Q&A: CEO Tony Sarsam says SpartanNash has set ‘different trajectory for growth’

Tony Sarsam has led SpartanNash as president and CEO since September 2020. This past November, the grocery distributor and retailer held its first Investor Day at the Nasdaq MarketSite center in Manhattan’s Times Square, where executives presented an aggressive growth strategy. Under the plan, Grand Rapids, Mich.-based SpartanNash aims to exceed $10 billion in total sales—or 12% growth from a 3% compound annual growth rate in 2021—by 2025.

Key elements of the strategy are well under way, including a consolidation of SpartanNash’s corporate-run supermarkets from about a dozen retail banners to four: Family Fare (conventional), Martin’s Super Markets and D&W Fresh Market (upmarket), and Supermercado Nuestra Familia (Hispanic). Two market fill-in acquisitions also have been completed, including independent grocery wholesaler Great Lakes Foods and independent grocer Shop-N-Save Food Centers.

Winsight Grocery Business Executive Editor Russell Redman and Editor in Chief Heather Lalley met with Sarsam at this past weekend’s FMI Midwinter Executive Conference in Orlando, Fla., where he shed more light on SpartanNash’s growth push and recent initiatives. Here are edited excerpts of the interview.

WGB: Before we delve into SpartanNash’s growth strategy, can you talk a bit about the Great Lakes Foods acquisition in early January? What does that bring to SpartanNash?

TONY SARSAM: Sure. Great Lakes, a great company, operates a wholesale business on the upper peninsula. It’s right on the border between northern Wisconsin and the upper peninsula of Michigan. They’re in a business that’s like ours. They’ve built a fine business up there and are in what was a little bit of a dead spot for us from a distribution standpoint. So it’s just one of those perfect fits where we now have a way to service great new customers and some of our own stores as well as we enroll these folks into our company and our growth strategy.

WGB: The Great Lakes distribution center will be offering SpartanNash’s private brands?

SARSAM: Yes. As we start working with these customers about what their specific needs are, we will certainly present the best of our private brands, and we expect that they’ll find them to be as effective as our other customers have and as we’ve found in our own retail stores.

Sarsam (3rd from left) gets a photo op after winning a drawing at the FMI/PepsiCo "Road to the Super Bowl" opening dinner at the Midwinter Executive Conference. / Photo: Russell Redman

WGB: Going forward, do you foresee more acquisitions like this, kind of fill-in acquisitions, on the distribution side and as SpartanNash has done in adding the Shop-N stores on the retail side?

SARSAM: I’m a little over two years into this role now, and I came here to SpartanNash to sort of set the company on a different trajectory. Amongst those things, we invested in our corporate identity statement, called our ‘Winning Recipe,’ which we shared with you a little bit ago. We said we’re building on a foundation of ‘People First’ and really investing heavily in people and in training, financially and emotionally and otherwise. Building that foundation to be a great operator, all that is so we can set ourselves on a different trajectory for growth. And that growth includes organic growth in our stores, what we can do to be more relevant for our current customers and picking up new customers. Of course, we have an eye toward M&A as well. So all those things fit together as we think about how we’re going to grow.

WGB: And the partnership with Coastal Pacific [Food Distributors] expanded your footprint [to the West Coast] as well.

SARSAM: That’s right.

WGB: At SpartanNash’s first Investor Day, you unveiled an accelerated growth plan to exceed $10 billion in total sales by 2025. That would mean a 12% CAGR and, I think, would add like about a billion dollars to the top line, right? Can you give an overview of the components of that plan?

By 2025, SpartanNash also expects to exceed $300 million in adjusted EBITDA, or 40% growth from a 9% CAGR in 2021. / Photo courtesy of SpartanNash

SARSAM: It was 12% overall growth in that time frame. Right. We will beat that. Obviously, we had—using track and field—a wind-aided start in 2022 with the inflation. So we’re well ahead of that goal on the $10 billion. But it includes the components of everything I mentioned earlier. It includes acquiring new customers, and it includes getting a little bit more density with current customers. We are very bullish on the ability to grow the private brands—Our Family, in particular—and that’ll play a role in that growth. The biggest one is going to be new customers. M&A is not included in that number; that would be all incremental. So new customers, greater business with our current customers and the growth of Our Family.

WGB: What was the response of the investor community to SpartanNash’s Investor Day event?

SARSAM: The feedback was terrific. We got a lot of really great feedback about the transparency of our goals and how [our] people really bought into the efficacy of what we presented. They liked not just what we talked about, but the way we talked about it as well. We had a chance to kind of peel off and do some breakouts with key functions. So they learned in greater depth about some other parts of the company. So we got really strong feedback from that community overall, and we had a great year on stock growth overall. Investor Day was later in the year, but broadly speaking, we think investors have spoken with their dollars and our stock is significantly up versus where it was a year ago.

