NEW PRESIDENT OVERSEES A MORE EFFICIENT MEIJER STORES

Mark Hamstra

KALAMAZOO, Mich. -- Meijer Stores had the second-most profitable year in its history in 2004 after implementing a sweeping cost-cutting initiative and re-thinking its merchandising, the chain's newly promoted president said last week.

"Meijer had tried to cut costs before, but was never able to do it," said Larry Zigerelli, speaking at the Western Michigan University Food Marketing Conference here. Zigerelli on April 1 succeeded Paul Boyer, who was named vice chairman and co-chief executive officer, along with Hank Meijer. Zigerelli is a veteran of CVS and Procter & Gamble who joined Grand Rapids, Mich.-based Meijer two years ago as senior vice president.

He said the company is on track to reduce selling, general and administrative expenses by 4% during the two-year span that a comprehensive efficiency program has been in place. In addition, construction costs for new supercenters have fallen 27%.

The company has refocused on making its stores easier to navigate and creating more destination departments, while emphasizing the "right products at prices that are proximate to the competition," Zigerelli said.

The company's focus on cost-cutting and remerchandising involved a significant re-thinking in the way it had done business since it was founded in 1934 in Greenville, Mich. The family-owned chain, which is on track to have 168 stores open by the end of this month, embarked on its new initiatives after reporting its first-ever profit decline in 2001, Zigerelli said.

"Our stores were not in good shape, and there was concern about what had been one of the top retailers in the country," he said. "We needed to face the brutal facts of our situation. For the first time in history, the company decided it needed to change."

As a family-owned company with deep community roots, Meijer historically had found it difficult to reduce its workforce, he explained. However, by involving the entire organization in the process through a program dubbed "Let's ROC" -- for Reduce Our Costs -- Meijer has eliminated more than 2,200 jobs.

The streamlining is designed to enable the retailer to better compete with the incursion into its territory of Bentonville, Ark.-based Wal-Mart Stores.

"We want more than our share of the 70% of the market that's left over after the big guy comes to town," Zigerelli said. "There's room for two of everything. There can be two supercenters."

Meijer also set a goal to be "the leading supermarket in town." To achieve that objective, the company is working to enhance its private-label offerings, and making sure its stores are clean and stocked with the right products.

For the past few years, the company has focused on remodeling while delaying the construction of new supercenters.

After opening just two new locations in 2003 and five in 2004, the company expects to open eight stores this year. It also plans to reduce new-store opening costs by another 9% next year.