The new year has brought formidable challenges to supermarket companies, which are trying to increase sales during a period characterized by a sluggish economy and a shrinking customer base.
For some companies, the biggest effort will be to strengthen cost controls by making better uses of technology or by pursuing better job-training programs to increase employee productivity.
For others, the major challenge will be doing what they've always done, but better than they've traditionally done it.
"Everyone's challenge is different, though there's a commonality
evolving from the changing business environment in the U.S.," Randall Onstead Jr., president and chief operating officer of Randall's Food Markets, Houston, told SN.
"The challenge is not to get so focused on one [competing] operation that you lose your focus on what brought you to where you are.
"Our commitment is to offer competitive prices and to run stores that reflect the history of what our company philosophy has always been about. It's a quality program, and we'll stay with it because, in the long term, that will be the difference between survivors and nonsurvivors."
Ukrop's Super Markets, Richmond, Va., also intends to do a better job of what it's always done. "The biggest challenge is to focus, focus, focus and execute, execute, execute," said James Ukrop, president. "We need to focus on managing our stores and do a better job of what we already do."
Ukrop's also plans to use technology "so we can make better use of all the information our systems are capable of generating," Ukrop said.
D&W Food Centers, Grand Rapids, Mich., plans to follow a similar approach. "We will continue to seek out ways to utilize technology to take costs out of the way we do business," explained Jeff Gietzen, president and chief operating officer. D&W will also focus "on the things we do best, including better service, friendly employees and quality products to differentiate ourselves from the competition," he added.
The focus at Farm Fresh, Norfolk, Va., will be to improve productivity through better employee training. "Because sales growth is so hard to come by today, the work force is very important, and profitability must come out of efficiency," said Michael E. Julian, chairman and chief executive officer.
"Providing good customer service is becoming a more critical aspect of growing sales. So we need a better-trained, better-motivated work force than ever before."
At Harvest Foods, Little Rock, Ark., "we think our challenge is basically a cost-cutting issue, as usual," Rob Rough, chief financial officer, told SN.
"With flat sales and little or no ability to improve grosses, we have to look at expenses. We're looking at utilities to see if we're wasting money there, and we're looking at supply expenses to see if we're doing all we can and buying as cheaply as we can. And we're looking at our administrative head-count."
One of the biggest challenges for Save Mart Supermarkets, Modesto, Calif., will be deciding whether to keep older, smaller stores, said Robert Piccinini, chairman, president and CEO, while Big V Supermarkets, Florida, N.Y., plans to "get smarter about how we operate in terms of expense control," said Stu Rosenthal, president.
On the wholesaler side, Fleming Cos., Oklahoma City, plans to undertake its first restructuring in 17 years "to take significant costs out of the system so we can implement the full vision of Efficient Consumer Response," said Robert E. Stauth, president and CEO.
Here are comments from executives on their biggest challenges:
Stu Rosenthal
president, chief operating officer
Big V Supermarkets
Florida, N.Y.
As we look at 1994, the challenge is a sales challenge. We're fighting for sales in a bad economic climate with an overdose of competitive activity, particularly in areas where competition has built too many stores too fast and more people are signing leases for future sites.
Our situation is unusual because we're in an area where competition has built too many stores, in a pocket that's been hurt by thousands of layoffs by IBM in Dutchess and Ulster counties. Over the last five months alone in Dutchess County, two Price Choppers, one Stop & Shop, one BJ's (warehouse club), one Price Club and one Wal-Mart have opened in an area of 5 to 6 miles that couldn't support all those stores in a sound economy.
So our focus will be twofold -- to grow sales and to get smarter about how we operate in terms of expense control. We're examining both pieces carefully.
We plan to enter the Connecticut market next year for the first time -- beginning with stores in West Haven and Milford -- and we have a very aggressive store opening program for 1994, though I can't discuss the details.
Rob Rough
chief financial officer Harvest Foods
Little Rock, Ark.
Our biggest challenge is to control expenses in the face of uncertain sales. We don't know what inflation is going to do, and competitors like Wal-Mart seem to be still out there, leading to greater uncertainties. But we don't see any huge growth in sales. In light of that, we face the ongoing challenge of maintaining expenses. We had Teamster negotiations begin last month and UFCW contracts expiring in May, which add further uncertainties. And whatever happens in negotiations, we're uncertain what will happen with health care, whatever Clinton does, because those things won't have any impact until 1997 or 1998.
We think our challenge is basically a cost-cutting issue, as usual. With flat sales and little or no ability to improve grosses, we have to look at expenses. For example, we're looking for utilities to see if we're wasting money there, and we're looking at supply expenses to see if we're doing all we can and buying as cheaply as we can. And we're looking at our administrative head-count.
These are all areas that got some hard looks in our budgetary process.
Some issues have already been dealt with. We let some people go to streamline our administration, and we're using technology to replace them on a constant basis. We've also made some progress in our plans to reduce gas and electricity usage.
