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The big news in the grocery business is the sale of Safeway to Albertson's parent company, Cerberus Capital. Safeway, the number two grocery retailer in the U.S., did not believe it had the strength to "go-it-alone" in the fast changing retail business.
After years of fighting off, Wal-Mart, Target, WINCO and Aldi on the lower-priced side, and Whole Foods, Trader Joe's on the natural, sustainable, quality side, the huge retailer looks to merge, cut costs and manage the steepness of their decline.
Is there a lesson for foodservice operators in this equation? Below are the highlights followed by my comment for foodservice operators.
I read an article in Bloomberg Businessweek, suggesting that for Safeway to succeed post-acquisition the company "would be wise to focus sharply on simplicity and shift away from the grocery chain model of cramming 60,000 different products inside each location. A narrower list is smart strategy." The story suggests four reasons.
• Customers more and more want retailers to curate their product selection: "Most shoppers don't want 20 brands of hummus or yogurt. They want experts to narrow that down to the best two or three, each offering distinct flavors and characteristics.
Foodservice operators should offer fewer menu choices and absolutely nail the execution in the kitchen, front of the house and in their marketing message.
• No supermarket should depend on big brands, which have largely become commodities: "If a chain is going to differentiate itself with a heavy reliance on these staples, unless it trims margins to the bone and hopes to make money on volume. That's not a battle regional grocers can really hope to win."
Selling pepperoni pizza for the cheapest price is a loser. Offer a differentiate product based on quality. Get rid of coupons and charge the right price for the value of the food instead of telling consumers it is not worth full price.
• Private label has become a brand statement, representing products that cannot be bought elsewhere ... and it will behoove Safeway to concentrate more on them.
Foodservice operators should spend their time on R&D and develop signature items that define their restaurant.
• And there ought to be a greater focus on local: "Buying locally produced food appeals to consumers on multiple levels. It's more eco-friendly than shipping organic yogurt from New Zealand. It turns national retailers into community players that support local businesses and artisans in our increasingly entrepreneur-driven economy. And it seems healthier, as the food typically is fresher and more in tune with the seasons."
So simple, especially with produce. Tell the local story, know your farmer and let consumers fall in love with them, too.
The food world has changed. Hanging on to old models that "always worked" is a death sentence; just ask the Safeway Execs who bailed out to the highest bidder.
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