Albertsons Looks To Make Impact With Changes

Discussion
Feb 23, 2004
George Anderson

By George Anderson


Albertsons announced a series of changes it was implementing on Friday including organizational changes and the creation of a new price impact store format.


The grocery and drugstore chain is reducing the number of divisions within the company from 11 to seven by combining its Southwest, Intermountain, Northwest and Rocky Mountain
units into a new Intermountain Division headquartered in Boise, Idaho.


The new price impact format will be run autonomously in a separate division under a banner other than Albertsons. Mike Clawson, former president of the Northwest Division, will
be responsible for running the price impact business.


Burt Flickinger III, managing partner of Strategic Resource Group said of the new format planned, “It’s a superb strategic decision. Despite what economists are saying, the economic
rebound is only true in the upper level. The fastest growing customer base is those with $25,000 or less for a household income.”


Albertsons, as evidenced by the issues surrounding the labor negotiations in Southern California, is looking for the new division to help it recapture lost ground to low price
competitors such as Wal-Mart.


Mr. Flickinger sees opportunities for the new stores to attract shoppers who have left Albertsons in search of lower prices elsewhere. He specifically mentioned Florida, Alabama,
Mississippi, Louisiana and California as states where conversion to price impact stores might be especially beneficial.


According to the Idaho Statesman newspaper, Mr. Flickinger speculated that the new format “could compete on price and perhaps even beat Wal-Mart because of less overhead
costs to operate the smaller stores.”


Moderator’s Comment: What are your thoughts on the intended moves announced by Albertsons?


Obviously, Albertsons has been losing ground and has even abandoned markets rather than compete as a lower-tier player. The price impact format makes sense
for the reasons outlined by Burt Flickinger but, whether the new business will be able to sell like products for less than Wal-Mart, Aldi, Save-A-Lot, etc. remains to be seen.


Also, Mr. Flickinger speculated on the overhead costs of the new operation. With that in mind, will the division’s store associates be represented by the
United Food and Commercial Workers Union (UFCW)?
George
Anderson – Moderator

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