PL Buyer Cover Story: Charging Forward
By Jill Rivkin
Through special arrangement, we offer this excerpt from PLBuyer’s recent cover article for discussion on RetailWire.
It’s not often you’d see a company’s revenues at $40 billion and consider it “new,” but Supervalu seems to be just that. Thanks to the acquisition of Albertsons last year, Supervalu is the No. 3 grocery retailer in the United States, behind only Wal-Mart Stores and Kroger.
Michael Witynski, Supervalu’s group vice president of the Our Own Brands group, said, “Our challenge in the short-term is the complexity of bringing two large organizations together. Now that we have 103 store brands, we’re working toward consolidating those brands and making sure they’re relevant to consumers in the different formats we serve.”
“Really, there are 103 labels and very few brands,” he added. “And that’s what our charge is — to create brand equity. We need to rationalize and create better brands. Our philosophy is based on becoming a best-in-class, industry-leading own-brands company.”
Supervalu’s pillars driving business development are developing formats that are relevant to customers; creating passion and fun in selling food; having a superior own-brands offering; and leveraging the size of the organization.
“We have a lot of work to do in terms of growing our own-brand category share,” said Mr. Witynski. “We’re sitting on about 16.5 percent if you look across the enterprise. Across the different banners, it’s anywhere from 9.5 percent to as much as 24 percent … By the end of year three, we want to be at 25 percent penetration. And by the end of year five, we’d like to get to 30 percent because our peers are sitting at about 24 to 25 percent today.”
So how is Supervalu going to reach these goals? By leveraging scale, staying focused in the store and picking brands from the lot that really mean something to consumers.
“In the long-term, we’ll be working on innovation to drive growth and in a parallel path working on our strategy to create mega-brands,” said Mr. Witynski.
With mega-brands, Supervalu will recognize cost efficiencies in research and development, production, labeling, packaging and everything in between, enabling the organization to invest in its brands and strengthen profits. Altering the company’s pricing strategy will be justifiable as “we move away from that 15 percent delta across the board,” Mr. Witynski said. “It will all depend on the category manager’s strategy in center-store and fresh, and what we’re trying to accomplish with the brand. With our innovation and product quality, now we have to have the courage to realize it’s OK to be proud, deliver superior quality and base our pricing strategy on that. It’s a discipline that we need to bring in and change the culture.”
To tag some of its own-brands with a higher price, Supervalu recognizes the need for a higher level of performance in new products and the development process. What was once about a year-long process, the team is targeting six months from concept to shelf, of course varying depending on the complexity of an idea.
Supervalu is looking for vendors to play a bigger role. “The online auction, in my mind, isn’t relevant any more,” said Mr. Witynski. “To collaborate with a manufacturer, price is absolutely important, but we can get there in different ways. Collaborating makes you work hard at delivering on customers’ expectations, and we plan to work hard to collaborate vs. short-term auctions and price relationships.”
Discussion Questions: What do you see as the biggest challenges going forward for Supervalu in its private label program? What should it do to bring a sense of cohesion when it starts with 103 separate product brands/labels? What was your reaction to the comment that online auctions aren’t relevant anymore?