Coyne Resigns as Raley's Battles Tough Environment

ELLIOT ZWIEBACH

WEST SACRAMENTO, Calif. — The resignation last week of William Coyne as president and chief executive officer of Raley's Supermarkets here may reflect the retailer's struggles in the current environment, industry observers told SN.

Local consultant Bob Reynolds said Raley's is caught “in the classic middle” — between operators like Wal-Mart Stores and Winco on the low end and Safeway and regional operator Nugget Markets on the high end.

Raley's has also been suffering from a lack of capital investment during the last few years, Reynolds, the principal at Reynolds Economics, Moraga, Calif., told SN — due in part to unsuccessful attempts to expand into Las Vegas and New Mexico that were engineered during Coyne's watch.

George Whalin, another industry consultant, said Raley's is falling victim to a combination of tougher competition and the weakened economy.

“And at a time when everyone is lowering prices and talking more about value, Raley's stress on value just isn't enough,” the principal at Retail Management Consultants, Carlsbad, Calif., told SN. “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.”

Coyne's interim successor is David B. Clark, who was hired by Raley's in June as chief operating officer.

The board of Raley's, a privately held company, said it would be meeting “soon” to outline a plan for selecting a permanent CEO.

Clark is a much-traveled executive with more than 30 years of industry experience, including senior merchandising and operations positions at Wild Oats Markets, Bruno's, Cub Foods, Skaggs, American Stores and Jewel Foods Stores. He also was president and CEO of Homeland Holdings in the early years of this decade.

Neither Coyne nor Clark could not be reached for comment last week.

In a statement to employees cited in a company press release, Coyne said he was resigning, effective last Monday, after 12 years with the company. “I want to assure you this is a personal decision that I feel is right for me and my family,” he said. “I'll be monitoring your success from the sidelines and cheering you on every step of the way.”

Coyne joined Raley's in 1997 as general counsel. He was named executive vice president, business development, in 2001; chief operating officer in February 2002; and president in April 2002, adding the title of CEO in December 2003.

“The word on the street is, Bill Coyne didn't leave Raley's — Raley's left Bill Coyne,” one local observer told SN.

Another local consultant told SN that Raley's ownership “just lost patience” with Coyne.

Raley's is privately held by Joyce Raley Teel, the daughter of the chain's late founder Tom Raley, and she and her husband Jim Teel serve as co-chairs.

Raley's annual sales volume is estimated at about $3.5 billion, with 134 stores that extend north to the Oregon border, west to San Francisco Bay, south to the San Joaquin Valley and east into northern Nevada.

The chain operates stores under the Raley's, Bel Air and Nob Hill banners, with nearly half the stores located in the Greater Sacramento area, where their combined market share is roughly one-third of the market. Though they differ in size, all stores operate with conventional formats and high levels of service.

Asked last week if Raley's might become an acquisition candidate, one industry observer told SN, “The family would probably like to bring the business back and get earnings levels up to generate the most dollars, which it couldn't get right now. I believe they will try to rebuild the engine to add value to the company before they would consider selling.”

In an interview with SN a year ago, Coyne denied that Raley's might consider a sale, noting that the Teel family had no interest in selling.

During the same interview, he said Raley's plan for dealing with the weak economy was to stress its value proposition for consumers.

“When the economy was humming along, we felt we were firing well on all cylinders,” he said at the time. “But as the economy started to change and anxiety levels among consumers became heightened — especially in areas of California that were particularly hard-hit by rising unemployment and the high number of housing foreclosures — we became aware that our customers wanted to be sure they were getting a good value offering for their families.”

The company introduced a program that included shelf-talkers that called shoppers' attention to sale items, temporary price reductions, private brands, top sellers in each category and new items, combined with a series of signs noting points of differentiation between Raley's and its competitors in such areas as sustainability, food safety, private brands and community involvement.

A few months earlier, the chain had eliminated television advertising altogether in favor of more radio and print, with plans to add more interactive elements on its website.

In mid-2005, Raley's introduced an “everyday value pricing” program that lowered thousands of prices to flatten the difference between promotional prices and end-display prices, Coyne explained last year — an effort local sources said “simply didn't work, given Raley's reputation as a full-service retailer with high prices.”

In May, Raley's cut its head-count by rationalizing its headquarters staff and offering buyouts to 100 union and non-union store clerks.