SAFEWAY READY TO UNVEIL NEW 'BRANDING' CAMPAIGN

Jon Springer

NEW YORK -- Safeway's brand strategy is going public.

Speaking at the Banc of America Securities Consumer Conference here last week, Steve Burd, chief executive officer of the Pleasanton, Calif.-based retailer, said Safeway is preparing to launch "a redefinition our of brand" to the public in coming weeks. The launch will deliver a message he said will distinguish Safeway's shopping experience, atop ongoing efforts inside stores to brand proprietary product offerings.

"What we're all about is branding that shopping experience so that if you hear Von's or Safeway or Dominick's, it stands for something," Burd told attendees. "We believe we can brand the shopping experience just as a consumer packaged goods company can brand a product."

Introducing a store-experience branding message to the public is the next step in Safeway's efforts to differentiate its offering from competitors, Burd said. The program began two years ago with the introduction of Rancher's Reserve meats. It has continued with "lifestyle" store makeovers that include expanded produce and prepared-foods offerings.

"It's our belief that in the supermarket segment, no one out there has really branded their proposition to consumers," Burd said. "I believe they just have a collection of banners."

Burd said the effort to distinguish Safeway would resemble what Minneapolis-based Target has done with its offering. While he provided few specific details of how Safeway would brand the experience, he predicted "it will generate a few 'Ah-ha!'s."'

Consumer research led by Brian Cornell, the chief marketing officer Safeway imported from Pepsi, has sped the development of its branding strategy, Burd said. The challenge, he said, has been in creating a message that will appeal to shoppers in disparate geographies and demographics, and over stores of different sizes.

"It was relatively easy to pick a brand like beef, distinguish it, and communicate what it stands for. That proposition was easy to sell. The Signature soup and Signature sandwiches was relatively easy," Burd said. "But when you talk about branding the entire shopping experience, that is a lot more challenging."

Laura Ries, president of brand consultancy Ries & Ries, Atlanta, said Burd was correct in describing Safeway's mission as a challenge.

"What makes you a brand is standing for something specific in the mind of the consumer," she told SN in a phone interview following Burd's presentation. "Traditionally, supermarkets have not effectively been able to brand themselves because they've tried to appeal to everybody. When you try to appeal to everybody, you don't stand for anything.

"Until recently, supermarkets haven't had much competition," she added. "It was more about location. Now, supermarkets are being squeezed at two different ends. Wal-Mart has very effectively branded itself as the place for low prices, and at the other end, Whole Foods has very effectively branded itself as 'better for you.' So now, supermarkets are stuck in the mushy middle. They're not cheap, and they're not cool."

Burd said developing a distinct identity behind proprietary offerings and what he called "the absolute best perishables in the supermarket segment" will drive identical-store sales for Safeway, in concert with improvements in center store merchandising and narrowing the price gap with discounters. "You'll see us demonstrate how much better we are than our competition," he said.

"The most interesting thing going on competitively is that if you look at supermarkets, you'll see we're all trying something different," Burd added. "More so than I've ever known. I like that because I think we have the right strategy, but it makes for interesting times."

Burd also reiterated Safeway's plan to migrate to a "dead-net cost" relationship with suppliers, and phasing out slotting allowance, scanbacks and advertising allowances over time. He said the arrangement will simplify accounting and save money over the long haul.

"We have a vision to get to that point because it's easier to manage the business that way," Burd said. "I can't give you a specific timetable, but I can say we have vendors now that we're on a dead-net cost basis with. Sometimes, it makes sense to do it on a vendor-by-vendor basis. Sometimes, it makes sense to do it on a category basis. You'll see us migrate to that system.

"I think there will be somewhere between 50 and 100 accountants in Arizona we wouldn't need if we were on a dead-net cost basis," he added. "I hate to disappoint those accountants, but that's the direction we'll be migrating."