Published on: March 16, 2015by Kevin Coupe
This morning, I'd like to bring your attention to a couple of CEO statements that I saw over the weekend.
One was in a Crain's Chicago Business story about Aldi's broadening assortment and appeal. At the very end of the piece,Ken Diehl, CEO of the Strack & Van Til Food Market chain, is quoted as saying that indeed, Aldi is a tough competitor. And here's the comment that grabbed my attention:
“Aldi's low prices do seem to be resonating with certain customers.”
Now, I recognize that one does not want to offer too much praise to the competition, but I think it also is important not to sound too removed from reality. The entire Crain's story - which you can read here - is about how Aldi is opening more than 100 stores a year, has expanded its assortment from knockoff brands to organics and fresh foods, and is driven by an ambition to get beyond its low-end roots ... though, to be sure, it remains a discount format. (Though so are Walmart and WinCo and Costco, and go into any of their parking lots and you're likely to find a BMW, Audi, and a Lexus ... saving a buck is not just the purview of the poor and middle class.)
To be sure, Aldi seems to be counting on the fact that persisting economic unease in the country, including stagnant wages, will give it considerable and sustainable momentum. In other words, it ain't just poor people shopping at Aldi anymore, and pretty much anyone in the food business better be prepared to deal with a format and competitive strategy that seem awfully strong and getting stronger.
It's not just low prices. It isn't just "certain customers." And putting it that way would not give me a great deal of confidence that the person saying it has a compelling competitive response.
Maybe he does. But words matter. And these seemed way too diffident for comfort.
The other quote was in an Oregonian story about Haggen's efforts to convert more than 140 stores that it has acquired following the merger of Albertsons and Safeway to a new banner. In the story, which you can read here, John Clougher, CEO for Haggen in the Pacific Northwest, is quoted as saying that the grocer studied the prices at the Safeway and Albertsons stores and hopes not to "disrupt the apple cart.”
Now, I know that Clougher was talking specifically about prices. And the story makes the fair point that Haggen "will need to retain stores’ old customers or bring in new ones, and it will have to stand up to tough, entrenched competition. And in California, Nevada and Arizona, where shoppers likely have never heard of Haggen, it will have to create a brand image from scratch."
So here's my thinking: Haggen absolutely must upset the apple cart. It has to upset it, throw it aside, and engage in radical new retail thinking if it is to succeed as it grows almost overnight from 18 to 164 stores.
I keep going back to that great line from an Amazon ad: "Normal just begs to be messed with."
I think that the folks at Haggen - smart, experienced, time-tested leaders working with, at least for the moment, the deep pockets of private investment group Comvest Partners - have to challenge every traditional grocery tenet, every sacred cow, every entrenched attitude within the organization. I think they have to communicate a kind of fundamental dissatisfaction with the food shopping experience to the consuming public, and make guerilla-style attacks on those fundamentals a core part of the business model.
For Haggen to succeed, I think, it will have to present a really, really good reason for people to give them a shot. And I'd worry, if I were them, that any governing philosophy that looks to keep the apple cart rolling - to do business as usual - simply won't be the kind of game-changing strategy they need it to be.
Again ... I recognize that I am taking two very specific statements by two executives and drawing some broader conclusions about their approach with which they might differ.
But words are important. In these two cases, they may be an Eye-Opening window into strategic thinking and tactical plans that could be problematic.
- KC's View: