Southeastern Grocers CEO Talks Shop as Turnaround Hits Growth Phase

When WGB last checked in with Anthony Hucker in October, the CEO of Southeastern Grocers said the Jacksonville, Fla.-based grocer was on the verge of entering “growth mode”—the third and final phase of a five-year transformation built on a foundation of financial and cultural fixes. This week, Hucker reports that growth is happening now behind momentum provided by innovative, data-driven rewards and personalization programs, and a leaner but healthier store base that he says is winning market share and key selling holidays in fast-growing but competitive Florida. While an initial public offering by its private owners early this year was withdrawn, they remain “bullish” on SEG’s outlook and strategy, says Hucker, who also offers reflections on operating in the pandemic.

The following conversation took place over email April 5.

Jon Springer: Since we last spoke six months ago, Southeastern’s shareholders filed for an IPO, then withdrew. What have they indicated to you is the next step, and how, if at all, has that impacted what you’re doing or able to do at Southeastern? Would a sale or some other exit be a possibility?

Anthony Hucker: Yes, that option remains on the table as a viable path for us in our transformation. The whole scenario was made possible by our consistent improvement in the financial health and performance in our business.

Related:Inside Winn-Dixie’s Viera Takeover

We feel very fortunate to be in the position to have the freedom and flexibility to consider multiple paths to continued growth. You may recall that the withdrawal followed an unusual level of turbulence in the market as our IPO was being considered. And as a reminder, the IPO was a secondary offering to provide liquidity for the existing shareholders and was not to raise cash for the company. The exploration of the IPO gave our shareholders the opportunity to carefully consider this option, and what they concluded was that they remain confident in management’s strategy and were not prepared to sell at the range offered during the IPO launch. Clearly, they’re bullish on our future outlook.

We are continuing to evaluate options that would enhance shareholder returns but nothing specific to call out at this time. 

One question we get often around SEG is what it’s like to be sharing a home state with a fierce, big and very well-regarded competitor in Publix. What in your view does Winn-Dixie provide that makes its customers loyal to it vs. other retailers? And without giving too many secrets away, where do you see the opportunities to differentiate?

There’s no doubt that Florida is our home. We’ve been proudly serving Floridians for nearly 100 years in the Sunshine State. We are a traditional grocery retailer with products and offerings that our customers have counted on for generations, and I’m proud to say that we have generations of customers who have established a tradition of shopping with us.

Florida is rich in competition because it is fertile ground to foster growth; it’s experiencing consistent, robust increases in population that really hasn’t slowed down since the pandemic began. So, we certainly understand the importance, and the opportunity, of attracting new customers in our stores.

As the state continues to grow and diversify, we are uniquely positioned to offer the right blend of value and service with our expanding lines of own brand products and world-class store teams. I believe that one of our most powerful differentiators is our loyalty program, and “without giving too many secrets away”… it is progressively providing us the ability to customize one-to-one shopping experiences for our customers. In fact, Newsweek recently ranked our rewards program as one of the best supermarket programs in the country. 

Several of Winn-Dixie’s newest stores, including the Viera, Fla., unit opening this week, are in the acquired sites of former niche-focused competitors like Lucky’s Market and Earth Fare. What might a shopper find different between Winn-Dixie’s full-size stores and the smaller units it’s since taken over? How are these smaller units performing? And what if anything might you have learned from what the preceding tenants did well and what their shoppers liked about them?

The first step in any new store design is to listen to our customers and the community.

We spent some additional time and effort to tailor our newest Winn-Dixie store in Viera to the desires and needs of the local community, and we also expanded the store’s footprint to accommodate a wider product selection and enhanced shopping experience for our customers.

The reception we had at our grand opening was incredible—we received such a warm welcome from the community. I think there are many things that our customers will enjoy about their new store. It’s a totally new experience. Each store is uniquely different and holds its own unique products and features tailored to the community. Frankly, we decided to invest some extra time in the development of this store to make it exactly right for our customers. We have refined our assortments, features and added locally sourced products that our customers crave.

New and remodeled stores are "intuitive, modern and pristine," Anthony Hucker says. Photo courtesy of Southeastern Grocers/Deremer Studios LLC

They’re enjoying an intuitive, modern and pristine store experience that features exceptional fresh produce; the highest-quality meats and seafood; a wide range of organic and natural foods; and thousands of SE Grocers products. Last but not least, our rewards program literally pays you to shop our stores. We are able to offer our customers extensive savings through “Deal of the Week,” “Mystery Bonus” and our new “rewards Boosters” to help provide uniquely tailored savings on the products they buy most.

Overall, we’re quite pleased with the return being generated by our investments in the renewal program. We continue to see correlative increases in traffic, sales and engagement. As you would expect, we remain focused on keeping those positive trends sustained in each community, so it’s not uncommon for us to make some tweaks to the ranges and offers after the initial Grand Opening period has passed.

When we spoke in October you said Winn-Dixie was in year three of the transformation and “just on the verge of shifting into growth mode.” Are we there yet? And what will growth mode look like for Winn-Dixie?

We are definitely in growth mode. We have just shifted full-steam into the third phase of our transformation, which we refer to as “Fit for Growth” with our associates; thus far, we’ve completed our initial phases of “Correcting the Business” and “Getting Fit for Purpose.”

