Branding Safeway

ELLIOT ZWIEBACH

Safeway, Pleasanton, Calif., is using consumer research and other techniques common to consumer packaged goods companies to help develop a brand image for its banners.

To get the job done, the retailer hired Brian Cornell as executive vice president and chief marketing officer, who has earned SN's Marketer of the Year Award for his ability to implement an overall theme for the program, his commitment to building the company's brand image, his creativity in developing a corporate brand strategy, and his commitment to keeping in touch with customers through focus groups. The award was to be presented Jan. 22 at the Friends of the Industry Dinner at the Phoenician Hotel & Resort, Scottsdale, Ariz., during the 2006 FMI Midwinter Conference.

"The success of most CPG companies has been based on their ability to provide products that meet consumer needs, and retailers have always relied on those companies to communicate information about trends and how to energize consumer needs in the marketplace," Cornell told SN.

"When Steve [Burd, Safeway chairman, president and chief executive officer] approached me," Cornell said, "he asked me to work with the management team to build a Safeway brand, elevate the company's standards, develop proprietary brands, build partnerships with CPG companies, leverage insights with consumers and create a unique shopping environment at the stores to increase sales to primary customers and to attract new customers as well."

When he was hired in mid-2004, his mission was to build on the progress stemming from Burd's decision two years earlier to stake out a unique niche among conventional supermarket operators by marketing the chain as a brand that stands for something specific in the consumer's mind, Cornell said.

"Branding is creating a product, or in our case, a shopping experience that's unique, with clear attributes that consumers attach to the experience and that stands for something very special," he told SN. "What we're trying to do is make Safeway stand for something in terms of consumer expectations the way Tide does among laundry detergents and Starbucks does for coffee.

"This is a new step for a retailer," he said. "While Safeway is not the only one doing it - I believe Tesco in the United Kingdom has spent considerable time trying to understand its shoppers and targeting its approach to marketing to meet their needs, and some U.S. operators are looking at what we're doing - I feel we are setting the pace by taking more of a leadership position to understand the consumer landscape and how to build strategies to meet emerging consumer trends."

Cornell brings a different perspective to Safeway - that of a consumer packaged goods veteran with 25 years of experience looking at the retail business from the outside. As an insider, Cornell looks at marketing with the fundamental purpose of creating a Safeway brand.

Working to achieve that goal, Cornell helped Safeway develop a guiding theme - "Ingredients for Life" - which it introduced last April as the cornerstone on which to build its branding program. The theme connected with the chain's moves over the last couple of years to differentiate its offerings by converting stores to a lifestyle format that encompasses top-quality perishables, new and unique corporate brands and a greater emphasis on center-store merchandising.

"If you look at what Safeway has done since April in TV, radio and outdoor advertising, it's clearly been aimed at communicating a message about the changes we've made - a recognition that life has changed for consumers and that we provide more of what they're looking for than we have in the past and more than other retailers are providing," he said. "The message is more emotional than ads that simply offer consumers items and prices. We still do that in our circulars, but we use other media to convey a fundamental brand message."

The message is based largely on what consumers told Safeway in 2004 and early 2005 - the kind of research that's basic to CPG companies. Given his CPG background, thinking about consumer trends comes naturally to Cornell, "but I found most supermarket retailers were more focused on understanding transactions than on doing dedicated consumer research that focuses on emerging trends," he said.

The Ingredients for Life campaign was introduced in all divisions with the Safeway banner (in Washington, Oregon, Colorado, Arizona and the Eastern division) and at Vons in Southern California last spring; Cornell said it will be introduced in the chain's remaining divisions in Chicago, Texas and Philadelphia in the spring.

Safeway is committed to spending $100 million through April 2006 to support the campaign with TV, radio and outdoor advertising, and Cornell said it expects to spend at the same level through 2006 and 2007.

The newest wrinkle in Safeway's branding effort involves a stronger push on corporate brands, including a reduction of 70 existing labels down to 10 "power brands," plus package and label redesigns and the introduction of a series of icons to help make shopping choices easier for consumers. The icons will identify products based on aspects of health and wellness, nutrition, food safety, convenience and environmental concerns.

The 10 power brands include Safeway-label products; Safeway Select; Eating Right health-oriented foods; O Organic natural and organic items; Lucerne dairy products; Ranchers Reserve beef; Signature soups and sandwiches; Primo Taglio delicatessen meats; Priority pet products; and Basic Red, a value line.

Safeway plans to roll the organics line out to all divisions by the end of the first quarter of 2006, starting with 150 items and expanding from there, Cornell said.

It also plans to broaden the rollout of the Eating Right line throughout the year, he added, at the same time it plans to puts a greater focus on single product attributes, such as low-carb and low-sodium, he said.

Safeway doesn't plan to brand produce, however. "We believe we're already building a terrific reputation for high-quality produce," Cornell said, "and instead of branding it, we've introduced a 100% money-back guarantee."

Cornell said Safeway has not set any particular goals for what portion of sales it hopes corporate brands will account for.

To manage its new approach to in-house brands, Safeway has restructured its corporate brands department, creating a virtual CPG company within the company under James White, former senior vice president of business development at Gillette, who serves as senior vice president of corporate brands.

Lifestyle Format Drives Results

PLEASANTON, Calif. — "Lifestyle" is definitely Safeway's style.

As the company strives to sell itself as a brand that stands for something special in consumers' minds, the proof of what it stands for can be found at store level, where Safeway is in the process of converting its entire store base to its lifestyle format - a concept that puts a heavy emphasis on merchandising a broad assortment of perishables combined with a mix of conventional and specialty products throughout the store.

Just over 300 stores, or about 20% of Safeway's 1,800-unit store base, was operating with the lifestyle format at the end of 2005, and that number is expected to grow to 43% this year, 60% in 2007 and 77% in 2008, "which gives us an opportunity to convert the entire company by 2009," Steve Burd, chairman, president and chief executive officer, told an investor conference here last month.

Safeway's commitment to the format has been strengthened by the results it is seeing at the lifestyle stores that have already opened. "When a store is remodeled, it usually gets a pop in sales and then goes back to normal," Burd said, "and one of our early concerns with these stores was that any increases would be a one-time event that wouldn't generate further increases moving forward. But that has not been the case."

At stores remodeled and converted to the lifestyle format in 2003, sales doubled what Safeway usually does in traditional remodels, Burd said. In those stores' second year, sales climbed another 23%; and in 2005, at stores opened for three years, sales jumped 35% more, he said, "and we expect sales to continue to be stronger than at non-lifestyle remodels.

"At this point we're getting closer to critical mass, where all customers can shop at a lifestyle store, and we think those stores will continue to attract increased numbers of shoppers over the next few years."

Although not all lifestyle stores are as successful, "all do well vs. all formats," Burd said, "with sales increases coming from existing primary shoppers spending more and from our ability to convert secondary shoppers into primary shoppers. And the number of consumers who shop with us exclusively has jumped dramatically, which tells us lifestyle stores increase customer loyalty."

Lifestyle stores that go up against conventional competitors perform very well, Burd said, "so our strategy is not to pick up sales from the price operators or niche players but to take business away from other conventional supermarket channels."

The stores also do well against operators like Trader Joe's, Whole Foods and ethnic retailers, he said. Against supercenters and other price formats, "we do only about 3% less than we do on average, which is a still a strong number."

Burd acknowledged that lifestyle stores that go up against stores where competitors have invested capital varies from one location to the next. "The competitive effects are real, and competition can affect sales by 1.5% to 2% a year," he said.

— E.Z.