[Image of: RetailWire Logo and Tagline (for print)]
 
[9 comments]

Is the New Supervalu a Stronger Supervalu?

March 28, 2013

Now that Supervalu has completed the sale of Albertsons, Acme, Jewel-Osco, Shaw's and Star Market stores — and related Osco and Sav-on in-store pharmacies — to AB Acquisition, the question is: what comes next?

The company, which had shifted most of its focus to retail operations in recent years, has now returned to its roots in grocery wholesaling.

"As we move forward, Supervalu will continue as one of the largest wholesale grocery providers in America serving nearly 2,000 independent retailers in 43 states; we plan to continue growing our hard discount Save-A-Lot format that includes over 1,300 stores nationwide; and we will operate five, strong regional retail banners," said Sam Duncan, Supervalu's president and chief executive officer, in a statement last week. "I am pleased to be leading Supervalu during this time of change and strongly believe there is an exciting future ahead for us."

In keeping with its focus on wholesale operations, Supervalu plans to form an advisory council of retailers it supplies to meet three or four times a year, reports Supermarket News.

Among the changes already taking place at Supervalu are job reductions. The company announced it would eliminate roughly 1,100 positions, affecting nearly all its offices and spreading across most departments. Store-level workers and employees at Save-A-Lot, Supervalu's limited assortment grocery format, will not be affected.

"The decision to reduce our workforce, although difficult because of the impacts to our people, is the necessary next step in the rebuilding of our business," Mr. Duncan said. "This move is an important part of our strategy to be more focused and efficient in our operations, including how we staff and support our three business units going forward."

FINANCIALS:     [NYSE:SVU] [ ]

Discussion Questions:

What does the future hold for Supervalu? Are there specific steps you think the company must take to be successful going forward?

While we value unfettered opinion, we urge you to show respect and courtesy for people or companies about whom you comment. Keep in mind that this is a public, professional business discussion. RetailWire reserves the right to edit or refuse the publication of remarks that we deem unsuitable. We may also correct for unintended spelling and grammatical errors.

Instant Poll:

How optimistic/pessimistic are you about Supervalu's plan going forward?

Comments:

With the recent reported financial success of such wholesalers as AWG, based in Kansas City, I believe the wholesale niche is still viable for Supervalu. In fact, their recent financial woes appeared to be directly attributed to their acquisition of a troubled Alberstsons brand, which was one Supervalu never seemed to be comfortable in digesting.

IF, Supervalu thoughtfully rebuilds their wholesale business, while cautiously continuing to run successful corporate stores such as Sav-a-Lot, they should be in position to remain a major player in the grocery industry. But for Supervalu it is all about staying with what you do best. They are saying the right things now, but time will tell if they stay the course.

[Image of: View Braintrust Panelist button]
Mark Heckman, Principal, Mark Heckman Consulting

With all the changes, Supervalu could end up on the positive side of the profit ledger if they do the right things. Giving the independents the deals needed to compete will be their success or downfall, as there are many competitors out there who are watching closely. We'll see what happens, and I wish them well.

[Image of: View Braintrust Panelist button]
Tony Orlando, Owner, Tony O's Supermarket & Catering

Supervalu needs merchants, not lawyers and accountants or even HR people. They need merchants who can help the retail customers sell more product profitably. Merchants who get out in the field and roll their sleeves up to do resets and bag with the store owners. Merchants who are really passionate about food and motivated to help customers differentiate themselves in the marketplace. Merchants who know when to apply technology to business challenges and opportunities, and when to straight out collaborate with trading partners to build solutions that deliver on the retailer's promise of exceeding the expectations of the shopper.

I know it's a lot harder than it sounds, but only by backing the merchants with the resources they need (and not the other way around, which is in large part how they got into this mess) will Supervalu make it back to the top of the wholesale grocery industry.

[Image of: View Braintrust Panelist button]
Ron Margulis, Managing Director, RAM Communications

I think they need to keep selling off assets. They can't sell groceries as cheap as Walmart and Target. They can't provide a compelling shopping experience. Their wholesale customers are scared and moving to other wholesalers. Supervalu still has a ton of debt, pays rent, has union labor, and their best employees have moved on. Now they are stuck with second stringers trying to face an onslaught of new competitive openings. Do the math. I think we will continue to see 1990s-style cap ex-starved stores with skeleton crews. I could be wrong, but I'm not.

David Livingston, Principal, DJL Research

This week's Supervalu announcement of eliminating 1,100 positions nationwide, including 600—or almost 40 percent of the total—from its Eden Prairie, Minnesota, headquarters, speaks volumes to its future and direction.

In addition, the lack of investment in terms of capital and human resources into its five regional chains makes these entities less relevant and viable in today's food retail landscape. I applaud the return to wholesaling and the focus on Save-a-Lot. Will this be enough going forward? I suspect not, but time will tell.

[Image of: View Braintrust Panelist button]
Richard J. George, Ph.D., Professor of Food Marketing, Haub School of Business, Saint Joseph's University

The destruction of Supervalu's dynamic, profitable and industry leadership aura in the past is the greatest tragedy of all.

It's true that Supervalu could not become what it had to be by remaining what it was at the start of this century. So it let its clouded and required ambition lead it an overly debt laden abyss by acquiring a formerly dynamic retail chain and its previous acquisitions.

After a year of adulation of Supervalu for its "astute" move in becoming the fourth largest food chain overnight, the economy started to tank causing Supervalu to flounder. That resulting in its stock steadily sinking for five years from $49.67 on July 18, 2007 down to $1.73 on July 25, 2012.

Now it's back to the future of the mid-70s and 80s primarily as a grocery wholesaler again, but with new and more costly executives, higher corporate overhead, less corporate pride and a slower expanding independent grocer environment.

What To Do? Unless Sam Duncan can prove to be the foresighted leader that Jack Crocker was, who helped produce 3 stock splits in a decade, the resuscitation of Supervalu back to its former greatness may not occur.

[Image of: View Braintrust Panelist button]
Gene Hoffman, President/CEO, Corporate Strategies International

With Walmart, Amazon and others getting into fresh and same day delivery, it will be interesting to see how this all plays out for Supervalu. If lot of this same-day delivery is going to be fulfilled by a drop ship vendor, it could open new doors for many local vendors and perhaps more opportunities for Supervalu. I'm sure Supervalu will turn around, and it's sure going to be an interesting journey for the market to watch.

[Image of: View Braintrust Panelist button]
Shilpa Rao, Practice Head - Merchandising, Tata Consultancy Services

They have two do two things—deal with their ongoing debt, and be the wholesaler that they know how to be. If they have forgotten how, then look to the past on how their predecessors did it, and adjust for today. Mr. Orlando, and Mr. Margulis are correct—they need to provide the deals and support for their supplied merchants to compete.

William Passodelis, associate, ML Co.

Many independent consumer business owners are having a major problem understanding, accepting and/or adjusting to today's technology environment. Supervalu's future depends on how well they can help their merchants achieve that hurdle. If they are successful in accomplishing that objective, Supervalu can end up back on top. However, like so many tier one merchants, their current staff more than likely does not get the real independent's needs, and as a result, they will continue to offer the wrong opportunities. Time will tell if they can make the big tier change when working with smaller tier merchants.

Gene Michaud, Principal, tGrowth Solutions

Search RetailWire
Follow Us...
[Image of:  Twitter Icon] [Image of:  Facebook Icon] [Image of:  LinkedIn Icon] [Image of:  RSS Icon]

RetailWire's
Getting Started video!

View this quick tutorial and learn all the essentials...

RetailWire Newsletters