November 16, 2006
Supervalu to Spend $1 Billion to Surprise and Delight
At least part of the question as to what Jeff Noddle, chairman and CEO of Supervalu, would do with the stores acquired from Albertsons has now been answered.
Yesterday, Supervalu announced a $1 billion capital expenditure programs to custom remodel existing stores and build new ones under a new program it is calling Premium Fresh & Healthy.
“Supervalu’s Premium Fresh & Healthy program is all about surprising and delighting the customer,” said Duncan Mac Naughton, executive vice president, merchandising & marketing, in a press release. “Our extensive research tells us that grocery retailing today should provide consumers with products that allow them to ‘turn the dining room lights back on.’ This program seeks to deliver compelling, timely and localized offers at the right price through combined scale, customer insight and market knowledge.”
Mr. Noddle, said of the program, “We can deliver to our customers an in-store experience that leverages our great local retail banner names with some new powerful upgrades in key departments.”
Included in those upgrades are:
- Expanded perishables departments, including produce, meat, seafood, bakery and deli;
- Shop the World, an international foods department;
- Wild Harvest, a natural and organics store-within-a-store, and;
- Enhanced and expanded pharmacy and health and beauty care (HBC) departments.
Supervalu currently has a number of Premium Fresh & Healthy stores in operation. These include new Albertsons opened in Las Vegas and San Diego along with a remodeled Acme in Doylestown, Pa. and a Shaw’s in East Hampton, Conn.
Discussion Questions: The Premium Fresh & Healthy program/design concept, as described, sounds similar to others’ efforts to upscale their stores.
What makes it more or less likely to succeed considering it is a Supervalu program?
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Hard to tell with SuperValu. They don’t always hit home runs. They have struck out in many markets, either closing or selling off retail stores. Milwaukee, Indianapolis, Columbus, Atlanta, Nashville and Denver come to mind.
Right now they are facing challenges in absorbing Albertsons into their company. If employees do not sense this is good for them, its going to show up in the execution of the programs. Keep in mind, Albertsons was not the brightest bulb on the supermarket Christmas tree. Otherwise they would not have thrown in the towel and sold out.
So at this point, its a wait and see game. Right now this is just words for the press to print. A year from now we will probably hear about an entirely new plan of action.
Supervalu’s new “Premium, Fresh and Healthy” program will, of course, upgrade and contemporize their acquired stores, but it success will result from its pre-planned cost-effectiveness and the determination and perseverance of CEO Jeff Noddle.
The move may not surprise and delight those who have ‘had the light on’ but it could capture a larger part of the population who would like to alter their lifestyles. If the Democrats maintain, this could fuel the trend towards new/old cultural patterns that are all about local/natural/healthy lifestyles. Whole Food’s corporate policies may be replicable if part of that billion goes to hiring folks outside of the store who understand and care about conscious consumption. You don’t need a weatherman to know which way the wind is blowing.
Jeff is a smart guy, so he’s on the right track. Since the words “part” of the acquisition are being used, I’m assuming he’s going to use the new category management initiative and put more art than science into this move. Identify the right store clusters for the remodeling, make the customer-centric but still keep the traditional proven amenities. Also, I don’t think SuperValu is still considered a low tier retailer anymore, what with their track record.
If there is one person in the industry I had to tie my fortunes to, it would be Jeff Noddle. No one of the initiatives is the magic bullet, but a combination of the tactics and a vision of what the experience should be is the best first step.
Great to see that, unlike other mergers/acquisitions of the past, SuperValu seems to be looking at the best practices of the various brands and incorporating them for all to share.
No question about the components – these are what consumers are looking for – taste, convenience, value, simplification, premium, etc. Retailers are getting smarter and recognizing that value can be about price or about benefits and there is more margin opportunity when focusing against the benefits value component. Consumers will pay more for benefits that simplify their lives and make them feel better, both real and perceived. So, moving from undifferentiated to differentiated by providing all the key trend needs (in one location) for consumers should be a positive strategy.
The focus on fresh and healthy is spot on from the consumer point of view. I’ve been in one of their newly remodeled stores, and it was great.
Unfortunately, you really can’t judge the potential impact of this investment without evaluating the situation at each specific store, i.e., the market potential and competition. And, of course, the trick is always to do this cost-effectively.
Not much of a surprise. This “new concept” is what Jewel Osco has been doing for years in Chicago.
The best thing about Fresh & Healthy is that Supervalu tested it before announcing any major commitment. Clearly, it’s a push for higher margins, which may work in many (though not all) locations. Supermarket standards are being raised in all upscale neighborhoods, however, so this might simply serve to preserve market share rather than measurably enlarge it.
‘Wild Harvest’ is a concept and execution that the banner Shaw’s/Star Supermarkets on the East Coast developed years ago. It’s been very successful and it is a difference that sets Shaw’s/Star apart from their local competitors.
Good for SuperValu that they recognize what it good and what works in their newly acquired stores/banners and make it their own, but the key to success is price, service and keeping existing customers while recruiting new ones.
Supervalu and Jeffrey are just responding to what their competitors have already been doing for several years. In Philly/NJ, A&P has opened dozens of fresh format stores. The Acmes are tired and do need some attention.
In Chicagoland, this will be tricky. They have their own Sunflower and will also have to upgrade and modernize existing Jewel locations. Safeway is remodeling all 1770 of its stores, and Dominick’s is no exception.