WGB: SpartanNash announced at Investor Day that it planned to consolidate its grocery retail banners. Where’s that at right now?

SARSAM: We’ve taken out a handful of banners already. As you know, we picked up some of these stores kind of one at a time, and in some cases, they have real relevance in a small community. Some folks have exaggerated the benefits of converting the banners. It’s not like it rains money as soon as you convert the banner. But we want to be efficient and make statements and invest in brands that people can understand. For example, we acquired Bill’s Shop-n-Save, with three stores in Michigan, and converted them instantaneously to three Family Fares. So that would be more of our path going forward. For stores that are similar to the profile of a store we might have in that similar geography, we’ll convert them right away.

It’s theoretically possible we may find some like Martin’s. You know, Martin’s has great brand equity. It’s a high-end banner. That’s a fine banner to keep the way it is. So it will depend on the circumstances. But we have a couple more banners we’re going to consolidate, where we think the alignment is more valuable than the old equity they may carry. And then we’ll have that process moving forward as we used with Shop-N-Save.

Led by the Our Family label, SpartanNash is aiming to boost private-brand penetration more than 20% over the next three years. / Photo courtesy of SpartanNash

WGB: What benefits does having fewer banners bring?

SARSAM: Well, one thing it brings is that it allows us to focus on the upmarket and core market banners. Overall, we’re going to have only a couple of expressions in the upmarket and probably only one in the core market. And we can think about tailoring the marketing, the categories and the overall offering to those customers depending on that core market.

Our history is that we’ve always been very focused on local relevance. We don’t see any conflict there. For example, we had a D&W [Fresh Market] in Grand Rapids and a D&W somewhere else in Michigan, which may have a local apple farmer. That’s really important. We would use those local apples. That focus on local has been a distinguishing attribute for us. That’s a store-by-store decision. But broadly speaking, the offering in the upmarket under these banners that we can market to the community or the offering in the core market where we can market consistently to a variety of communities, we think, allows us an appropriate marketing focus.

WGB: One of the breakouts at Investor Day focused on enhancing the in-store experience and the omnichannel experience. What’s going on there?

SARSAM: With in-store, one of the reasons we picked up share the last couple years is that people are gravitating back to some of those fundamental [grocery store] services. They like having a butcher. They can tell them how to make a steak, and they like having the service at the deli counter or the bakery. We think we do a very good job at that. So we think the overall [in-store] services are going to be really important for us as we grow. And that’s in all of our banners. The touch that our people bring to serving the shoppers is really important.

As far as omnichannel, when we think about digital, because we are primarily an in-store experience, we’re not going have as big of an expression for click-and-collect or delivery. But we have some people who really want that. So we focus on making that journey easier for them, making sure that offering is the best we can provide in terms of the experience with the online tool and the experience with a [personal] shopper that’s shopping for your goods in the store. We think we do a great job with that. So the notion that we’re going to provide you the best and most personalized service bleeds into omnichannel as well.

WGB: SpartanNash’s Fast Lane service, is that pickup only or does it include delivery? And I know SpartanNash also works with other partners like Uber Eats, DoorDash, Shipt and Instacart.

SARSAM: Yeah, we have some ways for customers to get delivery to their home, and some that are more click-and-collect. Frankly, the majority of what anybody offers is click-and-collect, which is one of the miscalculations of 25 years ago, where they thought everything was going to be delivered to the home and it’s actually more convenient to come pick it up in the parking lot than waiting around for someone to show up at my front door. So we’re seeing the same thing everybody else, and the majority of what we do is click-and-collect.

Sarsam (2nd from right) and other SpartanNash executives visit a store for the company's 2022 employee appreciation day. / Photo courtesy of SpartanNash

WGB: You’ve previously mentioned a “merchandising transformation” that was under way at SpartanNash. Can you talk a bit about that?

SARSAM: That’s a hot topic here at the FMI meeting. We began that investment last year, and the investment that I mentioned at Investor Day was, we had a fine merchandising team and a fine set of tools to address the world as it was in the recent past here. The world has changed quite a bit, and we were not equipped with the capacity to handle seven times or eight times the number of pricing actions and all the wild varieties of things that are coming at our merchants now. So we had to retool ourselves to deal with supply chain disruption and and the category disruption from these inflationary times that we are still in today.

And so we made some big investments in the fourth quarter, in particular, around engaging with our suppliers to make sure we had a great offering for our [distribution] customers and for our shoppers. That offering included the right kind of category, the presentation, the right pricing and access to deals and other things for shoppers trying to make sense of all the inflation. Overall, the response been very good. We’ve had really good engagement with our suppliers, for the most part, and we’re spending a lot of time talking about the next steps with them as well. So it’s all good news for our customers and our shoppers as we attempt a more accelerated approach to containing inflation and making sure the category offerings are right.

