Part one of Safeway's recent transformation was about costs. The chain battled its way to a more sustainable cost structure last year with a historic labor agreement.
Now part two is centered on customers. The company is launching a high-profile rebranding campaign to change consumer perceptions and position itself for sales growth. Safeway is pulling out all the stops with this $100 million rebranding, its largest such effort ever. The program relies on extensive consumer research. A national ad campaign touts the new slogan, "Ingredients for Life," with a blitz of spending on television, radio, billboards and other media. Safeway executives even rang the New York Stock Exchange's closing bell to formally launch the rebranding campaign.
You may wonder which will be the more challenging part of Safeway's transformation: last year's labor battle, or this year's rebranding? I believe it will be the rebranding.
That's because Safeway's goal is no less than to shed its conventional image at a time when shoppers are increasingly attracted to unconventional choices. Safeway has made some smart strides in this direction. It is centering the image campaign on perishables and staying away from a price message. It is coordinating branding across its national regions to foster a unified approach. The chain's heavy investment in advertising will guarantee that consumers take notice.
However, there are potential clouds. This isn't the first time Safeway has promoted a new program geared to building revenues. One financial analyst recalled in an SN article last week that the retailer's "breakaway sales" initiatives of a few years ago had "fallen short of expectations."
Also, Safeway has described a merchandising strategy based on upgraded fresh-foods assortments, including expanded produce and prepared foods and proprietary offerings. That direction makes sense, but isn't very unique on its face. Neither is the stated goal of branding the store, a concept that supermarkets have attempted for some time with varying degrees of success. It's not surprising that the investor community is taking a wait-and-see approach to Safeway's efforts.
Safeway's rebranding is not the most radically new approach in the supermarket space. For that, you would have to look to a company such as Delhaize, which is completely transforming its Kash n' Karry chain into Sweetbay and has created a new store banner in its Food Lion group called Bloom. Such moves are guaranteed to attract shoppers through the curiosity factor alone. Safeway's changes are more evolutionary, so they will rely on the ad campaign to convince shoppers that special new things are happening in the stores.
Which brings us to a central point: special things had better be happening in the stores. Safeway will indeed get its new look from consumers. Many shoppers will see the chain's commercials on popular TV reality shows, such as "Survivor" and "Amazing Race." Yet the in-store result needs to be worth all the promotion because Safeway may not get another chance with consumers.