James E. Ukrop
president Ukrop's Super Markets
Richmond, Va.
The biggest challenge is to focus, focus, focus and execute, execute, execute. We need to focus on managing our stores and do a better job of what we already do.
We're working harder to take costs out of the system through technology. Toward that end, we're going to change our Ukrop's Valued Customer cards to check-cashing cards and, by year's end, to introduce a debit and credit card because that's something customers are looking for.
We're also working with our wholesaler, Richfood, in the areas of using computer programs for pricing and promotional buying in an effort to get rid of paper. We've been on the leading edge of prepared foods, but we want to move forward in technology so we can make better use of all the information our systems are capable of generating. And we're redoing all our front-end point-of-sale systems in a move toward targeted marketing.
Randall Onstead Jr.
president, chief operating officer Randall's Food Markets
Houston
Everyone's challenge is different, though there's a commonality evolving from the changing business environment in the U.S.
Our biggest challenge will come from the competitive environment in which we operate. It's a mixed bag, depending on which city (Houston or Dallas) we're looking at, though it's a moving target. One city is competitive for one period, then not as much, and a month later it flip-flops.
A year ago the challenge in the industry was that everyone was trying to learn to compete with clubs, supercenters and other formats that decide to sell groceries. But the bloom is off that rose. And although that phenomenon is still prevalent, retailers are finding they can survive against those types of formats.
The challenge is not to get so focused on one operation that you lose your focus on what brought you to where you are.
Our commitment is to offer competitive prices and to run stores that reflect the history of what our company philosophy has always been about -- well-designed stores that are clean, well-stocked, with lots of departments and services. It's a quality program, and we'll stay with that because, in the long term, that will be the difference between survivors and nonsurvivors.
Michael E. Julian
chairman and CEO Farm Fresh
Norfolk, Va.
Our biggest challenge in 1994 will be to upgrade the productivity and competency of our work force.
Because sales growth is so hard to come by today, the work force is very important, and profitability must come out of efficiency.
Customer relations must evolve from a work force that understands how to serve customers. Providing good customer service is becoming a more critical aspect of growing sales. So we need a better-trained, better-motivated work force than ever before.
This is an area we've been working on for a couple of years. We've just spent enormous time and effort in the Richmond area, where we acquired some (former Safeway) stores, to develop the right kind of culture within our work force. We're working with our managers and associates there to develop a participatory approach -- to make them part of the organization for problem-solving and to work on issues they're confronted with. And we're spending time and money on formalizing skills training programs, because with the right culture and the right training, you can develop outstanding employees who will stay with you for years.
Jeff Gietzen
president, chief operating officer D&W Food Centers
Grand Rapids, Mich.
The biggest challenge is the constantly changing state of food retailing as it shifts from traditional competition to nontraditional competition. It's an ongoing challenge we must meet by serving customers with quality products and better marketing to keep these new forms of competition from taking away our traditional sales base.
We've been fighting off the challenge for some time, and we will continue to do more of it by focusing on the things we do best, including better service, friendly employees and quality products to differentiate ourselves from the competition.
With that in mind, we've moved more heavily into in-store cafes, food service and salad bars over the last 18 months, and we will continue to emphasize those areas.
We will also continue to seek out ways to utilize technology to take costs out of the way we do business. For example, we've installed electronic payment systems at all stores for credit purchases, and we'll be adding debit and a proprietary card-based marketing program in 1994.
Robert M. Piccinini
chairman, president and CEO Save Mart Supermarkets
Modesto, Calif.
The biggest challenge is just adjusting to what's going on in the marketplace, keeping expenses in line and making the right decisions on which stores to remodel and which ones to bite the bullet on -- all of which are challenges in any year.
In any company there are a number of stores that have become dinosaurs because they are old and small, and when their leases come due, you have to decide whether to lock them up and evacuate, scrape them or build a new store across the street.
Those decisions have become more pressing because the economy is tougher now. Three or four years ago, we would probably keep a 20,000-square-foot store that was making a little money. But now we have to decide if a bigger store would be more profitable or whether we'd be better off leaving that location completely.
There's no particular trend. Each store has to be looked at on its individual merits. In rural areas, where many of our stores are located, if we're the only player, then it makes sense to scrape it or build a new, 45,000-square-foot one across the street.
But in larger metropolitan areas, if we have a 23,000-square-foot store with a competitor's new, larger store down the street, it doesn't make much sense to keep it.
Robert E. Stauth
president and CEO Fleming Cos.
Oklahoma City
Our biggest challenge is a unique one at Fleming. It's a restructuring and re-engineering project designed to take significant costs out of our system so we can implement the full vision of ECR. That's our No. 1 priority in 1994.
We have to relook at everything we do. Companies of our size have downsized and made significant changes every three years for the last 10 to 15 years, and what makes this so unique is that Fleming has not restructured for 17 years.
In a company like Fleming, when you start changing the way you manage the business, it has major implications about where we're going, so this is becoming a major cultural event at Fleming.
