ALBERTSONS TO MERGE DIVISIONS

ANAHEIM, Calif. -- Albertsons plans to bring its Northern and Southern California regions under one umbrella later this year, Dave Simonson, president of the Southern California region, told sales representatives here.

Albertsons is still working on the details and the timing, he said, "but the plan is to make the right decisions for the entire California marketplace."

Sales reps expressed concerns about the pending combination during a question-and-answer session with Albertsons' executives preceding Simonson's speech. Simonson tried to address those concerns by telling them their contacts with the company would be simplified.

"As a national chain, Albertsons strives to leverage its national scope while being responsive to local needs by simplifying the points of contract for vendors," Simonson said. "Many retail companies have a single point of contact, and until recently, Albertsons bought for the equivalent of 11 companies from one contact point. But that had to change. That's one advantage you'll see with the new California division, whose operating structure will simplify your job because there will be only one contact point in the state instead of two."

The new California division will encompass 395 Albertsons stores, 11 Bristol Farms locations, and 370 Sav-on drug stores, "making it the largest retail enterprise in California," Simonson said.

He made his remarks at a dinner honoring Albertsons that was sponsored by the Combined Food Sales Clubs of Southern California, an amalgam of local sales clubs from across the area.

Albertsons' Southern California region, which includes Las Vegas, contains 315 supermarkets.

Simonson said that although the region has had a net increase of only seven stores in the last five years, it has actually opened 56 new stores. In addition, it's completed 82 major remodels, added 16 fuel centers, and closed 49 stores at an investment cost of $1 billion. "We hold the No. 1 or No. 2 market position in nine of the 13 Southern California counties in which we operate," he pointed out.

By the end of 2007, Albertsons plans to open 28 new stores and complete 57 major remodels in the region, he added.

Commenting on the Southern California labor dispute that ended in late February 2004, Simonson said the recovery has taken "considerably longer" than the 141 days the strike-lockout lasted. "Albertsons sales are strong, but it continues to be a tough battle to win back customers, who learned [during the dispute] how many different places they can shop," he said.

With the proliferation over the last five years of mass market alternatives, natural food supermarkets, ethnic retailers, specialty stores, dollar chains, WIC-only stores (stores that specialize in products available under the Special Supplemental Nutrition Program for Women, Infants, and Children) and online shopping options, "the playing field has changed," Simonson stated. "So have the rules of the game. We can't play by the old rules anymore because we're not the only game in town. We can't lie down in the face of new competition.

"Competition drives changes. The consumer benefits anytime there's an increase in choices because competition forces us to reinvent ourselves to meet the needs of consumers. But changes don't always go as we would expect. So we must stay flexible, embrace change as an opportunity, and avoid getting caught up in the past."

One change Albertsons has adopted, Simonson said, is a move to a multi-format store base with the introduction in August of its Super Saver stores, "which enable us to bifurcate a market with conventional and price formats." There's also the acquisition in September of Bristol Farms, an upscale chain of 11 stores in Southern California "that augments our strong position here."

During the seminar that preceded Simonson's speech, Greg McNiff, vice president of integration for the Southern California region, said Albertsons is looking at ways to help Bristol Farms. The chain operates as a stand-alone entity, with its previous management team remaining in place.

"Bristol Farms has been hungry to grow for a long time while it was owned by investment bankers. Right now, it's working on developing a three-year plan and looking at different options for growth, including just getting capital to invest in its existing operations. But this is a market [segment] that's ripe for growth."

McNiff said Albertsons is providing services to Bristol Farms "under a service agreement in instances where they were previously using a third party, but where Albertsons can provide the service at a better cost."

With regard to Albertsons' 17 Super Saver stores, which operate in Texas, Louisiana, Florida and Utah, Fred Schuit, senior vice president of operations for the Southern California region, said the company has no current plans to bring the format into this area.

Albertsons already operates three stores under the Super Saver banner in the region, but those are ethnic stores rather than price-impact stores, Schuit pointed out. "The company has a very concise model, based on demographics and income levels, to determine the best locations for these stores. While it's conceivable they will move to Southern California at some point, there are no plans at this time."

In other seminar highlights:

- Schuit said Albertsons' biggest challenge since "the event" -- the term seminar participants used to refer to the strike-lockout -- "was to bring associates back after five months, and make sure they treated customers with courtesy, dignity and respect. We were the first of the three chains to bring our people back. What we did quickly was spent money to have all of them go through sessions with a professional trainer to make them feel better about themselves and to be sure they knew we appreciated them.

"As a result, they came back as one team. While they were still bitter about the dispute, they were not bitter with Albertsons. Now our people are happy to work for Albertsons, and no one brings up 'the event."'

John Harb, director of center store for Southern California, said Albertsons is utilizing loyalty card data to determine what customers are buying "and what they're not buying. Once we pinpoint categories our top shoppers are not buying, we pop out coupons from Catalina Marketing to get them into those categories. We've started doing that with eight categories, and we plan to add more."

Dennis Bassler, senior vice president, sales and marketing, said the chain is using direct-mail pieces to boost sales, based on data about what customers are not buying.

- Bassler said Albertsons is pleased with the results of its switch last September to running weekly ads on Fridays instead of in midweek, "because that allows us to focus on the weekend, when people are thinking about going to Costco, Whole Foods, Trader Joe's or other alternative formats. The Friday ad gives us the opportunity to target those customers and try to get them into our stores to fill their pantries with our products."

- Schuitt said Albertsons regards self-checkouts at its stores as "another form of service because it's quicker for some people to check themselves out, especially at peak times when they may be in a hurry. It really doesn't cut out a lot of labor because it requires a checker to oversee those checkouts. In terms of productivity, it takes two to two-and-a-half times longer to process an order than it does at a regular checkstand."

- Schuit said Albertsons moved to earlier receiving hours -- in the morning before stores open at 6 a.m. -- "so we can have the stores ready before the competition so they are fully stocked when we open, which helps create less confusion for shoppers in the morning."

- Schuit said the heavy rains in Southern California helped boost sales at Albertsons.com, its online shopping service. "It was a real positive for us, and business really picked up because people didn't want to leave their homes. Some of those customers plan to use the service more often now that they've tried it," he explained.

- Bassler said Albertsons looks for 100% compliance on off-shelf displays, "and anything less is unacceptable." The chain has installed store execution managers -- a system "that takes execution to a whole new level," he noted. The system currently oversees store functions, but will add merchandising capabilities shortly, Bassler told SN after the meeting.

Harb said Albertsons plans to seek improved marketing execution at store level with a store mapping program -- due for installation later this year -- "that will tell each store what product goes where, and how long it should stay up."