When Albertsons' board of directors selected Larry Johnston, a 28-year veteran of General Electric, to be chairman and chief executive officer of the supermarket company in April 2001, analysts were optimistic that he would bring "a breath of fresh air" to the industry.
Four years later, the company is on the auction block and is expected to disintegrate into several smaller pieces through sales to multiple parties.
Whether Johnston will end up succeeding in his pledge to "increase shareholder value" has yet to be determined, but it's clear he was unable to breathe too much life into the industry's second-largest traditional operator.
That doesn't mean the supermarket industry will stop looking outside its own ranks for fresh thinking, however. In fact, recruiters say the industry has been searching beyond the borders of the food retailing channel more than ever for management talent as operators seek to gain a competitive edge and tap into the benefits of more well-rounded leadership.
"The underlying theme is differentiation," said Jose Tamez, managing partner, Austin-Michael Executive Search, San Antonio. "Supermarket companies are looking for somebody who has that magic dust that will give them something that distinguishes them from the competition, and they are willing to look outside the industry, whereas, two or three years ago, people would have been willing to stay within the industry to find new hires."
The consumer packaged goods industry has been especially rich feeding ground for food retailers lately. Two prominent marketing executives recently switched from the manufacturing side to the retailing side: Brian Cornell, executive vice president and chief marketing officer, Safeway, Pleasanton, Calif., who came from PepsiCo; and Stephen Quinn, senior vice president, marketing, Wal-Mart Stores, Bentonville, Ark., who came from PepsiCo's Frito-Lay division.
The appeal of executives with CPG experience may lie in their training as marketers of brands, which is something supermarkets have not traditionally had as a strength, some observers told SN. The marketing departments at food retailing companies tend to focus advertising -- centered around weekly specials in printed fliers and radio commercials -- instead of the more holistic discipline of brand-oriented marketing, they said.
"I think in our industry we have had wonderful advertising departments that have been masked as marketing departments," said Rick Anicetti, chief executive officer, Food Lion, Salisbury, N.C., in a recent interview with SN. "We were great at running ads, we were great at doing TV and radio, but the whole notion of marketing, I don't think has been a core competency for our industry.
"At Food Lion, specifically, we didn't have that strength in house, and we went outside of the industry, and found somebody that was doing some creative, novel kinds of approaches that we think have added to our mix and understanding here."
Anicetti was referring to Michael Haaf, who joined the chain in 2003 as senior vice president of sales and marketing after he had served as executive vice president of marketing for Office Depot, Delray Beach, Fla. Before that, he was senior vice president of marketing at First USA Bank N.A., Wilmington, Del.
Food Lion has been among those chains -- others include Whole Foods Market and H.E. Butt Grocery Co. -- that have tapped high-ranking executives from companies outside of food retailing to fill their management ranks.
"The way I would characterize it is, I want the best talent I can possibly get, and that's point No. 1," Anicetti said. "Point No. 2 is that I would prefer that talent come from the inside, but if we're moving in a direction where we may not have the learning and understanding and grounding, then I would look to the outside, and that could be within our industry or outside our industry."
At Giant Eagle, Pittsburgh, the company sees management from outside the industry as "bringing another perspective to the table," said Michele Reuss, vice president, human resources.
"The external candidates have a different perspective from multiple industries, which can be advantageous," she told SN. "Retail candidates, while they often have tremendous knowledge of the industry, may be less well-rounded than candidates with varied backgrounds.
"For example, Giant Eagle strives to take an innovative approach to technologies that enhance the shopping experience for customers. Candidates with a background in the technology industry could bring a fresh perspective to our customer-facing systems."
In addition, Giant Eagle recruits MBA graduates who Reuss said "typically bring a skill set that is applicable to a wide range of functional specialties."
Coping With Growth
Fast-growing chains like Whole Foods have no choice but to bring in people from outside their own organization, Tamez pointed out, simply because they are expanding at such a rapid pace. Often the natural-and-organics retailer has found talent outside the supermarket industry as well.
At H.E. Butt Grocery Co., San Antonio, the privately held chain recently named Craig Boyan, a former consultant to the chain, as its chief strategic officer. He had been manager of the New York office of Monitor Group, Boston, which had been assisting H-E-B for the previous 18 months.
In the newly created post, Boyan works closely with Bob Loeffler, chief operating offer, and reports to Charles Butt, chairman and chief executive officer, a spokeswoman for the chain told SN. "He will lead a strategic review of all of the company's activities to develop plans for the future," she said.
She said the review was necessary as H-E-B's business has become increasingly complicated in recent years with new concepts like Central Market and H-E-B Plus stores.
