Hyperlocal merchandising strategy is beginning to pay off
by Terrie Ellerbee/associate editor
Minneapolis-based Supervalu Inc. has been focusing on merchandising, connecting stores across its network based on similarities—for example, having a university in town—and on growing its private label line.
The company reported second quarter fiscal 2012 net sales of $8.4 billion, down from $8.7 billion in net sales in the previous year, but net earnings were $60 million vs. a net earnings loss of $1.47 billion a year ago.
Retail food net sales were $6.6 billion in the second quarter vs. $6.7 billion a year ago.
Identical stores sales were negative 1.8 percent, an improvement over the first quarter’s negative 3.9 percent.
Craig Herkert, president and CEO of Minneapolis-based Supervalu Inc., said the consumer remains “severely stressed.
“As long as Americans continue to express broad financial concerns, personal spending will be constrained. We cannot change this macro trend, but we can and will position our business to respond,” Herkert said.
One response is that Supervalu now merchandises around the dates when food-stamp benefits are distributed. The Save-A-Lot banner is seeing “high, high, high EBT usage,” Herkert said. “Depending on the store and the area, we see significant lifts when EBT breaks.”
Supervalu continues to expand its private label brand offerings, and by the end of its fiscal year will have added 80 new items. The Essential Everyday, which began rolling out to stores this summer, now has about 140 products. It will continue to expand this winter with additional categories like canned vegetables, condiments, dressings and frozen foods, Herkert said.
In some markets, the company’s entry-priced private label products, like $1 pizzas, are selling well, and in other markets the Culinary Circle and Wild Harvest organic lines are appealing to consumers.
The key, Herkert said, is to make sure that Supervalu’s stores are offering relevant assortments. Toward that end, the company gave its store directors control of half of the in-store displays in its 1,100 locations in early September as it continues on its path to become “America’s Neighborhood Grocer.”
“Today, we are in a better position than ever before to understand what each store needs to better meet the needs of their shoppers,” Herkert said. “Hyperlocal is about looking at our stores on an individual basis and determining what’s appropriate store-by-store, aisle-by-aisle. It includes national brand promotions, customized assortments, associate engagement and taking full advantage of our scale to deliver real value.”
The hyperlocal focus is increasing sales around sporting events like high school, college and professional football.
Supervalu has set up a college store network that is connected through an internal social media platform, so a store director in Southern California can connect to one in Cambridge.
“There are certain things that all college-age shoppers are going to be looking for,” Herkert said. “The communication among store directors at our college stores creates good camaraderie and a healthy sense of competition.”
Another cost-conscious merchandising plan is playing out in the Chicago market. Jewel-Osco has begun a “fair price plus promotion” in its produce sections, adjusting prices on about 200 items. Herkert said the produce area has signs promising “fresh produce, fresh prices,” to communicate the value to customers, and store employees have been trained to help shoppers choose fruits and vegetables and incorporate them into meals. It has garnered enthusiasm, Herkert said, and Supervalu will roll it out to more of its banners by the end of the year.
Supervalu continues to emphasize its value proposition to retailers in its independent business segment. Second quarter independent business net sales were $1.8 billion vs. $2.0 billion a year ago, a decrease of 5.8 percent.
“The slowing economic environment has made some retailers more cautious in shifting their affiliation,” Herkert said.
Save-A-Lot same store sales increased 3 percent during the quarter, but the economy is impacting the ability of licensees to get financing for new stores, he said. Still, the company believes it can double the size of the Save-A-Lot business.
Instead of building more Save-A-Lot locations, Supervalu plans to increase its investment in customer-facing assets like merchandising fixtures. It will also refresh some stores, increasing its traditional stores remodels from 55 to 75 to a new range of 80 to 90, as well as invest in energy management projects.
The company expects full-year net sales to be in the neighborhood of $36.5 billion, and for independent business segment sales to be down 3.5 percent to 4.5 percent vs. the previous fiscal year.
Projections for same store sales for the fiscal year are negative 2 percent to negative 2.6 percent.