‘Good is Not Enough’ for Cub Foods
Cub Foods is a household name in the Minneapolis/St. Paul
area, but its history has not prevented shoppers from seeking cheaper grocery
alternatives at SuperTarget and Walmart Supercenters. That is the situation
that Keith Wyche found himself walking into as he took over as president of
Cub Foods back in January.
Mr. Wyche, who had no grocery industry experience
before joining Cub, has authored a book entitled, Good is Not Enough.
With the competition his chain is facing, that may be one title he’d like to
edit (joking, of course).
Being a relative novice in grocery is not an impediment
to success, according to Mr. Wyche. He told the Star Tribune, “I
came in with a complete consumer focus,” and relied on the “hundreds
of years of grocery experience” on
his management team.
One of the primary goals for Cub under Mr. Wyche has been
to differentiate itself from the competition. For him, that means emphasizing
greater product selection and superior choices in produce and fresh meat. The
chain is also looking to add more liquor stores to its locations.
The chain
also reduced prices on 8,000 items across the store earlier this year. “It
reinforced the Cub message of great value that maybe had been lost,” Mr.
Wyche told the Star Tribune.
Discussion Questions: What are the primary challenges faced by Cub Foods and
what are the answers to overcome those? Is Keith Wyche’s lack of grocery experience
coming to Cub Foods a positive or a negative in trying to create a point of difference
for the chain?
One of the biggest challenges for Cub is the fact that is it owned by Supervalu, a company that is deeply in debt, has laid off employees, cut its dividend and seen its stock price plummet — not exactly the best position to be in when facing an onslaught of new Wal-Marts and Super Targets. It probably doesn’t matter if the new president has grocery experience or not at this point.
While Cub is still the market share leader in the Twin Cities, that market share is slowly eroding as the competition continues to undercut Cub with pricing. It’s very difficult for Cub to respond with all the cliche responses, such as better service and higher quality perishables, since their financial situation has weakened.
We’ve seen Cub close stores by the bushel all over the country during the past few years, unable to compete with the supercenters. In the Twin Cities, they still have the home field advantage. For how long we can only guess.
CUB started out as Consumers United for Buying. That said, “we have cheap prices” and they did. Cub shoppers marked the prices on the products selected, then checked out and bagged their groceries happily since they were saving more money than elsewhere.
Time passed. Things evolved. New well-focused competition arose. Wal-Mart and then Super Target became strong competitors, offering good customer services, good value in comparable items, and they also bagged groceries for their customers.
Now Mr. Wyche is running Cub and saying he will offer a greater product selection, superior choices in produce and fresh meats but customer-bagging remains, which seems a nonparallel balance. Meanwhile SVU’s CEO says he intends to cut the number of SKUs in stores. That’s more possible imbalance.
What should Cub do? Reinvent itself–or else reconcile itself to the current notion and motion of SVU or vice versa.
In my experience in the MSP area, Cub stores are simply not comfortable to be in. The stores themselves are old, tired and frankly pretty dirty. They are no match for newer (in our market) Walmart, Trader Joe’s, ALDI or recently remodeled Target and Rainbow (Roundy’s) stores.
Low prices aren’t enough anymore. At the very least shoppers expect a clean and comfortable atmosphere to shop in. Walmart learned that low prices are not enough a few years ago. Now they are remodeling at top speed all over the country.
Cub needs to define who they are and then become the best at what they do. When it comes to selling there is a truism: You can have two of the three benefits but you can not have all three, price, quality, and service. If you are going to provide the service and provide superior quality, someone is going to have to pay the price.
As a retailer Cub needs to pick its position and then defend it.
Cub really is stuck in the middle. They can’t have low prices because Wal-Mart, Target, and Aldi would be unbeatable. They can’t have good quality because Lunds, Whole Foods,and Kowalski’s have that market cornered. They can’t have good service because Cub is unionized. Variety and selection are now out the window with Supervalu’s CEO saying he wants to cut back SKUs. Probably best to milk the good location and big market share lead for as long as possible.
Cub would do well to closely monitor customer opinion, gain valuable feedback from store managers and employees and differentiate itself over the long term in key areas.