SCHNUCK'S CEO PLANS TO FOCUS ON PRICE, CORE BUSINESS

MARK HAMSTRA

ST. LOUIS - Sharper pricing and a focus on the core business are on the agenda for the new president and chief executive officer of Schnuck Markets, based here.

The family-owned company last month selected Scott Schnuck to replace his brother Craig as CEO, although Craig Schnuck will retain the chairman title and will remain closely involved in the management of the company, he told SN.

Scott Schnuck, 55, who had previously been slated to take over as CEO seven years ago, said the time is right now for the transition to take place.

"Now's a great time," he told SN. "There's a lot of opportunity to kind of re-energize this business."

When Craig Schnuck took over as CEO in 1989, Bentonville, Ark.-based Wal-Mart Stores had just opened its first supercenter in Schnuck's marketing area. Now Schnuck Markets, with 102 traditional supermarkets, competes with 44 supercenters, including one that just opened across the highway from a Schnuck store two weeks ago. And Wal-Mart's push into the market may only be just beginning, Scott Schnuck said.

"I think we're going to be looking more at shoring up our core than we have in the last several years, because we have to be ready for the Wal-Mart assault," he said. "That's going to require us to accelerate our pace, to keep our existing store base updated, possibly do more consolidations of stores in which we replace two smaller stores with one larger one, and do strategic expansions.

"I think we can compete with Wal-Mart if we maintain pricing that is, on a relative basis, maybe closer to Wal-Mart than we've been running at historically."

He said he sees Schnuck as offering several points of differentiation with Wal-Mart, including its more expansive perishables offerings; its knowledgeable, veteran workforce; its strong locations; and its work in the community.

"We fall back on our traditional strengths: our people, our store formats, our fabulous locations - because we've been here a long time and have been able to assemble a superior network of sites - and continue to work hard in the communities that we're doing business in to build loyalty with our customers not just by running good stores but by being good neighbors," Scott Schnuck said.

Scott Schnuck came up through the marketing/merchandising side of the company, and said he considers himself to have strong skills in that area. He created the company's first in-house advertising department and helped introduce category management throughout the chain's product offerings.

"I call myself a grocer," he said. "I really know the business, and I think I have a great marketing approach to the business."

The company, which generated an estimated $2.2 billion in sales last year, operates 60,000- to 65,000-square-foot stores with pharmacies, predominantly in the St. Louis market but also in Memphis, Tenn., and in the Rockville, Ill., area, where the company has acquired other banners in recent years.

Scott Schnuck said the company plans to continue to build new stores and expand and relocate old stores, with new growth primarily coming in markets outside St. Louis.

"We're not going into any new marketing areas," he told SN. "We can grow and expand by filling in other areas where we already operate."

Although both Schnuck brothers declined to comment on industry speculation that Schnuck might be interested in acquiring Marsh Supermarkets, Indianapolis, their comments seemed to indicate that such a deal was not in the works.

"There's nothing extraordinary going on," said Craig Schnuck in explaining the timing of Scott Schnuck's promotion. "We're operating on a very solid trend, and if Scott's going to do it, we need to give him a chance to have a solid run as CEO."

Craig had originally planned to remain CEO for only 10 years, but a series of events at the company had delayed the transition, including the acquisitions of the Logli supermarkets in Illinois and the Seessel's stores in Tennessee and the labor strike of 2003.

Craig, who has been active within the industry as vice chairman of Food Marketing Institute, Washington, and is the current chairman of the FMI long-range planning committee, said he also plans to remain involved in the management of his family's chain.

"I'm not disappearing," he said. "I expect to remain involved. I am downshifting a little bit - but I'm certainly not retiring, not anywhere close."

He said he will retain responsibilities for certain aspects of the company's operations, including real estate and corporate growth. He also will remain involved - along with his siblings - in the family's monthly strategic meetings.

Under Craig Schnuck's tenure, the chain was able to nearly double in size, mostly through the 1995 purchase of the National Tea Co. chain in St. Louis from Loblaw Cos., Toronto. Although the combined companies had to shed 24 stores to gain the approval of federal and state regulators, the deal gave Schnuck a dominant No. 1 share in the St. Louis market and increased scale to better compete on price with Wal-Mart.

In addition to the national acquisition - which involved convincing the Federal Trade Commission to consider Wal-Mart supercenters as competitors to traditional supermarkets for the first time - Craig Schnuck also said he counts among his proudest accomplishments at the company instilling a stronger focus on profitability and accountability.

"It was just a matter of running the business with the focus on both the customers and the bottom line, and making sure we kept the right balance," he said.

Todd Schnuck, 47, the former chief financial officer and brother of Craig and Scott, has been named executive vice president and will become president later this year when Scott becomes chairman and CEO and Craig becomes chairman of the executive committee. He is next in line to become CEO.

"One of the things this move does is that it strongly communicates continuity of ownership in our company," said Scott Schnuck. "I think that's very important for a private business. I think it's important to send that message to our people that the Schnuck family is going to be running this business for a while."