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Upsized chain keeps local touch

BY Jim Frederick

With the merger of Albertsons and Supervalu in June 2006, a new giant stood astride the U.S. food and drug marketplace. And with its first year of combined operations behind it, the energized Supervalu and its nearly 200,000 employees are learning to run a new kind of retail entity by weaving together the best elements and scale of diverse retail holdings without sacrificing local market brand identification.

By adding some 1,100 stores owned by Albertsons to its holdings, the deal instantly propelled Supervalu to the upper ranks of U.S. food retailing, making it the nation’s third-largest supermarket retailer and the eighth-largest retail pharmacy operator, with approximately 900 in-store pharmacies. Supervalu will have some 935 in operation by the end of its current fiscal year, company leaders predict.

The merger gave the 137-year-old retailer and wholesaler enviable reach, with a 2,500-store retail empire that stretches from New England and the mid-Atlantic region to the West Coast under a total of 15 distinct store banners, including Albertsons in the West and Northwest, Lucky in Southern California and Nevada, Cub Foods in Minnesota, Jewel-Osco in Chicago, Acme in Philadelphia, Shaw’s and Star Market in New England and Shop ‘n Save in St. Louis. Not included in that total are two drug store nameplates with deep ties to Midwestern and Western consumers—Osco Drug and Sav-on Drugs.

BY THE NUMBERS

$38 billion 2006 total sales

$3.1 billion Rx sales

900+ Pharmacies

2,500 Stores/15 Banners

The network also includes a diverse group of nearly 1,200 corporate and licensee stores operating under the Save-A-Lot banner, and served by Supervalu’s massive distribution network. What’s more, the company retains massive clout as a wholesale grocery distributor, supplying nearly 5,000 customer end points across the United States and adding both expertise and economies of scale to the company’s supply-chain activities.

Perhaps lesser-known are some of the other food-store nameplates under the Supervalu corporate umbrella—names like Farm Fresh in Virginia; Shoppers Food & Pharmacy in the District of Columbia and Baltimore; Bristol Farms in Southern California; Hornbacher’s in North Dakota; and Sunflower Market in the North Central and Midwest region. Though less well-known nationally, those regional players have gained strong and loyal followings among local consumers.

In the words of Supervalu chairman and chief executive officer Jeff Noddle, “Our new business model now represents a national food and drug retail and supply chain powerhouse with a footprint that spans the United States. With the addition of the Acme, Albertsons Southern California and Inter-mountain West, Bristol Farms, Lucky, Sav-on, Shaw’s, Star Market and Jewel-Osco brands to our multi-format retail portfolio, we are now positioned as a national player and can take advantage of our retail scale.”

Inside the stores, the acquisition of Albertsons’ premier properties also brought to Supervalu a newly developed and powerful pharmacy system, ARx, long in development by Albertsons’ pharmacy team and considered one of the most advanced automation platforms in any prescription center, capable of gathering and storing HIPAA-compliant patient data accessible to healthcare professionals and patients themselves. Equally significant was what the merger brought to the new company in terms of management expertise and culture—particularly in such areas as pharmacy and combo-store retailing. The acquisition brought to Supervalu such well-regarded pharmacy and nonfoods leadership veterans as Kevin Tripp, now serving as executive vice president and president of Midwestern retail operations for the 2,500-store chain; and Chris Dimos, who became president of Supervalu’s fast-growing pharmacy division. Many others, including influential clinical-care pharmacy leader Anthony Provenzano, also made the transition from Albertsons to Supervalu.

With that migration came Albertsons’ long history of experimentation and expansion in pharmacy-based patient care and disease management. Provenzano now leads a multi-pronged clinical-care initiative at Supervalu Pharmacy in such areas as diabetes management and medication therapy management, under the active promotion of Tripp, Dimos and other pharmacy leaders.

“If you look across the supermarket channel, you see pharmacy kind of shoehorned in a lot of different places in the organization—reporting to merchandising, reporting to here or there,” Tripp said. “Jeff [Noddle] and the leadership of Supervalu clearly see pharmacy as a strategic tool for the future. And to have a president of pharmacy who reports directly into the leadership of the company ought to send the message that pharmacy is clearly an important part of our business. And it has a lot to do with the way we organize the business, with Chris [Dimos] reporting to me and myself reporting directly to Jeff.”

Beyond that, he said, Supervalu employs what Tripp calls “an efficient but robust organization that supports our 900-plus pharmacies.”

Under Dimos, the pharmacy operation is run by an experienced staff, led by Gerry Bay, senior vice president of pharmacy operations, a veteran of Albertsons management based in Chicago. “Our company is basically broken into three regions—East, Midwest and West,” Dimos explained. “Our pharmacy operations group breaks down the same way, with a vice president of pharmacy operations for each region.”

Carolyn Sieraski is vice president of pharmacy marketing and strategy. Dan Salemi, another veteran of Albertsons and American Stores, is vice president of pharmacy central services, in charge of managed care, procurement and analytics.

“He buys it, sells it and figures out if we made any money on it,” Dimos joked.

In charge of clinical programs is Anthony Proven-zano, while government relations and pharmacy professional services is under the direction of Vic Vercammen. Randy Mound is vice president of pharmacy systems and process redesign.

The Supervalu pharmacy team also includes financial support staff and a vice president of pharmacy human resources, Chris Irmscher.

