Burd Leads Health Initiatives at Safeway

ELLIOT ZWIEBACH

Burd Leads Health Initiatives at Safeway

PLEASANTON, Calif. — Safeway here has been a leader in the industry's health and wellness strategies for years on both the consumer and employee fronts.

The chain has developed two proprietary brands — Eating Right, a line of more than 250 healthy products across all store categories; and O Organics, a line of more than 300 products free of synthetic pesticides, genetic modification, growth hormones or antibiotics — that it now sells worldwide to other operators.

It has also grabbed the initiative on keeping health care costs in check by offering incentives to its employees to opt for healthier behaviors to improve their personal health and reduce their health care premiums.

Jonathan Ziegler, principal at PUPS Investment Management, Santa Barbara, Calif., said Safeway saw the success Whole Foods Market was having earlier in the decade with natural and organic foods “and caught that wave by creating its own line of similar products — and Safeway was so successful with both Eating Right and O Organics that it's become a wholesaler of those lines to other retailers.”

As for incentivizing employees to alter their behaviors to improve their health, Ziegler said, “Steve Burd [Safeway chairman, president and chief executive officer] really grabbed the initiative on that one and showed real leadership. He didn't wait for the government to put a gun to the industry's head — he came up with a win-win program for the company and its employers.”

Improving employees' health can also result in more productivity from the workforce, which shows up on the bottom line, Ziegler added.

In testimony last June before the Senate's Health, Education, Labor and Pensions Committee, Burd said Safeway's incentive program has enabled the company to hold its health care costs flat over the last four years among non-union employees, compared with a 38% cost increase nationally. “If the entire country had taken Safeway's plan design in 2004, we would have a health care bill in this nation that's $600 billion lower than it is today,” he noted.

Nearly 75% of the chain's non-union workforce, including dependents, has opted into the plan so far, and roughly half the chain's union contracts have some elements of the plan, he said.

According to Burd, Safeway realized four years ago that 70% of all health care costs were driven by individual behaviors, “and as a business guy, that was good news because it said if we could influence the behavior of our employees, we could actually bend the cost curve and improve their health.”

Under Safeway's plan, employees with less-healthy conditions pay more for insurance on an annual basis. “But if you quit smoking by the end of the year, or if your body mass index is reduced by 10%, or if your hypertension is under control, or if your cholesterol is under control, we write you a refund check equal to the elevated premium,” Burd said.

Aside from developing Eating Right and O Organics, Safeway has also put together an online nutritional tool for club-card members called FoodFlex that enables consumers to view their grocery purchases, benchmark their performance against U.S. Department of Agriculture guidelines, identify healthier food alternatives in specific grocery categories and create a personalized shopping list to achieve their nutritional goals.

Burd has also been instrumental in forming a coalition of like-minded business leaders “to forge market-based health care reforms,” he noted.