PLEASANTON, Calif. — Safeway here last week told analysts that its new wellness initiative promises to become a significant piece of its business going forward — although it still has not provided much detail on its exact nature.
In a store tour with analysts as part of its investor conference, Safeway displayed “consultation/treatment rooms” alongside its pharmacy, which one analyst described as having a “spa-like” feel.
“They remained very vague about the initiative,” said another analyst, who asked not to be identified, but noted that Safeway said it had about 1,000 stores with the space for such additions.
“But it didn’t sound like they were going to open clinics,” the analyst added.
Steve Burd, chairman and chief executive officer, said he has spent about 50% of his time during the past year on the new wellness initiative, and said he wasn’t yet prepared to describe it completely for fear of tipping off competitors.
“I think in 10 years’ time we’ll be thought of as more of a wellness company selling food,” he said. “This should be the highest growth piece of our business for the next 10 years, and I think Safeway can own the wellness space.”
Burd described it as a $4 billion opportunity in the near term, and an $8 billion opportunity over the next five years.
“There is no one in the retail food or drug space today that is doing what we’re going to do,” he said.
Burd said the new venture would leverage existing store traffic and “create a destination.”
“People will come to us for this and other services,” he said, adding that 95% of the capital investment for the project has already been made.
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Safeway has been touting the new initiative for more than a year, and has delayed the launch from the previously projected fourth quarter of last year to the second quarter of this year instead. The company said it plans to test it in a few stores in a single market first, then roll it out marketwide and then more broadly by the end of the year.
Among other initiatives Safeway discussed at its investor conference is a new merchandising scheme for Center Store.
The new layout seeks to create three different destinations: “meals and ingredients,” which is adjacent to produce and meat; “living healthy,” which includes the pharmacy; and “everyday essentials,” which focuses on value and groups baby product, pet product and health care.
“The real overarching objective is to integrate the center of the store with all of the work we had done previously in Lifestyling our stores,” Burd said.
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