SAFEWAY GETS FRESH IN ADS TOUTING NEW DIRECTION 2004-09-27 (2)

LUCIA MOSES

COLORADO SPRINGS, Colo. -- If sex can entice people to buy cars and beer, then maybe it can do the same for produce.

That's the thinking behind a television ad campaign Safeway is running to promote its commitment to freshness. This past summer, the Pleasanton, Calif.-based chain began to selectively brand and guarantee its fresh fruit and vegetables, following the rollout of its Ranchers Reserve beef program promising restaurant-quality meat. The TV ad campaign represents "our way of using sex to see if it'll sell produce," said Brian Cornell, executive vice president and chief marketing officer, Safeway.

Cornell, speaking at the Grocery Manufacturers of America's Merchandising, Sales and Marketing Conference here last week, demonstrated a spot that featured lushly photographed apples and oranges slowly shedding their peels and rinds, suggesting a strip-tease. The tag line is "The joy of produce: Experience it at Safeway."

The produce promotion is part of a three-pronged corporate strategy outlined by Cornell that focuses on improving perishables, revitalizing the center of the store, and upping sales and merchandising efforts.

The perishables part is strongly reflected in Safeway's new prototype that is rolling out in its Washington-Baltimore area stores. The format emphasizes produce and prepared foods, from the rustic-looking produce department with an organic section to the self-service bakery and proprietary sandwich and soup bars and prepared meals.

As the company, like many of its competitors, looks to distinguish itself with its perimeter departments, Cornell said, "These really are the Safeway stores of the future."

To revive Center Store, grocery items have been getting more play in the perimeter departments in Safeway's East Coast stores. Other areas of attention are price and promotion, merchandising, and health and wellness sections.

Safeway will lower prices on items where the retailer is most competitive with other formats, Cornell said. "We are not moving to an EDLP [everyday low pricing] platform. But we also recognize it's important to be price-right [on key items]."

Products in single-serving sizes will get heavier emphasis on Center Store shelves, reflecting the growth of smaller households as a portion of the U.S. population, Cornell said. "We need to make sure we recognize that consumer." Sales will recognize shoppers' changing financial situations throughout the month.

In addition, the retailer is trying to improve the store experience by tapping manufacturers' expertise in health and wellness and other categories. It's doing that through an advisory council of roughly 10 packaged goods makers it assembled earlier this year. It plans to focus on improving the look and consistency of its lobbies and keeping endcaps stocked with popular products.

Driving these changes are the rise of alternative channels and consumers' needs and wants, which are shaped by changing household profiles, the rise of ethnic groups, growing affluence, and unyielding time pressure, among other factors, Cornell said. "There's no such thing as a traditional household," said Cornell, who spent 20-some years on the manufacturing side, working for such brands as Tropicana and Pepsi, before coming to Safeway. "I really believe the key for Safeway, as I look forward, is building true differentiation."

During the keynote address that kicked off the three-day conference, Cornell echoed recent comments by Steve Burd, Safeway's chairman, president and chief executive officer, concerning the need to trim expenses to compete against non-union players. "You cannot compete when you have health care expenses that are five times the market average," said Cornell.

Safeway has partially closed that gap, he said. Under its new labor agreement in Southern California, Safeway's health care costs are now less than four times the market average, while pension costs that used to be two-and-a-half times the market average are now just over one-and-a-half times that.