A PROBLEM WITH SAFEWAY'S OUTLOOK ON REINVENTION 2004-04-05 (2)

David Orgel

In a letter to the editor published in SN last week, Steve Burd, president and CEO of Safeway, Pleasanton, Calif., outlined his view of the recently completed California labor battles and the future of supermarket retailing (SN, March 29, Page 4).

The letter was written at a crucial moment in Burd's tenure at the company: He has emerged largely victorious from the lengthy strike-lockout in California, and is now under pressure from some institutional investors who are pushing for a "no confidence" vote at the company's annual meeting in May.

Burd's letter was intended to position Safeway as a forward-thinking supermarket chain in the aftermath of the labor strife. It accomplished much of that goal, but missed the mark in one aspect.

The letter points to the supermarket as a format historically focused on self-service and the selling of ingredients. It said supermarkets have "adapted somewhat to changing habits and families, adding delis and a few ready-to-serve meals, but for the most part, we remain a self-service provider of ingredients."

The key for supermarkets, according to Burd's letter, will be to expand the customer's repertoire of foods, grow the store's share of stomach, and focus on food service.

The letter stated: "The successful grocer of the years ahead will be more of a partner to the customer -- a source of knowledge and expertise in food choices and preparation." Burd is correct on all these points, and is wise to push Safeway in this direction. However, his letter gave me the impression that these are brand new concepts whose time is just now approaching. The phrase "successful grocer of the years ahead will be ..." leaves me with the feeling that supermarkets have not yet begun to actively embrace these trends.

That's not the case. For some time, SN has reported weekly on how supermarkets and consumers are already heading in the direction Burd discusses. This week, for example, a story by reporter Roseanne Harper (Page 37) reveals how retailers are actively expanding the meals imperative beyond deli/food-service departments. Operators including Kroger, Publix, Lunds/Byerly's, Piggly Wiggly and Wild Oats are showcasing fully cooked or value-added entrees in their meat departments in a trend that adds another layer to in-store meal offerings, according to the story.

Supermarkets are learning from the specialists. Another story this week (also on Page 37) outlines how a specialty foods retailer a stone's throw from Wal-Mart's corporate headquarters in Arkansas has been succeeding against competitors and creating a shopping sensation with an upscale food-service format.

In Manhattan, the headquarters of SN, Whole Foods' highly impressive new 59,000-square-foot store at busy Columbus Circle appears to be enjoying a major lunch and dinner business. Who would have guessed that New Yorkers, who live in a restaurant mecca, would be taking seats at Whole Foods for Saturday night dinner?

Conventional supermarkets are making the right decision to gear up for a revolution in food retailing. But supermarkets should refer to this trend in the present -- not the future -- tense. No one wants the revolution to pass them by.