important, but so are quality selections and good service. If they can use the upgraded stores to drive them in, then they have the opportunity to create loyalty where none exists. They will need to follow through with both in order to see a long term improvement.
It’s really quite a simple question:
Do you want your business to be shopper centric, following the Stew Leonards and, more recently, the HEB Central Market concept, and others–Safeway Fresh to an extent? Or do you want your business to be brand manufacturer centric? And keep your number one source of profits–cash from manufacturers?
I don’t say Sam Walton expressly thought in these terms, but by blowing all that trade money out of his stores, in return for rational, realistic manufacturer prices, he grew the world’s largest business. Seems pretty simple to me. You can hang on to the old model and let the rest of the world eat your lunch, or you can change. Fortunately, the change doesn’t have to be total, but it does have to be immediate. In five years, it could very well be too late for a lot of people futzing around with this decision.
Supervalue is not unique. Consumers, by and large, don’t like to go grocery shopping. They want the shopping trip to be efficient and pleasant. Not many grocery stores are set up so consumers can come in and find what they want quickly in a pleasant and enjoyable atmosphere. The definitions of quick, pleasant, and enjoyable will vary by customer base. Each store needs to define those terms for their customers, meaning everyone needs to reinvent stores.
Supervalu has far too many banners and there is one that is always forgotten, the Foodland banner, which they acquired from Charley Brothers years ago.
Foodland is an independently owned and operated franchise chain primarily operating in western PA, eastern Ohio and West Virginia. Their “close to home” slogan has been successful for a number of years. They also operate Foodland Fresh stores which focus on produce, flowers, prepared meals, etc.
What also hurts Supervalu is its far flung formats and banners. Star markets in Massachusetts should be combined with Shaw Markets.
Also they need to take a lesson from A&P which now concentrates on three formats, fresh with their A&P/SuperFresh/Waldbaum fresh market formats, discount with soon-to-be acquired Pathmark and its existing EDLP banner, Food Basics, and their gourmet/finefood/liquor headed by the Food Emporium markets.
SuperValu also has to shore up its various private brand labels, to integrate the various banner private brands into a three tier approach.
SuperValue definitely has a lot on their plate.