ST. LOUIS — Less than a year into Santiago Roces’ tenure as president and chief executive officer of Save-A-Lot, the limited-assortment banner that was a focal point of Supervalu’s growth strategy for the past few years is at a crossroads.
Save-A-Lot has been driven by its Minneapolis-based parent company to achieve aggressive growth targets, but the company has since tempered those goals to divert more resources toward its conventional stores. And while recent reports indicate the Save-A-Lot banner is performing well, some observers say Roces faces a big challenge in gaining the support of the banner’s licensees in a difficult business environment.
After Minneapolis-based Supervalu in January reported relatively strong sales at Save-A-Lot in the third quarter — identical-store sales were up “nearly 4%” — the company seemed to indicate that the business was on the right track.
The sales gains were driven by inflation “and the innovative merchandising and marketing programs we’ve implemented,” said Craig Herkert, president and CEO, Supervalu, in a conference call with analysts. He cited in particular the Save-A-Lot Today opening-price-point private label and the continuation of the chain’s Mix & Match and 10 for $10 promotions, as well as mid-month mailers.
However, he also cautioned that the banner would only open 50 to 60 locations in the fiscal year that ended in February, down from a previous forecast of 80 to 90 stores. Supervalu has said it planned to double in size — to some 2,400 units — by 2015. It currently has about 1,300 locations, some 915 of which are operated by licensees.
“While Save-A-Lot is a market leader in hard-discount retailing, hurdles for small-business financing and general uncertainty about the economic climate have factored into new store growth in the near-term,” Herkert explained.
Roces and Herkert both had worked in the international division of Wal-Mart Stores before joining Supervalu. Roces’ past positions included president and CEO of Wal-Mart Korea, and chief merchandising officer for Wal-Mart’s Argentina business. He also was senior vice president of Wal-Mart’s small-format division.
When Roces was hired, Herkert described him as being “the right individual to lead the business forward” and having a “wonderfully diverse” business background.
That background may or not be serving him well in his new position at Save-A-Lot, according to Jose Tamez, Denver-based managing partner in executive recruitment firm Austin-Michael.
'Biggest Challenges'
“Santiago’s biggest challenges may be the relational ones, both external and internal,” Tamez told SN. “Externally, the relationship with licensees has been strained over recent years, and much of that has been related to [Supervalu’s influence].”
Roces’ international background indicates he has a steep learning curve here in the U.S., Tamez added. Save-A-Lot “historically has been a smooth-running ship until the last three to four years,” Tamez said. “Their culture was strong and consistent. Their workforce was stable and achieving many of their target goals.”
Recently, however, he said some “doubt has crept in” at the chain.
“Save-A-Lot is still a prime banner, and so this can lead to trouble if not handled well by Santiago,” Tamez said. “With most parent companies in transition, you could say that as the parent company goes, so goes their holdings. In this case, though, I believe it’s the opposite in that as Save-A-Lot and Jewel go, so goes Supervalu. With that thought, Santiago’s performance becomes even more focal.”
In January Herkert said he was optimistic that Save-A-Lot was poised to continue being a growth leader for the company.
“We love the business,” Herkert explained. “Our consumers are responding well to it. Santiago Roces and the team have, I think, a fantastic business plan to continue to improve the value proposition of Save-A-Lot.”
In particular he called out the chain’s efforts to open stores in underserved areas, or food deserts. Last July Supervalu said it had committed — via a pledge to Partnership for a Healthier America — to open 250 new Save-A-Lot stores over the next five years in neighborhoods with limited access to healthy foods.
