ALBERTSON'S CENTRALIZES GENERAL MERCHANDISE

STEPHANIE LOUGHRAN

BOISE, Idaho -- Albertson's has taken steps to implement a more aggressive nonfood strategy through the formation of a corporate general merchandise function that will operate across all 2,500 of its food and drug stores.

This move was made in conjunction with the creation this month of 19 new operating divisions to better serve local markets.

On a store-to-store basis, "We'll have the opportunity to leverage the marketing expertise, previously with the drug division, across all of our stores. It should result in higher sales of general merchandise because of better selection, better pricing and directly marketing to each neighborhood," said Ertharin Cousin, Albertson's group vice president for public affairs. Before, she said there were separate general merchandise departments for the food stores and the drug stores, but general merchandise was primarily focused on Albertson's drug stores. "We've taken the best of these and made them one," she said.

In addition, the restructuring effort includes the creation of a drug store division and a centralized pharmacy department that will support all 1,900 pharmacies in the food stores and freestanding drug stores. Previously, the retailer had separate operation groups under Albertson's food stores and the Osco and Sav-on drug stores; now they fall under one umbrella, according to drug division spokeswoman Karen Ramos.

Industry analysts said only positive things about the changes. Bob Toomey, equity analyst for Dain Rauscher, Minneapolis, said the old structure has caused Albertson's to "lag behind the industry." This more autonomous structure "makes sense because it enables them to give their regional and local managers more flexibility to operate at the local level, which is where they need to be," he said. "It's the first step, and it gives a wide range of opportunity they have to better derive more value from their business."

On the general merchandise front, Toomey said the change will help Albertson's "fine tune their merchandise to better suit their local customer base, and it will help revenue growth."

Cousin agreed: "Demographically, we operate in some of the richest areas in the country and some of the poorest areas in the country, and we want to market to those places very differently. The centralized marketing and general merchandise functions will leverage our overall 2,500 store size to get the best deals and to set the planograms and programs for the entire company." This way, she said, the local levels will have a menu of products and planograms to choose from to meet the needs of the customers in a given particular area. "It's the best of both worlds."

The restructuring will create new job positions for two executives. Kevin Tripp will fill the new role of executive vice president of drug and general merchandise. He was president of the drug region. Mark Panzer will serve as the new corporate vice president of general merchandise. He was vice president of general merchandise in the drug region.

"They will be responsible for strategic direction for how we will market our general merchandise in the general merchandise category," Cousin said. "They will not specifically be setting the direction or market plan for any particular store or division, but a number of plans for the marketers in the division and at store level.

"Before, it was the corporate office that would make the decision of what products went into what stores, which may not have always been the right products or right price for a particular neighborhood. The change in pharmacy will ensure we have one set of standards and operating procedures. It will ensure we have a uniform function of all of our pharmacy services and delivery of pharmacy operations across the country, providing better service for the customers."

Toomey said this change was needed. "Clearly, the structure was evident in their financial results and their comparable store sales."