NEW YORK — Supervalu is trying to facilitate the expansion of its Save-A-Lot banner by looking for ways to reduce the costs for licensees to open new stores.
Speaking to investors at the Bank of America Merrill Lynch Credit Conference here last week, David Oliver, vice president of investor relations for Minneapolis-based Supervalu, said the company wants to bring the average cost of opening a new Save-A-Lot “from the $1 million range down to the $800,000 range.”
As previously reported, Supervalu is seeking to double the number of Save-A-Lots in the chain within the next five years, and most of that growth is expected to come from licensees. There are currently just under 1,200 Save-A-Lots across the U.S.
Oliver outlined some specific plans Supervalu has for reducing costs at Save-A-Lot, such as allowing more flexibility in store design, so that licensees can better utilize existing store infrastructure when taking over a vacated location, for example.
“If it was a pre-existing, small grocery store where they were going into, and the frozen-food lineup was already there with the equipment, and it happened to be on the right side of the store, they would have had to move that to the left side of the store,” he said.
Now Supervalu “can live with that” if the licensee can work with an existing layout.
Supervalu is also planning to allow more flexibility in the product selection that Save-A-Lot licensees are permitted to carry, he said, and is exploring ways to reduce costs through distribution synergies with the rest of the Supervalu organization. About 80% of the offering in Save-A-Lot is private label, and the other 20% is direct-store delivery.
Currently, Supervalu is “very controlling” about what Save-A-Lot operators can merchandise, but “what plays well in Philadelphia may not be the right products for small town America, and vice versa,” Oliver said, noting that the company is looking toward more “conditional flexibility” in its operations.
“We're letting the box be the box,” he said.