They might get a break in New England with Shaws/Star. But again A&P in CT and Delhaize’s Hannaford markets also are getting revamped.
I also hope that they do not ignore their franchise Shop ‘n Save and Foodland stores in Western PA or their Shop ‘n Save stores in the St. Louis area. Likewise their Shoppers and Cub stores could use some refreshing as well.
That leaves the Albertsons, which probably needs the most attention. Again Safeway is not standing still either. Kroger out West is revamping as well, and their Marketplace stores are being used as category killers/one stop shopping magnets in the Midwest and Southwest. Only Save-A-Lots can be left alone in their current format.
Yes, Jeffrey has a billion dollars to spend. His competitors have already beaten him to the punch. Let’s wait and see if all of this “heavy spending” is productive and profitable.
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Hard to tell with SuperValu. They don’t always hit home runs. They have struck out in many markets, either closing or selling off retail stores. Milwaukee, Indianapolis, Columbus, Atlanta, Nashville and Denver come to mind.
Right now they are facing challenges in absorbing Albertsons into their company. If employees do not sense this is good for them, its going to show up in the execution of the programs. Keep in mind, Albertsons was not the brightest bulb on the supermarket Christmas tree. Otherwise they would not have thrown in the towel and sold out.
So at this point, its a wait and see game. Right now this is just words for the press to print. A year from now we will probably hear about an entirely new plan of action.
Supervalu’s new “Premium, Fresh and Healthy” program will, of course, upgrade and contemporize their acquired stores, but it success will result from its pre-planned cost-effectiveness and the determination and perseverance of CEO Jeff Noddle.
The move may not surprise and delight those who have ‘had the light on’ but it could capture a larger part of the population who would like to alter their lifestyles. If the Democrats maintain, this could fuel the trend towards new/old cultural patterns that are all about local/natural/healthy lifestyles. Whole Food’s corporate policies may be replicable if part of that billion goes to hiring folks outside of the store who understand and care about conscious consumption. You don’t need a weatherman to know which way the wind is blowing.
Jeff is a smart guy, so he’s on the right track. Since the words “part” of the acquisition are being used, I’m assuming he’s going to use the new category management initiative and put more art than science into this move. Identify the right store clusters for the remodeling, make the customer-centric but still keep the traditional proven amenities. Also, I don’t think SuperValu is still considered a low tier retailer anymore, what with their track record.
If there is one person in the industry I had to tie my fortunes to, it would be Jeff Noddle. No one of the initiatives is the magic bullet, but a combination of the tactics and a vision of what the experience should be is the best first step.
Great to see that, unlike other mergers/acquisitions of the past, SuperValu seems to be looking at the best practices of the various brands and incorporating them for all to share.
No question about the components – these are what consumers are looking for – taste, convenience, value, simplification, premium, etc. Retailers are getting smarter and recognizing that value can be about price or about benefits and there is more margin opportunity when focusing against the benefits value component. Consumers will pay more for benefits that simplify their lives and make them feel better, both real and perceived. So, moving from undifferentiated to differentiated by providing all the key trend needs (in one location) for consumers should be a positive strategy.
The focus on fresh and healthy is spot on from the consumer point of view. I’ve been in one of their newly remodeled stores, and it was great.
Unfortunately, you really can’t judge the potential impact of this investment without evaluating the situation at each specific store, i.e., the market potential and competition. And, of course, the trick is always to do this cost-effectively.
Not much of a surprise. This “new concept” is what Jewel Osco has been doing for years in Chicago.
The best thing about Fresh & Healthy is that Supervalu tested it before announcing any major commitment. Clearly, it’s a push for higher margins, which may work in many (though not all) locations. Supermarket standards are being raised in all upscale neighborhoods, however, so this might simply serve to preserve market share rather than measurably enlarge it.
‘Wild Harvest’ is a concept and execution that the banner Shaw’s/Star Supermarkets on the East Coast developed years ago. It’s been very successful and it is a difference that sets Shaw’s/Star apart from their local competitors.
Good for SuperValu that they recognize what it good and what works in their newly acquired stores/banners and make it their own, but the key to success is price, service and keeping existing customers while recruiting new ones.
Supervalu and Jeffrey are just responding to what their competitors have already been doing for several years. In Philly/NJ, A&P has opened dozens of fresh format stores. The Acmes are tired and do need some attention.
In Chicagoland, this will be tricky. They have their own Sunflower and will also have to upgrade and modernize existing Jewel locations. Safeway is remodeling all 1770 of its stores, and Dominick’s is no exception.
They might get a break in New England with Shaws/Star. But again A&P in CT and Delhaize’s Hannaford markets also are getting revamped.
I also hope that they do not ignore their franchise Shop ‘n Save and Foodland stores in Western PA or their Shop ‘n Save stores in the St. Louis area. Likewise their Shoppers and Cub stores could use some refreshing as well.
That leaves the Albertsons, which probably needs the most attention. Again Safeway is not standing still either. Kroger out West is revamping as well, and their Marketplace stores are being used as category killers/one stop shopping magnets in the Midwest and Southwest. Only Save-A-Lots can be left alone in their current format.
Yes, Jeffrey has a billion dollars to spend. His competitors have already beaten him to the punch. Let’s wait and see if all of this “heavy spending” is productive and profitable.