Q&A: CEO Leon Bergmann champions Save A Lot’s ‘extremely powerful model’

Leon Bergmann has led Save A Lot as CEO since February 2022. Last week, the discount supermarket banner reached a milestone with the sale of its 18 remaining corporate-owned stores, wrapping up its transition from a retail to a wholesale business model. Under the process, which began in late 2020, the St. Ann, Missouri-based company has divested some 300 stores to local owners. The last group of stores, all in the St. Louis area, are being purchased by current retail partner Leever Supermarkets Inc.

Bergmann started as Save A Lot’s CEO just before the company began operating under a wholesale model. A veteran distribution executive, he came to Save A Lot after serving as CEO of Harvest Sherwood Food Distributors and holding leadership roles at Supervalu, Unified Grocers and C&S Wholesale Grocers. Save A Lot now has eight distribution centers and serves more than 800 stores in 32 states. Independent grocers own and operate Save A Lot banner stores via a relicensing program and receive marketing and other support services, including private label.

In an interview with Winsight Grocery Business Executive Editor Russell Redman, Bergmann shed more light on Save A Lot’s store sale and its business strategy as a 100% licensed wholesaler. Here are edited excerpts of the interview.

WGB: What led to Save A Lot’s decision to sell its remaining stores in the St. Louis area, which had been retained as test sites for new programs and innovations?

LEON BERGMANN: It’s part of a broader transition for us as a company to go to a completely licensed wholesale model. Ultimately, the value of holding those stores as a “test lab”—I’d rather test things with our retail partners, who will push us more. If I own stores, they’ll do almost anything I ask them to do, right? Retail is a fairly top-down model. So if I truly want to do a test, I wan to do it with my retail partners who are going push every aspect of that test, and I learn the most possible by working with them.

WGB: Going forward, how can Save A Lot—with its 100% licensed wholesale model—help its independent owners grow sales and expand with new stores, as well as modernize current locations?

BERGMANN: It all comes down to local relevancy—getting these stores into the hands of our retail partners who are in their markets, involved in their communities and know their customers so well. You combine that with data we can provide them, and it’s an extremely powerful model. So what it comes down to is local relevancy and serving your customers well. And we believe our retail partners, being both community citizens and entrepreneurs, are best-positioned to do that.

WGB: How does Save A Lot seek and add new retail partners?

BERGMANN: You know, retail is a game of imitation. When other retailers see our partners succeeding, they want to become part of that. It kind of goes back to, ‘the best advertising is free advertising.’ Quite frankly, the success of our retail partners breeds interest and success for others.

The Save A Lot store network now spans more than 800 independently owned and operated stores in 32 states. / Photo courtesy of Save A Lot

WGB: You touched on this already, but what advantages does Save a Lot’s model bring in terms of licensing its banner to local owners and then providing marketing, private brands and other support?

BERGMANN: Save A Lot provides a tremendous core offering and a tremendous format. You combine that with people knowing their customers and being entrepreneurs—and let’s face it, an independently owned store usually feels different than a generic, corporate store. Whether it’s the culture of the store, the interaction with the customers, the involvement in the community, etc., grocery retail is a local game. Playing a local game improves and increases your relevance to your customers, and it increases your connectivity to your customers. That’s what our independent retail partners excel at.

WGB: You were announced as Save A Lot’s CEO in February 2022, just before the company said it started operating as a wholesaler. What potential did you see for Save A Lot?

BERGMANN: They made that decision and started on that journey shortly before I got there, but I completely agreed with it as the right thing. I think it’s a combination of us focusing on the core of the business, and our retail partners focusing on their varied assortments to best serve their customers. I can’t sit in St. Louis and claim to know 800-and-something individual trade areas, right? But my retail partners in those trade areas do know those trade areas, so they’re going to assort better than I ever could for them. I want to give them that 85% or so, but that other 10% to 15% is what makes them super-relevant to their customers.

So it’s really the best of both worlds, where it allows Save A Lot corporate to focus on supporting them and being as efficient as possible, and it allows them to assort around those edges and best serve their customers. It’s an extremely powerful model.

WGB: How does Save A Lot compare to other discount grocers—such as Aldi, Lidl, Grocery Outlet, etc.—and how does it compete with conventional grocers?

BERGMANN: It’s a different answer depending on who you’re talking about. For Aldi, Lidl and Grocery Outlet, what I would say is that the value proposition is there; it just varies a little bit depending on who the competitor is. But the overall value proposition is very high quality—both in center store and the perimeter—discount pricing and ease of shopping.

Our stores are smaller. It’s easy in, easy out. You don’t have to walk a 200,000-square-foot supercenter to save money. And it really combines the value, pricing and quality, which determine the value equation, as well as a very pleasant shopping experience, in and out. I think that’s very difficult to beat.

It’s really a positive thing when you could add something to people’s lives. There are over 230 locations where, if Save A Lot didn’t exist today, they would be food deserts. We have a model that can serve those areas and still be profitable, which is fantastic, because that makes it sustainable. It’s a wonderful feeling to be able to add something to people’s lives.

WGB: The U.S. grocery market just passed through an inflationary period that was trying for many consumers. And prices remain elevated for a lot of products. How has Save A Lot fared with its discount grocery model? Has it won market share?

BERGMANN: We’ve taken share with our existing customers. The challenge is our existing customers have less money to spend. We don’t give out specific numbers, and there’s a stiff headwind with the reduction of SNAP benefits for us. But without going into specifics, we’re actually increasing market share with those customers, even though they have less money to spend. That speaks to the value of our format, and what we provide to them as well. When they need help buying quality foods and stretching their dollars, we’re there for them.