It’s clear that the company’s far-flung and diverse portfolio of retail brands will demand new thinking and new solutions from its management team. “Supervalu operates in some of the nation’s largest and most densely populated urban areas, including Boston, Chicago, Los Angeles, Philadelphia and Washington, D.C.,” the company noted in a report. “Serving a broad demographic spectrum demands that Supervalu is a flexible, dynamic retailer that is in tune with cultural and customer trends and responsive to local demands.”

To that end, Noddle has laid out four performance milestones that he says will guide the company’s future decisions, strategies and initiatives, “and our new culture of service.” They include:

Delivering economically by leveraging economies of scale, best practices from each retail banner and rising sales to bolster profitability;

Serving customers through a better understanding of their needs, according to Noddle, and by better responding to changing demographics and demand trends. Part and parcel of that process is an aggressive campaign to remodel stores, rejuvenate and keep fresh the merchandise mix and keep the focus on local retailing and new customer-service programs.

Creating a new company culture to energize employees and keep them, in Supervalu’s parlance, “customer-focused, passionate about the grocery business and committed to delivering our customers the best possible shopping experience.”

Investing in the store network through store renovation and new construction. Along those lines, the company has created a “Premium Fresh & Healthy” strategy for its new store and remodeling efforts, consisting of a series of easily customized merchandise presentation modules, tailored to individual stores and markets and “all with a focus on making it easy and convenient to shop for wholesome meals” and solutions for health, wellness, beauty and other needs, according to Supervalu.

Premium Fresh & Healthy is “clearly our go-forward strategy,” Tripp said. “We think that’s where the customer is going, and we think we have all the tools to get there quickly.

“We clearly see pharmacy in a leadership position for that, and as the beacon around which to build the healthy strategy.

“We also see the format itself as advantageous because some of the things we can do within that format really can’t be duplicated within the drug store industry.”

Examples, Tripp said, include the Living Healthy with Diabetes walks that Jewel-Osco sponsored in Chicago for many years, which Supervalu is rolling out nationwide across its retail markets this year. “Things like that really can’t be duplicated in the chain drug channel,” Tripp said. “So we see that as a huge opportunity for us, and as we pull this Premium Fresh & Healthy strategy together, we see pharmacy obviously playing a key role in that.”

Added Dimos, “In any successful enterprise with two companies coming together, you must get common quickly. So we’ve spent a lot of time and energy around consolidating into being…an easy company to do business with.”

Along those lines, he said, Supervalu now wields “a common managed care group…a common procurement group and a common operations focus. So even though we’ve brought together two enterprises to make a best-of-breed, we’ve focused a lot on being easy to do business with for our vendor community, and for our consumers.”

Those efforts are bearing fruit already. For instance, Dimos said, “When we came together, we had five in-store pharmacy applications. By the end of the fiscal year, we’ll have one. So we’ll be able to have common experiences, common financials and other things that help us run the back end of our business better and also provide that common patient connection.”

In pursuit of that goal, Dimos added, “From the technology and business side, we’re doing everything we can to get common very quickly, because we believe that will make us successful and much less distracted as we move forward and grow our business.”

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Fred’s reports both monthly and quarterly record sales

BY Allison Cerra

MEMPHIS, Tenn. Fred’s Inc. reported record sales for the five-week and eight-month periods which ended Oct. 6, 2007.

The company said Friday that its total sales for the month increased 2 percent to $161.4 million compared to the same period last year. Total sales for the year-to-date period increased 5 percent to $1.157 billion.

Same store sales for the month rose 1 percent on top of a 5 percent increase in September last year. On a comparable store basis, sales increased 1.3 percent through the first eight months of fiscal 2007 compared with a 2.7 percent gain in the year-earlier period. Same-store sales are a key predictor of how well the company performs in stores that have been open for several years, and how well the newly open stores will do in the future.

“September sales came in at the low end of our forecasted range of a 1 percent to 3 percent increase, affected by unusually warm weather across our markets and the disruption caused by the updating of 98 stores under our refresher program,” said Fred’s Stores chief executive officer Michael J. Hayes. “We look forward to finishing our refresher program in October with the last 60 stores and to a better economic environment for our customers going forward, as the benefits of the minimum wage increase and the focus of Federal Reserve Board on the credit crunch take hold.”

Fred’s opened four stores at the end of September, bringing total store openings to 22 for the year-to-date period. These new store openings have been balanced by the company’s decision to close underperforming stores. In the remaining months, Fred’s Stores said that it plans to open 14 additional stores, with no further planned closings, which will result in a net increase in stores of 2 percent for the year.

Fred’s Inc. operates 702 discount general merchandise stores, including 24 franchised stores in the southeastern United States.

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Target to open another 61 stores nationwide

BY Allison Cerra

MINNEAPOLIS Target announced that it will be opening an additional 61 Target stores, the company said Friday.

The stores, which will all open Oct. 14, will open in 22 different states. The majority of the stores are making their debut in Arizona, California, Ohio and Texas.

In addition to offering the latest in trend-right merchandise, Target also brings a 44-year tradition of community involvement. The retail chain commits itself to local communities donating more than $3 million each week to area nonprofit organizations, becoming involved in local volunteerism efforts through Target Volunteers, and orchestrating other special projects that help meet area social service, arts and education needs.

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