WGB: And there was something mentioned about a “category CEO”?

SARSAM: Yeah. As we think about our merchants, we want to change their focus to be more complete around growth and profitability as opposed to having goals around slotting fees or ad fees. And that’s part of the equation. The big equation is we want to sell more to greater profitability, and we don't want them to be limited in the way they think about this. So we might have them really own the category in a way where their good work is accreted to the kind growth you want as a company.

WGB: I was told at Investor Day that SpartaNash is slated to relaunch its loyalty program this year. Is that correct? If so, what can we expect to see with that?

SARSAM: On the loyalty relaunch, first and foremost, we’re extending it to more places. It has varied in parts of our broader geography, so we want to get a more consistent offering. It’s linked a little bit to the banners as well, not 100%, because even some of the banners have different offerings. But we’re really kind of bringing the best of our loyalty program to new geographies and to new stores.

Family Fare, which accounts for roughly 60% of SpartanNash's stores, serves as the conventional grocery retail banner. / Photo courtesy of SpartanNash

WGB: You already mentioned private label as a big growth component for SpartanNash. I think the company has said it aims to generate a more than 20% increase in penetration and add over 1,000 new products over that time frame through 2025. What’s the game plan there?

SARSAM: We want that to be known as a great option for our shoppers and our customers. Our current penetration has opportunities. By wholesaler standard, we’re good. We’re not good by the standards of the best of the best in this business. What I have an eye toward is, what are those folks doing? What can we learn from them? And what can we learn in terms of great ideas for our stores? We know that’s going to come with having great, quality options for folks.

The fundamental premise is they’re going to have attractive prices, right? And we’re getting a lot of people into these categories now, I should say into the franchise of Our Family [brand]. People who may not have tried it in the past are now looking at it more thoroughly because the price gap is growing with the national brands. Our private brands are growing at about three times what the national brands are growing, and we want to keep that ball rolling and continue to offer and delight our customers with the great quality of those products at the right price. We’re going to put some marketing muscle behind it as well.

WGB: This includes the launch of the Fresh & Finest brand. How is that doing so far? What categories does it include?

SARSAM: It's going to be an important frontier for us. Basically, it’s in the fresh spaces. There’s an element you may find in our deli with some of our fresh prepared foods, in our bakery with some baked items, and then even in meat and produce, ultimately. So that whole fresh part of the store will be the way we go to market with Fresh & Finest.

WGB: Any new brands on the horizon?

SARSAM: New private brands?

WGB: Yeah.

SARSAM: I’m going to say no, with an asterisk. [Everyone laughs.] So we might.

WGB: Let me change gears a bit. You’ve talked about SpartanNash’s efforts to transform its supply chain and drive efficiencies. The information pack from Investor Day said 20% of the company’s network has been reworked. It also mentioned reducing mileage in the system. Can talk more about that?

SARSAM: I think it probably refers to additional touches on product. That’s a big part of what our head of supply chain [Chief Supply Chain Officer] Dave Petko says. He would say you might get rid of steps and touches to have as few of those as possible within the box. So we’re thinking about things like re-profiling our warehouses, even trying to get out of the scenario where we have slow warehouses and fast warehouses. There’s an extra touch there, right? So want as few products in the scenario where they’re being stored someplace and then put on a truck and going another warehouse and being taken out and put on a truck again. All those inefficiencies are part of reducing the steps and touches. That’s a big part of that supply chain transformation.

WGB: Now I’ll put you on the spot a bit. The economic picture for 2023 looks uncertain. What kind of business climate can grocery retailers and wholesalers expect for this year?

SARSAM: There has been a lot of pricing taken on food. In the near-end wake of the COVID pandemic, there was a lot of supply chain disruption. It sort of started the ball rolling, with a lot of labor difficulties. And people found themselves with input costs; they’re quite a bit higher. They took really an extraordinary amount of pricing—pricing that most of my team hasn’t seen in their lifetime, right? As an old guy, I can remember back in the ’70s and early ’80s. Most folks haven’t lived in that environment.

But as we pushed through that, our economy is not really that much different than it was a couple years ago. And there are some limits—I’m going to speak for the food community as a whole. We don’t have as quite as much innovation as we used to have. We have a lot of stock outages, and we have a lot higher prices. That’s not the way to compete to win the hearts of the shopper. So when you get back to bringing great solutions, great quality and great availability—and we have stable prices—folks in the food community are going to be big winners. I think people will start figuring out how to get there, how to get half a step ahead of their competition. That’s when we’ll see winners will emerge, once we get back to those basic, tried-and-true practices of delighting the shopper in that way.