As a former executive with Wal-Mart Stores, Supervalu CEO Craig Herkert knows what low prices and a tightly-controlled selection of top movers in food categories can do for a retailer's sales. So, there shouldn't be much surprise that Mr. Herkert's plans to turn Supervalu into "America's neighborhood grocer" include a rapid expansion of the company's limited assortment Save-A-Lot format.
Mr. Herkert is looking to double the number of Save-A-Lot stores over the next five years from its current count of 1,200. The company is slashing its dividend to help pay for the expansion and it has plans in place to make it easier for licensees to open and operate stores.
"This is not an abandonment of traditional grocery; this is an acceleration of Save-A-Lot," Mr. Herkert told analysts during Supervalu's second-quarter earnings call.
While Save-A-Lot is a big part of Mr. Herkert's answer to Supervalu's recent woes (company earnings were down 42 percent in the most recent quarter versus the same period in 2008), he also sees the need for the company's other chains to become more price competitive especially in everyday retail.
Discussion Questions: What do you think of Craig Herkert's plans for growing Supervalu? Do you see the greatest opportunity for growth with Save-A-Lot or some other part of Supervalu's business? What about its role as a wholesaler?