Save A Lot flags savings throughout the store via its "Shop the Dot" signage, which plays off the red dot in its logo. / Photo courtesy of Save A Lot

WGB: What is the level of discount that Save A Lot offers versus conventional supermarkets? I had heard in the past the savings is up to 40% for Save A Lot brands versus national brands.

BERGMANN: That’s true. I’d say up to 40% is a good way to put it. Generally, it’s 20% to 40% [savings with Save A Lot brands versus national brands at a traditional grocer], skewing a little towards the upper end of that.

The beauty of what we do is customers can save that money every day because of our prevalence of private label. The other big thing that makes this whole model sustainable is our independent retail partners can make a decent gross margin on that private label while still providing those savings to their customers. That’s the power of this model. They’re great products. I’m super proud of the quality of what we sell.

WGB: How is Save A Lot growing its private-label program? What kind of customer feedback is the company getting on its products? How are the products promoted and marketed?

BERGMANN: We do several things. One, we’ve actually been able to introduce and/or reintroduce numerous products. You know, during the pandemic, no one had capacity on the vendor side. Now there is capacity available, so we’ve been able to go back and re-establish some items that had fallen out of rotation because of lack of capacity. So that’s great news.

We’ve done a tremendous amount of cuttings to reinforce the quality, and we’ve reformulated a few products. For the most part, we haven’t had to do that. But we want to constantly make sure that we’re providing the highest-quality products at the greatest discount possible. So we’ve been going through all kinds of line reviews to reinforce our offering. As I said, I feel great about what we sell. I shop there, I eat it. I think it’s something that you can save money on and feel great about feeding to your family.

WGB: How many brands and SKUs does Save A Lot’s private-label portfolio now include? I think I found out the other day that it’s more than 55 brands.

BERGMANN: Yes, and roughly 1,800 individual SKUs. That’s one of our primary differences as well. A lot of people have tried to copy the Save A Lot format. No one has done it successfully. And I believe a big part of that is because of our portfolio of brands. You’re not going to walk into a store and see three [tiers of] brands throughout the store—a value brand, a national-brand equivalent and an upper-scale brand, as in a traditional grocery model. We have 55 brands. I think that’s extremely powerful, and customers value that. It’s a psychological advantage that we provide to our retailers that they then provide to their customers.

Save A Lot's limited assortment speeds up shopping by offering customers a curated selection of the products they want most. / Photo courtesy of Save A Lot

WGB: What percentage of a store’s assortment is private label, approximately?

BERGMANN: It varies by store but, on average, 65% to 70%.

WGB: How has the Save A Lot store evolved inside, in terms of assortment, departments, layout and so forth?

BERGMANN: It has been interesting. Prior to the pandemic, we had seen a multiyear decline in frozen sales, and the pandemic completely changed that. And not only did it change it, but it also sustained it. So we’ve really looked at how we do those sets, adding a shelf where we can and things like that to increase the frozen itemization. We’ve also taken advantage of a broader trend around meals-to-go and/or take-and-bake. We’ve increased our holding capacity in the refrigerated sections as well and reallocated space to better support those emerging categories. It’s all about relevance to the consumer. What they want, I want to sell them. It’s that simple. So I want to give them a broad variety. I want to give them healthy options. And I want to give them other options, because if they’re not going buy it from me, they’ll go somewhere else and buy it. So I want to give them the choices that they want.

WGB: Save A Lot already is in 32 states. What areas of the country offer the most promising expansion opportunities—within current market areas or brand-new markets?

BERGMANN: It’s a great question. There are a ton of white-space opportunities in our current trade areas. The best way to expand your business is where you have brand equity. That’s our focus right now, expanding around where we currently distribute. There’s a whole other set of stores out west that have white space. That’s not our immediate focus. Our immediate focus is where we can currently serve effectively.

WGB: I think one thing that a lot of shoppers don’t realize with the limited-assortment, discount grocery format is how fast they can get in and out of the store compared with 50,000-square-foot conventional supermarket.

BERGMANN: Yes. Quite frankly, between e-commerce and subscription services, I think the size of our stores makes the four-wall economics ideal for where this industry is going. That’s a trend that none of us can fight individually, but we’re well-positioned to take advantage of.

Save A Lot owners have steadily modernized their stores to reflect the grocery banner's latest look and design. / Photo courtesy of Save A Lot

WGB: What’s the average size of a Save A Lot store? I’ve been told it’s around 16,000 square feet.

BERGMANN: It varies, but 14,000, 15,000 to 16,000 square feet, right in there, is average.

WGB: And what’s the total SKU count typically in a store?

BERGMANN: That varies as well, by store and by how much they itemize locally. But it’s around 3,500 or so.

WGB: You had mentioned e-commerce before. What does Save A Lot offer in e-commerce services? Is there a strong customer demand for online grocery service with Save A Lot’s retail model?

BERGMANN: We have a partnership with Instacart. It’s not a big percentage of our sales at this point, and it isn’t for most people [shopping Save A Lot]. But it’s a service that we feel is important to offer. Our stores are very local to their trade areas, so there isn’t quite as much of a need, and our customers can’t afford to pay extra for that last-mile delivery. But some want it, and some need it, whether it’s driven by other commitments, their schedules or sometimes a lack of transportation. There are a variety of reasons they may want that option. So it’ important that we give them that option, but it’s not a huge part of our business either.

WGB: Is pickup more popular than delivery?

BERGMANN: Not really. No. We provide such a convenient and quick shopping experience, I think that people feel like—for whatever time they save—they’d rather select their own items.

I just feel very fortunate. We have a great format, and we have a great group of retail partners. And like I said, it’s a gratifying feeling to be able to give back to these trade areas that we serve.