Tamez noted that H-E-B has historically been active in bringing in management talent from outside the supermarket channel, although not often at such a high level.
"He was brought in to be [Butt's] alter-ego -- someone to be on the strategic side, and get them through the rough-and-tumble waters of the Houston marketplace," Tamez explained.
CPG Marketing Skills
Industry observers noted that executives from CPG companies make especially attractive candidates for food retail management positions.
"Retail has always had a soft spot for people from consumer goods companies, because they bring a different perspective in terms of supply chain, they bring a different perspective in terms of leadership, and in terms of background," said Mary Kier, managing director, executive search, Cook Associates, Chicago.
Jim DiFilippo, vice president and managing director for the Retail Practice Group at Cook Associates in New York, noted that executives from CPG companies tend to have "classic marketing skills."
"There's a shortage of good talent, and companies will look for the people who have the right skills, and consumer packaged goods people often have the skills at marketing," he said. "Where it differs is that manufacturers have to worry about selling the product to the retailers, and at the retailers' end, it is all about getting that product at the best price and then selling it to consumers. That's a different skill set."
Gary Preston, the former chief administrative officer at Ahold USA, who is now a partner in an executive search firm, Reffett and Preston, Bellevue, Wash., agreed that food retailers today are more willing than ever to look outside the industry to secure leaders with the right skill sets.
"People are looking for demonstrated talent," he said. "We always talk about resiliency, resolve and reputation, backed up by intellectual horsepower. If you have those, it doesn't really matter what background you come out of.
"Our clients tell us they are looking for talent," he added. "They want people who can grow with the organization, and they want people with diverse experiences."
Boards of directors in these post-Enron, Sarbanes-Oxley-influenced times are under increased pressure to find people to lead their companies that will not only deliver results but will do so with integrity and honesty, recruiters said.
"People are looking for executives that can establish relationships easily, that can adapt to their culture and hit the ground running," Preston said. "When you look at the CPG companies, those are huge conglomerates, and the people that run those are very, very talented folks."
Johnston is not the only top executive at a major supermarket company whose resume extended outside of food retailing. In fact, until Joseph Pichler retired last year, the Big Three traditional supermarket chains were all headed by "outsiders" -- Pichler came from academia and Steve Burd of Safeway was a financial advisor to the company before he became its chairman and CEO. Pichler was succeeded by a more conventional industry leader in David Dillon, scion of the Dillon's chain that is now a division of Kroger.
Thomas Haggai, chairman and CEO, IGA, Chicago, noted that executives from outside the industry sometimes need to develop a closeness to the consumer that can be lacking in other professions.
"In other businesses, that emotion is not always near the surface," he told SN. "I think food retailing does require a little bit of a different mind-set. There's an intimacy involved in providing food that people bring home to their families."
Himself an outsider who joined IGA 30 years ago after a career as a minister, Haggai said he had to ask himself whether he had the passion to perform his job when he first accepted it, and it is something he has since asked of others he has considered for hire at the company. They also must have the resolve to work within the notoriously unglamorous, glacially paced world of food retailing.
"They say that retail is detail, and food retailing is even more that way," he said. "It's not a collection of big objectives, and you have to be aware of that going in. They have to have enough discipline to stick with it -- it's not a romantic business -- and they have to be able to stay enthusiastic about the routine."
IGA currently is seeking a successor to Haggai to take over day-to-day operations as CEO, while Haggai plans to stay on as non-executive chairman. The company has engaged the search firm of Eastman and Beaudine, Plano, Texas, to find a successor. Ron Marshall, chief executive officer, Nash Finch, Minneapolis, who himself has announced his plans to retire, is chairing the committee to find the next leader of IGA.
Experience in Fresh
Recruiters noted that the skills required for some supermarket-industry positions, such as those in finance, human resources and technology, are readily transferable across industries, while retailers continue to seek out managers with experience in the perishables area to fill positions in the perimeter departments.
"It's a little easier for someone from the CPG side to go to a non-perishables job, where you are dealing with new products and development and private label -- there are a lot of similarities there," said Preston. "With perishables it's a little different, because you are getting into commodities and sourcing and consumer trends and demands.
"Whether you're dealing with yield management in meat or organic sourcing in produce, it's not easy," he said. "Everybody is trying to differentiate themselves in perishables, whether it's Wegmans or Whole Foods. Everybody wants to make a little difference in that area."
DiFilippo of Cook Associates said historically the fear that executives from other industries lacked the understanding of the fresh departments has slowed the influx of outside talent to food retailing companies.
"Other executives from outside the industry would work in the supermarket industry, except that supermarket companies do not believe they understand the perishables concept well enough," he said.