There has recently been a Harvard Business School case study published on our transformation strategy, should you have an interest in diving into the details of it.

Regardless, we’ll have five pillars that will define our next phase of transformation.

One: We’re going to sustain our market share momentum. We have been steadily growing share. And winning key shopping holidays, in particular, have been an effective driver for us. We have exceeded our goals going back to the Super Bowl of 2020, and we’ve kept that winning tradition through Easter of this year.

Two: We will build, buy and create the stores of tomorrow. Through acquisition, we added eight new stores last year, and we are continuing to look for similar opportunities, as well as new construction. By the end of this year, we are on track to have renewed 70% of our fleet, with the goal of renewing our entire fleet by the end of 2023. That puts us a full year ahead of schedule and thus far, we’ve made a massive reduction in the average renewal age of our store fleet.

Three: Continue our cultural transformation; I always say that our people are our most important asset, and it’s absolutely true. We’ve made big strides in our cultural transformation, and we’ll continue to be a place where all people feel they belong. Building on our recent Best Place to Work certification, we will firmly set our sights on industry recognition as a top place to work, retaining and developing our world-class talent.

Four: Innovation to shape customer experience. This industry moves quickly and we will do the same. We will drive our business with a particular focus on programs that strengthen our customer experience. Our unique and differentiating loyalty program will continue to be a lever we pull, and we will create new ranges, products and offerings only to be found at SEG.

Five: Strengthen our foundation in trust. We’ve had a financial turnaround, but it was fueled by a cultural transformation. In 2017, we had historic lows in associate trust scores, and we’ve increased those by 30% since through a commitment to transparency. Our associates trust in our strategy, and that’s ultimately helped us rebuild trust with our customers and communities.

A lot of U.S. grocers that saw soaring sales and profits amid the trends that accompanied COVID a year ago this year are encountering same-store declines that are challenging their cost leverage. How does it look from where you sit at SEG? What are your top priorities for the months ahead?

We got more than our fair share of market share during the pandemic. We were well-positioned to help our customers and communities, as they have come to count on us during all sorts of challenging times—whether those be natural or man-made.

Powered by insights from our loyalty program, we have a particularly clear vision of the right recipe for store experience, products, offers and ranges that drove the lion’s share of our sales lifts. We’ve seen our biggest increases in proteins and alcohol—personally, I’ve never seen increases like those we realized in seafood. Our teams have been incredibly effective in shifting to meet those demands, and I see those as big opportunities for us to create value and keep that share of basket in our stores.

Pandemic winners: seafood and alcohol. Photo courtesy of Southeastern Grocers/Deremer Studios LLC

In the coming months, we will have a laser focus on customer retention. We will leverage and replicate a very precise blueprint for customer experience, ranges, offers and product segments proven to keep our customers shopping with us regularly.

We also know that our rewards app plays a big role in customer experience, so I can give you a bit of sneak peek into our plans for some new features coming—within the upcoming months, we’ll be adding a “Smart Shopping List” function, rewards points “boosters” and a product-aisle locator tool for each customer’s store. These have all been shaped by customer feedback.

Kroger as you know is opening a high-tech distribution center with the potential equivalent of several new stores in Florida. Although it won’t likely come all at once, how do you see the market with regard to its ability to absorb that? Is there enough demand to go around still? Related, how does e-commerce and home delivery figure in Southeastern’s current offering and in its plans?

As I noted, Florida is fertile ground; it’s not surprising to see innovation and investment scaling in this market. Florida isn’t showing any signs of slowing down in development, so it’s reasonable to assume that innovation and investment in the customer experience will only continue to gain in importance.

Historically, e-commerce sales have accounted for a relatively small percentage of our sales, but the pandemic drove some renewed momentum in broadening our offering. We recognized a 400% increase in sales in this category in 2020.

We continue to take a measured approach as we carry out a very thoughtful, precise and profitable e-commerce strategy. We are adding new partnerships and taking advantage of what we see is increasing commoditization of delivery. Our flexible and asset-light strategy allows us to test and learn local conditions and offer options that make sense for both our customers and for SEG.

We have an exclusive partnership with Uber and Uber Eats in more than 165 Winn-Dixie and Fresco y Mas stores in Florida, and more than 85% of our stores are covered by our commerce programs. We will continue to optimize this increasingly important option for our customers.

2020 was crazy year all around. How did you hold up personally, and what did you find most satisfying about the role you and the company were able to play?

I agree with your characterization! It was an incredibly challenging year, and it tested our resilience more so than any events of the past. And as you surely know, there were the additional factors of social unrest and a record-setting year of hurricanes as well.

However, the challenges gave us the gifts of trust in each other and the trust of our communities. What really drives loyalty to a retailer is a strong relationship, and you can’t sustain that relationship without trust.

On a personal level, I was given the gift of inspiration; I was reminded that we can have such a powerful role in our communities. Our reason for being is noble. We nourish communities. And no matter how badly things are going, we all share the common need to be fed and nourished.

In a moment that I will never forget, I had the honor of helping out first responders by paying for their groceries. I was so moved by the emotion I saw in their eyes. It was pure gratitude. And in a year in which our differences were so starkly contrasted, it was a really powerful reminder of how much we all have in common.