A&P, Montvale, N.J., said it is looking to grow profits in 2002 by increasing the penetration of private-label brands.
"It is within our ability to drive penetration to at least 15%" from its current level of 12%, Beth Culligan, A&P chief operating officer, told investors at the Food and Drug Retail Conference sponsored by Credit Suisse First Boston.
Each percentage-point increase, Culligan said, results in a $5 million increase in EBITDA (earnings before interest, taxes, depreciation and amortization).
"We have so much opportunity in private label," she noted. "We're setting targets. We should have 15% penetration [with a particular product]. We are also looking at profitability along with volume."
Other key strategies outlined by Culligan included:
Achieving operating efficiencies. "We are embracing category management so that we can optimize our mix of categories and brands," she said. "We are also building more effective vendor relations and using technology to continue these improvements."
Driving out costs. Culligan credited A&P's strategic sourcing initiative for streamlining purchasing. She noted that in the past, each of the company's regions bought nonproduct items separately, but now, having consolidated those buys, A&P saved $5 million on shopping bags.
Aligning the organization. Culligan said the company is introducing performance-based pay for executives and store employees, and is instituting continuous training programs.
The company's comparable-store sales increases are "an early and strong sign of improvement," said Christian Haub, A&P chairman, president and chief executive officer.
Haub also explained that A&P has instituted a "much more rigorous review process" for new store development. "There is much more research in every step of the process."