Two Food Distributors Seek Methods to Get Beyond Price 2006-11-27 (2)

By David Merrefield
Editorial Director

One of the principal industry themes of recent times is the high level of price competition raised by alternative formats being faced by conventional stores. In fact, that theme was visited last week in this space.

Through it all, though, it has been widely recognized that price challenges can be met by means other than matching every price a competitor offers, so a conventional store need not match the price points on every stockkeeping unit in an alternative-format store to retain a viable shopper base. It’s just as clear, though, that conventional stores can’t be permitted to atrophy in any way, which includes continuous strategic pricing coupled with periodic facility upgrades.

Perhaps it was with such considerations in mind that Supervalu is taking a look at its Albertsons acquisition with a view toward upgrading the store base in various ways. Doubtless, Supervalu won’t wander too far off the map when it comes to pricing considerations, but the chief tactic Supervalu intends to pursue has little to do with head-on price competition. Supervalu’s plan was described in last week’s SN. Reaction to it is on Page 4 this week. Let’s take a look at some of its most salient features.

Supervalu’s current outlook is that it’s better to simultaneously upgrade specific stores that most need attention across several divisions rather than deal with the needs of one division, then proceed to the next. The initial intent at Supervalu was to proceed division by division, in sequence. The idea behind the remodels will be to ensure that each store well fits its locality, that fresh departments receive appropriate attention, and that the overall store experience is improved. In all, the good news is that a major company such as Supervalu is finding a way to remain competitive without undue reliance on destructive price-competition tactics.

Meanwhile, as you’ll see on the front page of this week’s SN, Supervalu’s crosstown Minneapolis rival, Nash Finch, is taking a new tack too. Actually, since Supervalu has tipped so far toward becoming a retailer, it’s no longer quite correct to view them simply as rivals. Indeed, the whole burden of what Nash Finch is now doing is to move further from retailing and more toward wholesaling. Nash Finch, with an eye toward the competitive landscape, sees that companies once dominated by wholesaling are now becoming retailers. That includes not just Supervalu, but regional players such as Spartan and Roundy’s too. And, of course, Fleming is defunct. Together, then, it might be reasoned that wholesale capacity is attenuated and attention is being fixed on retailing.

The plan at Nash Finch is to turn its corporate stores into a lab for developing formats to license to its independent customers, then unbundle the wholesaling offer by setting up three distinct divisions according to product: Center Store, meat and produce. It’s anticipated that the divisions will feature special attributes. Produce can be built around speed to store and freshness, meat on the establishment of destination store departments and Center Store on price. (Supervalu made a similar move early last year with the establishment of W. Newell & Co. as a separate produce-distribution unit.)

Nash Finch’s strategy is to allow it to present its offer in such a way that specific product needs of independent retailers can be met, even if Nash Finch isn’t the full-line distributor to certain accounts.