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Safeway Finds the Best Way

I recall reporting on a mess of problems at Safeway some years ago. They had acquired Randalls in Texas and Dominick's in Illinois. It culminated in 2001, when the retailer bought Genuardi's outside of Philadelphia. Shoppers were upset by the changes the parent company made after that purchase, taking away Genuardi's local flavor and replacing it with centrally bought, cookie-cutter business practices that made it just another chain in the Safeway family of stores.

Well, chairman and CEO Steven Burd and the folks at Safeway can feel vindicated. Not only has the chain rebounded from those troublesome times, it's flourishing. First-quarter results reported this week reached 44 cents per share, 2 cents ahead of analyst estimates. Safeway is forecasting its full-year profit will come in at $2.25 to $2.35 per share, up from the $1.99 per share earned in 2007.

More than anything, executives can thank health and wellness for the success. In 2005, the $40.5 billion chain (No. 4 in SN's "Top 75 North American Food Retailers" list) launched the "Ingredients for Life" branding campaign. The initiative was built around health-focused Lifestyle format stores featuring upgraded perishables, a better selection of better-for-you foods and eventually, two private labels centered on wellness: O Organics and Eating Right.

Both of those store brands have been so successful they're going global as part of a new broad distribution agreement called the Better Living Brands Agreement. Safeway officials say O Organics is the No. 1 organic food brand in the country, while Eating Right has become one of the fastest-growing health & wellness food brands. Better Living will make both labels available to all retail and food service channels in the country, supported by a network of co-packers and distribution companies.

I don't think there's another conventional food retailer out there that has used health and wellness to improve its own health as much as Safeway. Say what you will about conventional operators getting into the wellness business. Safeway has done it right.