WEST SACRAMENTO, Calif. — Michael J. Teel feels like he's walking a tightrope, though he's not concerned about losing his footing.
Teel returned to Raley's Supermarkets here as president and chief executive officer earlier this month after eight years pursuing other ventures.
“As CEO I'm the one charged with walking that tightrope between what we've done in the past and what we have to do going forward,” he told SN.
“It's my job to take all the opposing points of view and find a way to bridge the transition between the need to change and the desire to retain what's worked for us in the past and who we are going to be — and that's something I haven't quite figured out yet.”
Interviewed just five days after he rejoined the company, Teel acknowledged it could be several months before he makes some of the long-term decisions Raley's might need to make, though he's ready to implement some short-range programs immediately, including investing margin to drive sales — a program that should become evident to consumers sometime in February, he said.
“We're not afraid to spend margin to increase traffic and increase customer share for the short term while building a longer-term plan,” Teel explained. “We will get better at selling the right items at the right price, and we won't let conventional competitors outsell us.
“In addition, we've spent a lot of money over the last two to three years investing in technology, and we're getting ready to launch a number of those systems. But we anticipate a rough market ahead for the next several years, so we want to proceed wisely and take our time doing so.”
Raley's has a lot of initiatives under consideration, Teel noted, “but we will narrow the focus down to a handful geared to driving top-line revenue because we can't allow our market share, which has been dropping for the last two years, to continue to shrink.”
Teel, 58 — grandson of Tom Raley, the chain's founder — served as president and CEO of the family-owned company from 1997 until 2002, when he resigned and became a partner in a venture capital company. However, when his family asked him to return to run the 136-store, $3.4-billion company earlier this month, Teel accepted the offer.
“Raley's is a family-owned business,” he explained, “and because it's our business, the family should be involved. Plus, we want to keep this as a family business, and we feel the best way to do that is to have someone from the family involved in top management.”
The company has been run by outsiders before — first by Chuck Collings, who had worked closely with founder Tom Raley and helped train Teel through the 1980s and 1990s to take his place, and then by Bill Coyne, who succeeded Teel when Teel left in 2002.
“I've observed the company as an outsider for the last few years,” he said, “so I have a general idea of the challenges we face. But now that I'm back in the midst of the company's business, I'm getting more information, and it could be three or four months before I can offer some concrete changes that we need to make.”
According to industry sources, some of the challenges Raley's faces stem from an unwillingness by the owners to adapt the business to compete with a wider variety of companies than it did when it dominated the Sacramento marketplace, including Wal-Mart Stores and WinCo on the low end; Safeway and Save Mart in the middle; Whole Foods Market and Nugget Markets, a local independent, on the high end; plus specialty operators like Costco, Trader Joe's — and soon, Fresh & Easy Neighborhood Market — that have made their mark in the last couple of decades.
Raley's has also maintained high-low pricing — what it terms “value” pricing — despite the economic downturn.
“What Raley's needs to do is rethink how it does things if it hopes to play in this environment, and that's going to be tough,” George Whalin, a consultant, told SN in October.
Teel said Raley's is not going to try to be something it's not.
“I don't think we're going to change who we are or the quality and service we've always stood for — but we will get better at doing it,” he told SN.
He also denied Raley's has shut its eyes and ignored the growth and breadth of competition it currently faces.
“People here are not resistant to change,” he said. “But we recognize there have been changes in the communities we serve, and some markets have shifted dramatically because of changing consumer needs and because of the economy, and that's created differences within the company about what to do.”
Even before Teel returned, Raley's had begun testing various promotional and pricing approaches in different regions and gauging customer reactions to the effectiveness of each program, Teel said.
“What we want to do is to understand how the consumer has changed and how those changes have affected our conventional supermarket business model at a time when companies like Trader Joe's and Whole Foods were getting stronger,” he explained.
“There were also changes happening in the general marketplace on the price end, and then all those evolutionary changes were interrupted by unprecedented changes in the economy. In fact, I think when we look back on this period, we'll see it was worse than what we experienced in the Great Depression.
“We're in the middle of all that now, and we're seeing major competitive shifts, and we're trying to figure out how the consumer is responding as we cast our vision out to determine where we belong in this changing world.”
Teel dismissed criticism from some observers that Raley's has failed to invest capital in its store base. “We have slowed down a bit — not from any lack of capital availability but because of a slowdown of growth in the region — but we have always continued to remodel stores, so our stores are in very good shape.
“At this point, we want to save our capital so we can invest it in margin if we need to.”
Teel said he's looking forward to the give-and-take within top management that could make balancing on the tightrope difficult.
“As you add more members of management and try to keep everything in balance, the rope is likely to undulate, which makes it very hard to keep your balance,” he said. “But I like to hear opposing points of view, where everyone gets to express his opinion, and if that makes things a bit shaky for a while, that's OK with me.
“I work well with a diverse group of people, and I thrive in an environment with a lot of dynamic tension, which is something I want and need. Having opposing points of view come to the surface makes for good decisions.
Asked what he missed most during his years away from Raley's, Teel said “I missed the wider array of challenges you find in a large organization like Raley's.”
