Supervalu Changes Image for the New Consumer

FILED DECEMBER 1, 2009

Dear Client:

Supervalu’s new ceo, Craig Herkert (who was chief of Wal-Mart Americas), is hoping to boost the image of the nation’s fourth largest retailer with a new focused strategy. While Supervalu’s competitors were quick to offer consumers discounts and deals in the recession, Craig admits his company was “not as quick to adapt as we could have been,” in an interview with WSJ. In its most recent earnings report, Supervalu’s quarterly profit dropped 42% from the year before.

One way they could have improved, he said, was by offering smaller package sizes for its products. Secondly, deals such as three-for-$5 can be confusing “even if you’re good at math.” Instead, Craig believes the consumer is also looking for “a simple, clear price.”

There is now a “new normal” and a different way to attract consumers as they increasingly “focus on value.” One of his first initiatives is to shrink the gap between promotional prices and regular prices. “In too many cases, we've trained our customer to only buy certain goods when they're on promotion, because we've allowed the gap between the promotional price and the regular price to become too great...But if I can sell more at regular price and not send my customers down the street...I'll be much better off,” he said.

In addition, Craig is pushing a 5-year plan to double the number of Supervalu’s 1,177 “no-frills” Save-A-Lot stores. They target households that make an average $40,000 a year, which is about half the US population. “There is an underserved market segment there,” said Craig. They are looking to cut costs to help fund the expansion, but he doesn’t plan on selling any major part of the company’s portfolio, which includes a large wholesale grocery distributor and more than 1,200 traditional supermarkets, including Albertsons, Jewel and Shaw's.

Meanwhile, Craig thinks it’s important for traditional grocers such as Jewel and Albertsons to be “hyper-local,” or offer locally made products, and not just in fresh foods. This could certainly apply to local wine and spirits producers.

ROCKY WIRTZ’S AMBITION TO GROW

An interesting article in Chicago Business highlights Rockwell “Rocky” Wirtz’s (the head of Wirtz Beverage Group and chairman of the WSWA) ambition to become “the nation’s leading distributor by 2012.” Rocky took over the Chicago-based company in 2007 after his father William “Bill” Wirtz passed away. Wirtz Beverage is the 6th largest wine and spirits distributor and currently has operations in 5 states. The article estimates it makes about $1.5 billion in annual revenue.

One of the first changes Rocky made was unifying the company’s independent businesses in Illinois, Nevada, Wisconsin, Iowa and Minnesota under the Wirtz name. He’s also centralized banking, training and purchasing and invested $15 million in new software to link all the businesses.

His father Bill shied away from acquisitions, while Rocky has already attempted to strike two separate deals with Glazer’s and Young’s Market. Although both deals have fallen through, according to the article, Rocky says: “There is no reason we can't be a dominant player going forward. In a horse race, the favorite doesn't always win.” He doesn’t “want to rush the process” and believes a deal could still happen. Although wine and spirits distributors are largely consolidated, there are opportunities with smaller competitors in the Midwest.

TESCO EXPANDS IN CENTRAL CA, HALTS PLANS IN NORTHERN CA AND NV

Despite facing rumors of failed growth over the past year, Tesco’s Fresh & Easy US chain is opening 6 new stores in central California by February, reports the Financial Times. It also launched its first regional radio and newspaper advertising campaign in September. However, Fresh & Easy has put plans to expand in northern California and northern Nevada on hold due to poor economic conditions in both areas. According to the article, Fresh & Easy is “sitting on several dozen store sites around Sacramento, San Francisco, Reno and the East Bay area, as well as a new distribution centre facility at Stockton in the north of the state.”

Tesco said in October that it expected its US stores to record a loss of $259 million for the current fiscal year to March 30, and that the losses "reflect the fact that Fresh & Easy has been built with the necessary infrastructure in place to support hundreds of stores,” says the article.

COULD YELLOW TAIL’S CONTEST BACKFIRE?

Yellow Tail is launching an un-oaked chardonnay this summer and asking fans “to solve their latest dilemma” by submitting names for the new varietal online. A panel of judges will determine the best title, and the winner will receive a complimentary case of wine before its release along with “(fifteen seconds of quasi-fame),” according to the website. It also says: “The wine is ready to be poured (we’re so proud) but we can’t decide on a name (we’re so ashamed)! The suits want to label it themselves, but we think you would do a better job.” The contest ends December 9.

The question is, will this work? An article in Daily Finance says crowdsourcing, which means asking the public to solve a problem usually handled by an employee, can be risky. It lists several examples of crowdsourcing-gone-wrong by NASA, Chevy Tahoe, MolsonCoors and Kraft’s Vegemite campaign in Australia.

Lily Volpe, director of new products and innovation for W.J. Deutsch & Sons, says the company isn’t worried: “We're open for anything and that's the brand's tag line...This is so straightforward and it's so fun that I think it's a different situation.”

WSD BRIEF:

THE NATIONAL ASSOCIATION OF STATE ALCOHOL AND DRUG ABUSE DIRECTORS (NASADAD) has named Robert Morrison as its new executive director, effective immediately. The group reportedly ran a year-long national search to fill the position. Robert most recently served as interim executive director/director of public policy for NASADAD.


Until tomorrow, Megan

“Idleness is not doing nothing. Idleness is being free to do anything.”
Floyd Dell

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