News articles on the front page of this issue of SN tell a tale of two companies. They are very different from one another but have a common objective: to increase sales by $1 billion during the next four years.
The two companies seeking to leap the $1 billion growth hurdle by the turn of the century are Randalls Food Markets, Houston, and Certified Grocers of California, Los Angeles.
The two news articles, written by SN reporter Elliot Zwiebach, show that while growth goals may be identical, completely different growth tactics must be run out for dissimilar styles of business. Randalls, with current sales of about $2.4 billion, is a conventional chain; Certified, with a top line of about $1.8 billion, is a cooperative wholesaler. Clearly, Certified is the organization that must change most dynamically to achieve significant sales growth. Certified's Al Plamann told those at the annual meeting that independent stores supplied by Certified need to act like a "virtual chain."
"Integrated retail chains have a built-in advantage over our organization because they can manage product flow through the distribution system and achieve significant cost advantages," Al said. "For Certified and its members to be competitive, it's necessary to create a virtual chain."
To do that, Certified will roll out a simplified pricing system, inaugurate an interactive ordering system, add customer services and seek technology upgrades. The last objective looks especially challenging since just 40% of independents supplied use front-end scanning; scan data is the well from which all information-driven applications flow.
Actually, any effort to forge independent stores into any sort of a chain will be daunting. They're not called "independents" for nothing. Meanwhile, let's glance at what a privately held and family-operated chain such as Randalls must do to net its $1 billion of growth. In keeping with what Certified's Al Plamann had to say about integrated chains, Randalls' challenges have little to do with distribution or inspiring dissimilar stores to pull their oars at the same time. Instead, Randalls is busy grappling with the psychology of folding an acquired entity into the main operation.
Randalls acquired Tom Thumb from Cullum Cos. in 1992 and has already combined buying, accounting, management information systems and such functions into the Houston headquarters. Now Randalls is facing the far more nebulous problem of positioning the sluggish Tom Thumb stores in Dallas as a hometown operation, and leaving behind the "interlopers-from-Houston" image that has sprung up in the minds of Tom Thumb shoppers and employees alike.
So Chairman Robert Onstead moved to Dallas earlier this month in a bid to burnish the stores' local image by increasing the stores' involvement with the Dallas business community, ensuring stores properly reflect local tastes and fostering communication between Houston and Dallas. No small task.
Will the strategies outlined in this issue of SN by Certified and Randalls carry the day and produce $1 billion in new sales for each? Let's reconvene in the year 2000 and find out.
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