CHICAGO -- Supermarket operators must study what retailers outside the food industry are doing in order to be successful in the future, Gary E. Michael, chairman and chief executive officer of Albertson's, Boise, Idaho, said here last week.
"If you're just worried about the supermarket across the street, business might be a lot easier," Michael said.
"But you have to look at all kinds of retailers because every category you sell in your store is being sold by someone outside the supermarket business, sometimes with more variety, so you have a lot of challenges to look at."
Michael made his remarks in a kickoff session at last week's Food Marketing Institute Convention and Educational Exposition here.
Joining him on the stage was Jack Stahl, president of the North America Group of Coca-Cola USA, Atlanta, who said manufacturers can do a better job connecting with consumers by being sensitive to their needs and honest in their approach.
According to Michael, retailers should concern themselves with the core issues facing the industry today. Those issues, he said, are the following:
Consolidation. "Consolidation is happening, but we have to be careful, because there's only a one-letter difference between critical mass and critical miss. So we have to ask ourselves, do we want to stay in the food business or broaden our scope by acquiring pharmacies or other related businesses?"
Pharmacy, nutrition and health care. "The supermarket philosophy for these categories used to be, put them in the back of the store and make customers walk through the whole store to get to them, which was definitely an inconvenience," Michael said.
"Now each is its own business, and we can't feature these categories as part of a basic ad because customers have different thoughts about each one. So we have run each business separately and find the perfect place for each one so we can dominate these businesses."
Home-meal replacement and restaurant-meal replacement. "We don't want to just replace meals -- we want to take them away from restaurants," Michael said. "Otherwise, I don't see how we can continue to do business in the middle of our stores and be competitive.
"Consumers want to see supermarkets in this business. But they want the products to be fresh and to taste good -- it's that simple. We used to fill this need with hot cases, with lights shining down on brown or red stuff. Now we're looking for total solutions in each department in the store, all tied together.
"After studying this issue, we determined if we want to have it fresh and to taste good, we have to do it at store level, with add-ons supplied by local sources. Half the people in this business today would like to see it go away because of all the challenges, but it's here to stay, and it's the only way we can sell the middle of the store."
Store technology. "Achieving efficiencies through technology is a huge issue, and we plan to ramp up our use of technology," Michael said.
Neighborhood marketing. "This is an advantage that independents and regional chains have, because they understand the neighborhoods in which they operate. But the bigger companies today have gained tremendous insights in this area that have made us more competitive, and we at Albertson's try to tailor each store to the community.
"Ten years ago we felt all stores had to look the same for efficiency, but we now feel we can offer the same values chainwide without every store having to look the same. The consumer is looking for a Main Street shopping experience to counter all the big box stores, and we think we're achieving great success by developing destination departments in our stores."
Supplier and manufacturing issues. "Consumers want variety, and they're not getting it at the club stores -- what they get there is promotional prices on the same items we're selling.
"So we need variety, but the bigger manufacturers are not always delivering that. But variety drives each category, and many variety items are being supplied by smaller manufacturers."
Stahl spoke about seven bedrock qualities consumers look for in deciding what items to buy. "Companies should go back to basics, because consumers still want to find values in traditional places, and brands are a shorthand way to cut through the clutter," he explained.
Stahl said the seven qualities include the following:
Trust. "Consumers see hypocrisy and self-interest from companies and groups they thought were acting in the public interest. They don't necessarily expect businesses to be altruistic, but they don't have tolerance for posturing and pretending to be something they're not. So trust is the key to developing consumer loyalty, and building brand equity is a promise, as long as you deliver on that promise."
Heroism. "Most of the public can't identify any heroes," Stahl said. "We certainly don't aspire to be heroes, but people are looking for consistent attitudes that project hope for the future and a sense of optimism, and being good corporate citizens can make heroes of a company."
A sense of honor and morality. "Consistency means people can rely on you to deliver against expectations, and people equate consistent delivery on your promises with honesty and integrity. No one expects perfection but they do expect accountability.
"When we introduced New Coke in 1985, people told us we had violated their trust, so we switched back to the original Coke formula, and consumers were glad to come back to our product because we demonstrated accountability," Stahl said.
Substance. "People want richer lifestyles, and the quality of relationships and consumer passions are redefining what wealth means. So those expectations must be met if a company's products are going to be accepted."
Combining the past, present and future. "More people are looking back to draw comfort and reassurance from the past as they cope with the present and contemplate moving ahead into the 21st century, and we must provide consumers something to look forward to. So as we tap into nostalgia, we must take a positive view of the future without discarding the principles of the past."
Control. "Consumers want to have control over their choices, rather than being part of a captive audience. The Internet gives them choice and control, and that's an opportunity for us to tell our company and brand story. There are still some consumer concerns over privacy, and while we're not sure what longterm impact that will have, we must take the initiative because this is not the time to be passive."
Consistency. "Consumers want consistent quality, features and price," Stahl said. "With 13,000 new products every year, we need to break through that clutter, and consumers will be drawn to super brands that deliver the consistencies they want."
