Herkert Enumerates Observations that Will Change Supervalu's Direction

In his first conference call as Supervalu CEO, Craig Herkert, shared 10 observations about company that are framing the strategic vision he is forming.

In the conference call, he detailed immediate initiatives that he had launched to improve the customer’s perceptions of Supervalu. The observations, which represent something of a bridge between the immediate, tactical changes he is instituting and the strategic path he is considering, are:

1. Supervalu must focus on the customer experience.

Every time a customer enters one of our stores we need to deliver a positive shopping experience. We have to and will get this right.

2. The independent retailer is a key customer that has to be part of Supervalu’s focus.

I have been very impressed with the caliber of our independents. They are an integral part of our business, and I look forward to…meeting more of them to understand their growth objectives and the role we can play in their continued success.

3. No immediate solution is available to the challenges the retailer faces.

Improving our performance is my responsibility, and that of this management team and we’re committed to getting it done. We anticipate recent trends and the pressure that the consumer is facing will continue in the near term. In fact, through five weeks of the second quarter, identical stores sales have declined approximately 100 basis points compared with first quarter ID sales.

4. Supervalu’s price position has hurt the company, in the recession particularly.

Briefly stated, our value image is not what it should be. Our retail operations are taking steps to enhance the value position, but it will take time for these actions to gain traction. Customer perception doesn’t change on a dime. However, the bar must also be raised in our customer service, in-store conditions, merchandising and customer-centric marketing, as all play critical roles in the customer experience and, ultimately, building loyalty.

5. As a high/low price operator – one that offers deep discount promotions with relatively high everyday product prices — in its most important chains such as Jewel, the company has relied too heavily on deals.

Not surprisingly we scored very high — better than our competitors — across the majority of our markets on promotions. But in this environment, this characteristic is not influencing our customer’s overall price perception of us nor their loyalty to us. We need to be less dependent on deep-discount offerings and be better positioned on everyday pricing. Again, this will take time.

6. Supervalu must market more effectively.

We possess strong marketing capabilities today, and now must better leverage this expertise across the organization to provide more customer specific incentives to shop in our stores as well as increase the effectiveness of our marketing and promotional spend.

7. With operations from coast to coast, the company has to do more to establish the uniqueness of the various supermarket brands it operates, including Acme, Jewel and Shaw’s, at retail.

We must do a better job building our unique brand identities in various marketplaces and communicating what differentiates us to our customers.

8. Organizational realignment must center on the customer.

The changes we have made…will create more informed decisions that will be made in a shorter amount of time, and our ability to meet the needs of our customers will be strengthened. This is the first step in generating new roles and responsibilities that will ultimately make us a more focused and efficient operator.

9. Centralizing merchandising and marketing will allow Supervalu to maximize the benefit of its national scale and make more sophisticated decisions as it approaches the marketplace.

It also produces a lower cost model for the vendor community and will allow both our vendors and ourselves to participate more easily in national programs. We will no longer be selected against because of the complexity of doing business with us.

10. Private label must improve.

Our own brands have shown steady growth, but we still fall short of our competitors and must take our offerings to the next level. We are accomplishing growth through new product introductions and greater penetration of existing labels. This past quarter, we introduced Stockman & Dakota, our premium Angus beef brand and Stone Ridge Creamery, our premium ice cream line. Total unit movement of own brands increased in the quarter although sales penetration remained at about 17.5 percent due to the unprecedented deflation we saw in certain commodities including milk and eggs.

As part of a realignment of executive responsibilities under Herkert, Supervalu has placed private label under Steve Michaelson, chief marketing officer and senior vice president of own brand. Michaelson will utilize his expertise in this area. He has worked for Wegmans and was CEO of online retailer FreshDirect, both of which have a stellar reputation for developing quality products. Also capitalizing on Supervalu’s research capabilities, he is charged with defining product and prices that the company offers as well as communicating to customers in the most effective manner.