Word to the Weis

JON SPRINGER

David Hepfinger, who today is expected to be named only the fourth chief executive in the 96-year history of Weis Markets, said he intends to build on the retailer's strong local heritage and reputation for quality with a new emphasis on operating standards and a sharp focus on the consumer.

In an exclusive interview with SN, Hepfinger said his goal is to create an offering that is “best-in-class in all the areas in which we compete.”

Hepfinger succeeds Norman Rich as CEO. Rich, who has served in that role at Weis for 44 years, is retiring.

Hepfinger, 50, is a 32-year veteran of the Schenectady, N.Y.-based Price Chopper chain. He joined Weis last February as its president and chief operating officer.

The hiring was somewhat of a homecoming for Hepfinger, who said his first job in grocery retail was as a part-time dairy clerk at a Weis-owned Albany Public store in his hometown of Troy, N.Y. He later joined Price Chopper and worked his way through the organization, serving on its executive committee for 16 years, most recently in the role of executive vice president of retailing and administration, a role he likened to that of a COO.

At Weis, he takes the wheel of a $2.3 billion chain with 155 stores in five states, primarily Pennsylvania and Maryland. After months of visiting stores and facilities, Hepfinger assessed Weis as a financially strong company with a wide range of store sizes and performances and room to improve behind the right programs and the right people.

“I think we've got a great core fleet of stores. We have a full range of markets from very small rural towns to larger metropolitan areas. We also have a full range of volumes, with some that are quite low by today's standards — under $100,000 a week — to quite high — stores in the $700,000, $800,000 range,” he said. “We also have great troops out there and a lot of great talent — some tapped, some untapped. And I think as we even further align everybody onto common strategies we can even perform better than in the past.”

Weis, he said, is well-positioned to make improvements thanks to a solid financial footing. This he credits to his predecessor, who saw that more than half of the company's stores — 83 as of last year — were owned by the company, rather than leased. Weis is also completely free of debt.

“To see the financial acumen and the expertise with which Robert Weis put together the portfolio, and kept an eye on the financials to make it such a strong organization, was a pleasant surprise. I'd done some investigation of my own before I jumped into this, but it was actually better than I thought,” Hepfinger said. “The fact that we own about half of the store base makes us better able to compete when necessary, and much more financially viable than the average competitor out there, and that's before you consider today's economic pressures. In today's economic pressures there will be [competitors] that struggle even further. We are well-prepared to face that battle ahead of us.”

Although the company is still finalizing details of its 2009 capital spending plan, Hepfinger said he intends to continue the slate of store remodels and expansions of recent years while devoting a greater percentage of capital to information technology. This, he said, would help tie merchandising strategies to business-driven initiatives and assist in the development of advances like computer-assisted ordering. Officials expect spending for fiscal 2009 will be increased “significantly” from 2008, when it spent approximately $60 million on eight expansions, seven remodels and one new store.

The company is already making headway at improving basic store conditions and standards, ranging from programs to improve in-stock positions to those helping it to deploy labor most efficiently and effectively. It's all a part of a consumer-centric focus that has become even more critical as store trips decrease and order sizes increase, Hepfinger explained.

“The customer has to be where you start thinking of the supply chain, and you walk yourself backwards until you understand what makes the customer come back,” he said. “We will engage our customers and turn that into a strength. That goes back to operating conditions and housekeeping, because that's what resonates with today's consumer.”

Weis emphasizes value-added amenities in store as a point of differentiation with its competitors, which include Ahold's Giant-Carlisle and Giant-Landover divisions as well as Wal-Mart. Its newly expanded store in Brodheadsville, Pa., for example, featured a variety of take-out foods including pizza from real pizza ovens, displays of specialty items like olives and cheeses, and service meat and seafood counters. Weis' slogan — Where Freshness Matters — has promoted these offerings since 2006 to positive results.

Weis has also worked to make a virtue of its position as a regional retailer, emphasizing its local buying, including what it believes to be the industry's first local Angus beef program. The company estimates it purchased more than 19 million pounds of local produce items from Pennsylvania growers last year.

The retailer also has a well-developed private-label program Hepfinger considers to be “best in class” in terms of sales penetration. The three-tier program is notable for a unique approach to its Five Star, or premium label, which in some categories is co-branded with a specialty product producer. This arrangement provides the supplier — for example, the Delverde Italian pasta label — with a sales boost without advertising expenses and certain exclusivity in the premium category, officials explained. “It's not just about selling the value tier,” said Hepfinger of Weis private-label program. “We think we have as much opportunity if not more on the higher end.”

A tightly held public company, Weis Markets rarely seeks the spotlight. Members of the Weis family own about 74% of the company's stock. Some analysts believed the company was to be for sale, particularly after the descendants of co-founder Sigmund Weis sought to sell their stake several years ago. But the hiring of Hepfinger — and efforts to recruit his own stable of new talent — finds Weis ready to continue into its second century.

“David brings us a set of fresh eyes and comes from a slightly different perspective, which I think will be good for us,” Jonathan Weis, vice chairman of Weis, told SN. “I think we can benefit from some of his great ideas, tempered by his experience.”

Though he admitted he'd gotten a kick out of some observers calling the new regime “Weis Chopper,” Hepfinger said he had no plans to turn Weis into a Mid-Atlantic outpost of his former employer.

“My challenge,” he said, “is to make Weis a better Weis.”