PORTLAND, Ore. -- Retailers are overlooking consumers in their rush to consolidate and achieve money-saving synergies, resulting in a serious breakdown in consumer loyalty, the chairman of Bruno's Supermarkets, Birmingham, Ala., told an industry conference here last week.
"Mergers are driven by synergies, and consumers are just an afterthought," Terry R. Peets told the sixth annual Food Industry Leadership Conference sponsored by Portland State University.
"When retailers rationalize assortments at acquired stores, remerchandise those stores, change the pricing and marketing approach, alter distribution patterns that create out-of-stocks, rationalize manufacturing by adding and deleting items, and changing recipes, customers do notice."
According to Peets, consumers have a different view of consolidations than the industry. "While we tell them how good it will be, the reality is that it can be quite different, and consumers are angry about the changes.
"They really don't care what we do or what we save backstage. Their concern is, why is it necessary to discontinue so many items and to remerchandise and change the store?"
"Mergers will continue, but the planners should focus a lot more on consumers."
Peets suggested that companies making acquisitions should put consumer representatives on their integration teams. "The customer is worth at least that degree of consideration," he said.
Peets declined to comment to SN last week on trade reports involving a possible acquisition by Bruno's of an unspecified number of units of Jitney Jungle Stores of America, Jackson, Miss., which is seeking to divest stores as part of a Chapter 11 restructuring. "But if ever we do acquire some stores, we will keep the consumers in mind," Peets told SN last week.
Ron Johnson, chairman and CEO of Jitney, also declined comment last week. However, industry sources said an announcement could come as early as this week.
In his presentation, Peets said the four primary reasons for consolidation are greater efficiencies, better growth potential, increased profitability and increased shareholder value. "But no reference is made to consumers -- how odd!
"The reality is, consolidation is for greed. It's a series of takeaways for customers, and it creates a consumer who isn't loyal to anyone."
As consumers feel disenfranchised by consolidation, they also feel less loyal to any one operator, Peets said. He cited a southern California study by Information Resources, Chicago, which indicated 70% of each chain's best customers said they shop at competitors' stores on two out of four trips, spending 50% of their food dollars with someone other than their preferred chain. The IRI study defined best shoppers as the top 33% of a chain's customers based on dollars spent.
Consumer frustrations with consolidation are not limited to retail mergers, Peets said. "Consumers are being pummeled by consolidation throughout the food industry," he declared.
"When regional brokers are acquired by national firms, conflicts arise over representation at the retail level, and the result is often poor shelf conditions and slower new-item placements, and that doesn't help consumers," Peets said.
"And the acceleration of consolidation among packaged goods manufacturers results in brand rationalizations and also leads to poorer shelf conditions, out-of-stocks and discontinuance of some preferred items."
