In today’s world, focus is essential for success, particularly in retail.
Supervalu Inc’s Chairman and CEO is Wayne C. Sales; he added the CEO’s role, to his role as Chairman, in July, when the former CEO was ousted, and now he’s got the business up for sale. All in all, dumping the CEO, and putting up the sales sign so soon afterwards, doesn’t give you a lot of confidence that its turnaround strategy is working, does it? In these difficult days for food retail in the Americas I’m not too sure there will be many takers though as, apart from the recessionary pressure that now seems quite commonplace, Supervalu is struggling to “achieve competitive pricing”: so, what exactly is Supervalu, a brand name that promises, at the very least, competitive pricing, all about then?
Supervalu has been in business for over a century and it is the third largest food retailer in the United States. It emerged out of the Winston and Newell Company, a charter member of the Independent Grocer’s Alliance but then, in 1942, it went off on its own to form a “virtual chain” of independent stores that operated under the Supervalu, or U-Save, brands. This was a pretty good idea in 1942 but sadly its business model hasn’t changed a whole lot since and today the food retailing world is a very different place indeed. From the 1960’s onwards it has grown though, by buying other retailers, culminating in the acquisition of Albertson’s Inc in 2006 for $9.7Bn. No wonder it has quite a bit of debt to worry about too.
Today, Supervalu operates 2500, or so, food and food/drug combination stores under various brands, 878 in-store pharmacies, 117 fuel centres and it still serves as primary distributors to 2200 other stores. Since 2011 it has been trying to adapt to changed times by cutting its store portfolio and it has changed leaders one or twice too. Sadly, just getting bigger and arguably more complex wasn’t a good move when the world of food retail was getting more streamlined and focused, with retailers like Walmart beginning to cramp its style, and then fast-growing local chain Giant Eagle came along too.
Supervalu has already begun to chase its brand promise, and it has started lowering prices in its Jewel-Osco chain, but in a recent analyst call Mr Sales, the new CEO, in spite of what his name might promise, wasn’t able to give any hard evidence that it had yet made a difference to profits. He also said he was trying to “balance a number of things” not least the complexities and conflicting priorities of managing a discount chain, traditional brands and distribution to the independent stores it supplies, all at the same time. Clearly Supervalu is very late in recognising that its diversified business model will not work today. If you can compete and win on one front today you are doing very well; the more you try and do the less chance you have of doing anything well enough to win at this game.
Reading about Supervalu I couldn’t help remembering my 11th October blog: I wrote about a UK based retailer, WH Smiths, and its very successful leader Kate Swann – CLICK HERE if you want to read it. A decade ago, Kate acted early to focus the business on what it did best and sold off its distribution business too. She also refocused its product range and retail outlet location strategy whilst cutting costs and leading the business forward to brighter and much more successful times. To my mind a lot of this now needs to happen at Supervalu.
The subtitle to my 11th October blog was “What Will Kate Swann Do Next?” Well, I think I might have found just the job for her: Kate, what do you think?
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