Safeway’s Burd Looks To Differentiate

Sep 09, 2004

By George Anderson

Safeway’s chairman, president and chief executive officer, Steve Burd told analysts at Prudential’s Back-to-School Consumer Conference yesterday that to be successful the grocer would need to find a way to differentiate itself from its competitors.

Although Safeway had not yet accomplished this, it was not alone, he said. “No one has adequately differentiated themselves.” He added, “We think we can be the first to do that.”

Mr. Burd said he saw the greatest opportunity for differentiation on the perimeter of the store. Others have said that over the years, he observed, and have made attempts through merchandising but Safeway believes the answer is in the quality of the product.

“When we talk about differentiation, we mean that we intend to become famous, literally famous, for having the best meat, which to us means we must have the most tender product.”

The company was also looking to develop the same reputation in its other perishables including produce and deli.

Mr. Burd also spoke about the need for reinventing the company’s cost structure. One example of that is the on-going labor negotiations with the United Food and Commercial Workers (UFCW) in various marketing areas.

Another area, would be in the way the company buys. Because Safeway is a “highly promotional operator”, it has relied heavily on vendor deals. The company intends in the coming years, said Mr. Burd, to go to more dead-net pricing.

“We think the way supermarkets typically buy goods is more complicated than it should be,” he said. “Our goal is to get down to a net cost so allowances go away.”

As the company grew sales, he said, “we would expect to pay less for the products.”

Moderator’s Comment: What are your thoughts on Safeway’s plans to differentiate? What impact will dead-net pricing have on the grocer’s competitiveness?

Steve Burd is not looking for dead-net pricing and its other plans to restructure costs to allow Safeway to compete on price across the board with the likes
of Wal-Mart. He does believe, however, that the grocer will be able to compete in core categories important to consumers. That combined with the company’s “famous” perishables
will be enough to help it enjoy steady growth.

George Anderson – Moderator

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