retail news in context, analysis with attitude

Lots of email responding to yesterday's reporting and commentary about the fine mess that Supervalu seems to find itself in...

One reader wrote:

What you have to realize to understand Supervalu's management is that Walmart and Costco are not seen as "traditional" competitors - let alone Amazon. Most of the management benchmarks against old-school grocery chains like Giant and Dominick's. Walmart is an emerging threat if anything, and there is no widely-understood high-level strategy in place to compete with them.

All of our emphasis has been on short-term, unprofitable promotions for the past 2-3 years, while anyone bold enough to raise the bigger issues of brand strategy and competitive positioning has been sidelined or let go.

Really? There is someone at Supervalu who has described Walmart recently as "an emerging threat"?

Because if there is someone like that, they ought to be fired for incompetence.

Saying Walmart is an emerging threat is like saying that one of these days, Tom Brady will really learn how to throw a football....

From another reader:

Concerning your story about Supervalu, it really points out the dire straights this company is in.  The current cuts are dramatic.... Whereas Supervalu used to provide it's corporate employees with free coffee, tea, paper plates and plastic eating utensils, the new policy is that you pay for it or you bring your own from home. Whereas Supervalu used to provide a wastepaper basket and a recycle basket for each cubicle, now employees have to take their trash and recycles to a central location.  These are the hard hitting decisions corporate is making to save this company.  Not only is this a token move (how much can they actually save) it highlights to the employees that they are an expense rather than an asset.  Is this the type of big decision making that stockholders are looking for?  I can't imagine there are too many at Supervalu who feel confident in their jobs.  What a lovely working atmosphere.

As far as getting competitive on prices, why does it take so long to implement?  Competitive pricing has been the mantra for some time now.  Why not give the store managers the discretion to shop competition and price accordingly?  After all, they are the ones on the firing line.  They are the ones whose jobs are in jeopardy if profits and sales aren't there.  If a person is good enough to manage a store, they should be good enough to set pricing.  I'm not sure where the idea came from that Corporate is the genius behind running stores, but that philosophy hasn't worked.

Supervalu is on a very slippery slope.  Laying off front line people will only make their stores less attractive destinations for customers.  Here's a novel idea, why not lay off some of their multitude of Directors and VP's.  These are the people that are making the decisions that don't seem to be working.  Their salaries would have saved a bunch of part time store personnel from being let go....  It would also have paid for a few cups of coffee or tea.

Interesting how some of this same territory was covered by another email, though with a more positive slant:

Changes are being made at our Store Support Centers and outlying facilities to help reduce expenses. First, a decision has been made to change our food service vendor at seven office locations across SUPERVALU, effective July 30.

After reviewing all potential food service suppliers, including the current suppliers at SUPERVALU office locations, Treat America was chosen as the food service supplier for seven of our locations including Boise; Eden Prairie (2 sites), Chanhassen and Hopkins, Minn.; Earth City, Mo.; and Franklin Park, Ill. This change should not have an impact on prices for our cafeteria offerings.

As part of these changes, a decision has also been made to eliminate the free coffee and hot beverages traditionally provided at our Store Support Centers and outlying office facilities, also effective July 30. Additionally, complimentary cups, sweeteners, creamers, stir sticks, plates and utensils will no longer be provided. Associates from across the company have suggested this change as a cost-savings idea, and this modification alone will save SUPERVALU over $350,000 per year that can be reinvested into our business. As an alternative, at some locations, coffee and hot beverages will be available for purchase at a moderate cost, or a coffee maker will be made available to allow associates to prepare their own hot beverages on site.

Another MNB user wrote:

I have been a follower of  the grocery business and news as I have made my living developing grocery anchored shopping centers since 1980.  You hit on something when you mentioned Jeff Noddle and his departure.   My contacts in SV told me at the time of his departure that it was a combination of him shown the door and his willingness to walk through it because of the Albertson purchase debacle.  They recognized  almost immediately that the new debt, in addition to the cost of integrating the purchase was through the  roof compared to what he thought it was going to be.  While I am definitely  not a fan of Craig Herkert, I think he realized pretty quick after he came on board what a pile he has stepped in.

Another MNB user chimed in:

Been reading your blog since the day I left Albertson's - basically when the transition to Minneapolis happened. While I admit ALB had problems - I have watched from the side lines and watched this decline - it started the day we turned out the lights in Boise in May 2007.

I've been through a number of sales and transitions and this was the worst I've seen  - SV pitted legacy teams against other and tossed Daymon in the middle with the power to collect as many fees as possible. There was never any culture of collaboration - it was aggressive, nasty and did irreparable damage to vendor relationships (no wonder vendors won't help on pricing - they've given all they can for years with no return). The result of this nastiness - the percentage of experienced retail, private label and store ops people who first signed on and then changed their minds was staggering (from 60 people to less than 8 in one Dept.) We all sat there and said how are they going to run thousands of stores with no one moving to Minneapolis.

I consulted for a few month after but even as a contractor got sick of the "rudderless ship" and took an offer to get back in the biz and ended up at Target working on PFresh - cashed out my SV stock at $46 a share and never looked back. I'm sad for both the legacy Albertsons and the legacy Supervalu peeps - they got screwed by both Larry Johnson and Jeff Noodle and now watching Craig Herckert drive it into the ground - what is the airline or fighter jet term "unrecoverable stall"? Aren't you supposed to push the nose down and pick up speed to recover-  not pull back and slow down till you stall in 2014.

Lucky you sold that stock at $46 a share. Yesterday, it closed at $2.48.

One MNB user wrote:

Your story and commentary concerning Supervalu’s plan to prosper by cutting made me shake my head in bewilderment.  It also brought to mind a piece I first read about on one of my hometown TV news channel’s (WHEC TV 10) website:

The website Business, has named Wegmans one of 16 brands that have "fanatical cult following."

The article lists Wegmans with other popular brands like Harley Davidson. It says Wegmans is something that people want to be a part of and they feel a sense of belonging while they're shopping.

Customers say they are proud to be fanatics. Shoppers said it's a combination of atmosphere, variety and freshness.

Genevieve Yaeger said, "It's like heaven on earth. It's like if God made heaven and put it in a store."

Jason Berman said, "Whenever we have out of town guests, this is always on the list of where you have to go and visit."

Some of the other brands with "cult followings" according to Business Insider are Zappos, the online shoe retailers; Yuengling Beer, Mini Cooper, IKEA furniture and Trader's Joe.

Full disclosure – Wegmans was my very first full time employer when I gave up my paper route back in 1974.  I grew up in Rochester in a time when Wegmans was the “in” place to work in the retail world (Oh, wait . . . 40 years later it still is).  I remember fondly the connection between Bob and Danny Wegman and every single employee they came in contact with as they toured the stores on a regular business.  This is a company that still today understands who the most important people in their organization are.  I worked for Wegmans for the about 10 years, the first four of which helped get me through college.  I could go on and on singing their praises, but I’ll spare you the nostalgia.  Suffice to say there are some companies that just “get it”, and then there’s Supervalu.

KC's View: