Unified Grocers is off to a fresh start.
With the promotion of Robert "Bob" Ling Jr. to chief executive officer in May, the member-owned cooperative is assessing all processes and procedures to see where it can improve.
It has already instituted customer satisfaction teams to make it easier for the company to communicate with its members and a sales task force to explore ways to help members grow their top lines, Ling told SN.
“Anytime there’s a transition in leadership, it’s an opportunity to look at everything we do — all the basic blocking-and-tackling — to determine if we should keep doing something the same way or change or modify it to improve how we do it,” he explained.
“At the same time we’ve also begun to focus on making sure our performance is running at a superior level — from procurement to warehouse operations to deliveries.”
The Los Angeles-based company is also working to bring more specialty categories in-house and to develop programs to help smaller operators move into digital marketing, Ling pointed out during an interview with SN that also included several other Unified executives.
“Our challenge is to make sure our independent members get their fair share — and by stocking the right products and putting creative people in place, we’re able to be forward-looking, to serve diverse formats and to gather and analyze information so our members can serve their customers better.”
Unified has approximately 425 members operating 1,200 stores, plus 650 non-member customers. It services companies in California, Oregon and Washington, with additional customers in Hawaii, Alaska, New Mexico and Texas, along with some in Mexico and the Pacific region.
The membership base includes regional chains like Stater Bros. Markets, San Bernardino, Calif., and Raley’s Supermarkets, West Sacramento, Calif., as well as independents operating handfuls of stores, plus small neighborhood specialty stores.
Sales have been flat — $3.85 billion for the fiscal year that ended last September, compared with $3.9 billion a year earlier.
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“We start with a solid foundation — a strong group of independent retailers operating dynamic stores in several major marketplaces,” Ling explained.
“Their performance reflects the current economy, with some members experiencing ups and others experiencing downs, but everyone is trying to improve what they have, and that’s what Unified is working on.
“The economic environment remains difficult in many areas. In addition, all retailers up and down the West Coast are facing margin pressure and the pressure to present a strong value proposition.
“But the competitive situation seems to be improving slowly.”
Leon Bergmann, Unified’s senior vice president, sales, said the outlook is positive. “The glass is half-full for our retailers. While these are certainly challenging times, some of the very good, very strong operators are taking advantage of growth opportunities and picking up additional locations, including some from existing members.
“Of course, retailers are under a lot of pressure in Center Store, and our sales team and ad groups are listening to them and working closely with them to see what we can do better.
“As a cooperative, everything we do we do for the retailers. When we make a profit, it goes back to the retailers, which is a great thing because it completes an entire loop of teamwork.”
Focus on Performance
Ling, 56, has been with Unified for 17 years, serving as general counsel — a position he still holds. He was named president in August 2011, “at which point I was given the opportunity to work toward becoming the next CEO,” he said.
When Al Plamann announced plans last February to retire on May 1, Ling was named as his successor.
Ling said he has taken on increased responsibilities over the years. “My duties as general counsel went beyond the company’s legal affairs,” he pointed out. “Over the years I’ve participated in all company activities, including sales, procurement and finance, and I’ve learned about retail on the job.”
Dick Goodspeed, chairman of Unified and a former president and CEO of Vons, said Ling was elevated to president and, ultimately, CEO “because he was well-networked with the membership, which is a key element in the independent environment.
“In addition, as in any business, you have to have a certain amount of continuity along with new ideas, and Bob brings a different outlook as CEO. He looks at the business differently than Al Plamann did, just as Ling’s successor will look at it differently than Bob does.
“Bob is putting a new focus on accountability. What happens in all organizations is that people lose focus, and Bob’s finding new ways to measure performance.”
As part of Unified’s focus on performance, it has created customer satisfaction teams that cross traditional organizational lines “to make sure we are an easier company for the members to work with and to ensure that all aspects of the customer experience are at the highest levels,” Ling said.
According to Bergmann, the teams consist of core groups of people within each distribution center “who drill down to what the members want and communicate with them on various issues aimed at improving sales, like making sure we are in-stock and that orders are being delivered on time.
“Each team could include four people or 15 people, depending on the issue and how complicated it is,” he added.
“The program is designed to ensure that each issue gets to the right people. So when a member asks for help, rather than assuming someone will take care of the problem, the teams make sure there’s a resolution through more focused follow-through.
“We’re still working on some of the low-hanging fruit to see how quickly we can eliminate issues and make sure problems get resolved and don’t reoccur. It can be tough to get things fixed 100% of the time, and it can be frustrating to the retailers.
“But by spotlighting problems, we believe improvements will take place,” he said. “Plus, the process enables us to stay engaged with the retailers.”
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Team members report to Bergmann, who said the new approach has resulted in several operational changes that are improving the retail customers’ experience in dealing with their warehouse. “It comes down to execution and sharing best practices in each region,” Bergmann pointed out.
“One thing we’re trying to do is eliminate mis-picks,” he said. “Though we’re well within the industry norms, we’re always striving to improve — and errors can be common for a selector who is picking eight soups, for example, and who doesn’t notice the wrong variety in a particular slot. But if we’re aware of it, that’s a common error we can fix really quickly.”
If the process uncovers a need to reconfigure a warehouse to fix a problem, Ling added, “then we have our industrial engineers come in and make the change and ensure that the new standards are appropriate.”
Creating Shopper Demand
Unified has also developed a new sales task force that seeks ways to handle products better and more efficiently, Sue Klug, senior vice president and chief marketing officer, pointed out — “to focus on looking for ways to help the members grow their top line.”
“One of the initiatives we’re working on is creating shopper demand,” she said. “We’re always looking for ways to help retailers move product off the shelf and into the basket, and we’re utilizing scan data from individual companies to help those companies drive sales by providing analytics to help them identify selling opportunities.
“If one group of stores sees movement on a particular item while other stores within the same company aren’t moving a single unit, for example, we help them identify the problem, which may involve creating shelf tags to cut into the schematic to fix the problem and get them back in business.”
Unified is also helping some members move into the digital marketing world, Klug said.
“A lot of smaller retailers don’t have the infrastructure to deal with digital marketing, so we have teams that work with them to figure out how to make money when digital applications are available,” she explained.
“For example, one two-store operator is moving away from print circulars and beginning to communicate with customers through email and other social media. What we do is suggest ways he can communicate with his customers and what value messages will be effective, and he’s been willing to push the envelope and work with us.”
Unified supplies its members out of four distribution centers located in the city of Commerce, near Los Angeles, in Southern California; Stockton in Northern California; Portland, Ore.; and Seattle. It also operates a chilled warehouse and a bakery/deli warehouse, both in the Los Angeles area.
The company completed the consolidation of general merchandise and HBC into its Commerce facility last fall when a warehouse lease in Fresno, Calif., expired.
Overall warehouse capacity is sufficient to serve Unified’s needs going forward, Ling said, “though we’re making investments to reconfigure some of the facilities as new categories evolve.”
Unified is also constantly expanding the role of Market Centre, its specialty food subsidiary.
“Market Centre started more than a decade ago to enable Unified to get involved with niche food areas that may or may not graduate to the mainstream,” Joe Falvey, senior vice president of Unified and president of Market Centre, told SN.
“To be successful, independents need to be first to market, so Market Centre focuses its efforts on the next emerging category or trend, and we’re constantly searching for unique items.”
One emerging category is natural and organic foods, Falvey said.
“We try to follow where the consumer is going, so as consumer interest in that category increased and it became a bigger piece of our members’ business, Market Centre recognized it as a big opportunity, and we’ve been expanding our offerings in the category to take control of that business for our retailers.
“Members had been buying a lot of that merchandise from United Natural Foods Inc. and Kehe Foods, but as those vendors have been adding more chain customers, they seemed to change the dynamics of distribution to our members.
“Furthermore, outsourcing is more expensive, and it’s not the most efficient way to be competitive, so we’ve been taking on distribution of natural and organic items ourselves more and more.”
Earlier this year, Unified expanded the category in its Portland warehouse, “and by early fall, it will become a more significant offering in our California facilities,” Falvey said.
There were some concerns at Unified about doing its own distribution of natural and organic categories, he noted, “but we’ve been very thoughtful and moved very carefully to make sure we have the right itemization, and we’ve tried for a smooth transition that avoided bumps, and we’ve been successful.”
As retail members have switched from third-party distributors to Unified, “we’ve seen significant price reductions and sales increases, and gross profits are up,” Falvey said.
Another significant category Market Centre distributes is ethnic foods, particularly Hispanic and Asian varieties, he pointed out.
“When we developed the ethnic category years ago, it involved mostly Mexican foods. But with the influx of Asian populations on the West Coast, especially in California, distributing Asian foods has become more complex because it involves Chinese, Japanese, Korean and Filipino products and requires a more comprehensive approach that involves adjusting the selection to fit the specific needs of specific retailers.
“Right now we carry as many as 1,800 SKUs of Asian foods, and we will continue to put a lot of energy and effort into that area. And as those items become more mainstream, they will become a bigger part of our business.”
According to Ling, “Market Centre is not so much about ethnicity as about behavior. As people become more educated about what’s available, it expands the entire food chain.”
“And it’s not just providing new products, but also expertise,” Klug added.
According to Falvey, because not all wholesalers in the U.S. have a full-service specialty operation like Market Centre, “some of them have expressed interest in working with us because we have the expertise on how to get into unique categories.”
Unified’s business is divided primarily among three regions, with 45% of sales emanating from Southern California, 20% from Northern California and 35% from the Pacific Northwest.
“The membership in Southern California is led by retailers who target Hispanic shoppers,” Ling noted. “As Hispanic customers evolve into second- and third-generation consumers, we help our members adapt and tweak their formats and offerings.
“In Northern California there’s been growth among Hispanic operators, but it’s also an area where the economy is recovering so there’s a higher demand for more upscale offerings. And the Pacific Northwest is clearly led by strong natural and organic grocers like Market of Choice and New Seasons.”
Some Unified members, mostly in the Pacific Northwest, have allied themselves with IGA over the past six years. “IGA has been an outstanding addition for our members because it gives them a group identity and the ability to share information among themselves,” Ling said.
“And there’s still room for that program to grow,” he added.
“But IGA is a commitment that’s not for all stores. We didn’t want IGA to grow too broadly or arbitrarily within our membership. However, we did encourage members to take advantage of the compliance programs IGA has,” Ling explained.
Unified does not operate any corporate stores, he pointed out. “We believe we should focus on what we are best at, which is being a first-class wholesaler that supports our members through a combination of innovation and creativity and by constantly offering new items.
“However, we do offer help with financing to support member growth.”
Sidebar: Unified Shakes Up Leadership Team
Unified Grocers, the Los Angeles-based member-owned cooperative, has sought to strengthen its management team over the last few months by moving some personnel around within the organization and by recruiting two new top-level executives.
“We peered within and gave people a chance to demonstrate they can be strong leaders,” Bob Ling, president and chief executive officer, told SN, “and we also went outside the company to fill a couple of positions.
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“It’s important to have creative people in place, and we think we’ve put a great team together.”
Ling was named Unified president in August 2011 and added the title of CEO May 1, when he succeeded Al Plamann. He joined Unified in 1996 as general counsel, a position he continues to hold.
The other members of Unified’s management team include the following:
• Richard J. Martin, who remains executive vice president, finance and administration, and chief financial officer. Martin joined Unified in 1998.
• Leon G. Bergmann, senior vice president, sales, a new position. He was formerly president, independent business, for Supervalu, Minneapolis. Bergmann joined Unified last December.
• Joseph L. Falvey, senior vice president and president of Market Centre, the company’s specialty foods subsidiary. Falvey, who joined Unified in 1999, was formerly vice president, corporate sales.
• Susan M. Klug, senior vice president and chief marketing officer. Klug joined Unified last December after serving as president of the Southern California division of Albertsons when it was owned by Supervalu. She succeeded Phil Smith, who retired Jan. 1 with the title of executive vice president, procurement and marketing. Smith’s responsibilities for procurement shifted to Mark Johnson (see below).
• Daniel J. Murphy, senior vice president, fresh programs and manufacturing. Murphy, who joined Unified in 2000, was senior vice president, perishables and retail support services. Retail support services are now part of Klug’s responsibilities.
• Christine Neal, who remains senior vice president, finance, and treasurer. She joined Unified in 2003.
• Randy G. Scoville, senior vice president, accounting, and chief accounting officer. He joined Unified initially in 1995 and left in 1999 as vice president accounting, then rejoined the company in 2005 as vice president and chief accounting officer.
• John C. Bedrosian, vice president, manufacturing. He has been with Unified since 1975 and was formerly general manager of manufacturing.
• Terry Ann Bodwin, vice president, employee and labor relations. She joined the company in 2000 and was formerly executive director of labor relations.
• Scott Bower, president of Springfield Insurance Co. and Unified Grocers Insurance Services. He joined the company in 2004 and was executive vice president of the two subsidiaries before his promotion following the retirement in March of Joe Ney.
• Bob Garibaldi, vice president, sales, for Northern California and international. Garibaldi joined Unified in 1985 and was formerly general manager of sales for the Northern California division.
• Gary C. Hammett, who remains vice president, real estate. He joined the company in 2000.
• Gary S. Herman, who remains vice president, information services and chief information officer. He joined Unified in 2000.
• Mark D. Johnson, newly named vice president, procurement — a title he shares with Robert E. Lutz, who retains the same title. Johnson joined the company in 1997 and was formerly executive director of procurement for Unified’s Pacific Northwest division; Lutz has been with Unified since 1996.
• John Wiedmann, vice president, logistics, a new title. He joined Unified in 2007 and was formerly executive director for transportation in the Pacific Northwest division. He succeeded Rod Van Bebber, who retired earlier this year as senior vice president, operations.
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