He pointed out, however, that other retailing channels face similarly challenging issues. "Design and fashion are just as perishable as produce, but you will never be able to make a supermarket person believe that."
Developing Diverse Skills
DiFilippo said the fact that food retailers do less cross training of their own executives than they used to has led them to look outside the industry for top leaders who have a broader range of experiences.
"Today there are fewer training programs like that because the budgets don't allow you to be trained in all different areas," he explained. "Now they look for the CPG companies to do that for them."
Kroger and Albertsons' Jewel-Osco division had traditionally been known for their cross training of executives, he said.
Now one of the few chains that develops broad-based skill sets among its up-and-coming executives through extensive cross training is Hannaford Bros., the Scarborough, Maine-based division of Delhaize America. That discipline has begun to be adopted by Hannaford's sister chain, Food Lion, Anicetti told SN.
Food Lion recently shifted the responsibilities of seven vice presidents, moving them from one department to another to give them a broader range of experiences within the company.
One of the challenges to conducting such training, Anicetti said, is the development of the other core people in the departments who can keep things running smoothly as the people above them rotate to different areas of responsibility.
But the staff reductions brought on by consolidation have in some cases reduced the ability to invest in cross training, DiFilippo explained, because the mid-level positions below department heads have been eliminated.
Like Hannaford and Food Lion, Giant Eagle also moves its high-potential employees to multiple departments to give them better overall knowledge of the company, Reuss said.
"Understanding all facets of the business is very important to the success of the company and to the employee," she said. "The employee's knowledge is broadened, along with their gaining credibility within the organization."
In addition, Giant Eagle also seeks to increase the depth and breadth of its management experience through its "Executive Store Experience" program, Reuss said.
"They also spend time in our warehouses and in other departments," she added.
Tamez of Austin-Michael said signs indicate that the trend toward bringing in managers from outside the industry is only gaining steam.
The fact that Wal-Mart -- which is notorious for promoting from within -- has gone outside its own ranks to find top executives is a sign that even that powerful, yet stodgy, company recognizes it has a need for fresh thinking, he said.
"To me that was a shift in their paradigm," said Tamez. "One could argue that they didn't need to do something like that, but the fact that they brought in someone from the consumer branding side shows you that even the 800-pound gorilla is willing to look at marketing their brand and their franchise even better and differently than they have done in the past."
Food Retailing Salaries -- 2005
Small Co. (Less than $500M); Medium Co. ($500M-$3B); Large Co. (More than $3B)
CEO $325,000; $525,000; $795,000
President $275,000; $425,000; $545,000
VP Finance/CFO $195,000; $290,000; $385,000
VP IS/CIO $120,000; $210,000; $245,000
VP Marketing/CMO $120,000; $195,000; $260,000
VP Operations $130,000; $195,000; $235,000
VP Grocery $120,000; $175,000; $205,000
VP Perishables $120,000; $175,000; $210,000
VP Non-Perishables $120,000; $175,000; $210,000
VP General Merchandise $115,000; $165,000; $200,000
VP Merchandising $130,000; $180,000; $215,000 VP
Meat/Seafood; $115,000; $150,000; $185,000
VP Produce/Floral $115,000; $150,000; $185,000
VP Distribution $120,000; $180,000; $225,000
VP Real Estate N/A; $175,000; $210,000
VP H/R-People Resources $115,000; $165,000; $205,000
VP Director Diversity N/A; $115,000; $135,000
VP Loss Prevention $85,000; $130,000; $175,000
VP Risk Management $85,000; $130,000; $170,000
Director Advertising $90,000; $110,000; $125,000
Director Training $85,000; $100,000; $120,000
Director Warehouse $90,000; $115,000; $140,000
Director Meat/Seafood $85,000; $115,000; $130,000
Director Seafood $75,000; $90,000; $105,000
Director Produce $85,000; $115,000; $130,000
Director Floral $80,000; $90,000; $110,000
Director Deli/Bakery $85,000; $110,000; $120,000
Director Grocery $90,000; $110,000; $130,000
Director General Merchandise $85,000; $100,000; $120,000
Director Operations $90,000; $120,000; $140,000
Director Real Estate N/A; $ 110,000; $ 130,000
Director Internal Audit N/A; $110,000; $140,000
District Manager $85,000; $110,000; $125,000
Category Mgr Non-Perishables $75,000; $90,000; $100,000
Category Mgr Perishables $75,000; $90,000; $100,000
Buyer Perishables $65,000; $70,000; $75,000
Buyer Non-Perishables $65,000; $670,000; $75,000
The chart excludes bonuses, special incentives or other compensation factors. This is a sampling of the industry based on salary ranges of client assignments and existing salaries of candidates in the database. Salaries have been rounded off to the nearest $5,000.