SUPERVALU GIVES BOOST TO CENTER STORE PERFORMANCE

DAVID ORGEL

ATLANTA -- Supervalu, Minneapolis, has achieved impressive results from a category management program aimed at retrieving lost sales in key Center Store items, Jeff Noddle, chairman, president and chief executive officer, said in a presentation here.

The distributor, which posted companywide sales of about $21 billion last year from its wholesale and retail businesses, plans to have the Center Store program operating in some 540 stores it serves within the next year. It has already rolled out the program to 242 stores in the nine months since the pilot ended.

"This is an opportunity to recover some of the business we've exported to other operators," he said.

The results were presented here at the World Food Business Summit sponsored by CIES -- The Food Business Forum.

"There's been a migration of business to other formats for products that used to be sold in supermarkets," Noddle added, citing categories ranging from laundry detergent to paper towels. "Our retailer customers came to us and said 'Can you help us?' Customers were leaving the supermarket in order to buy those items elsewhere. The goal was to get consumers to buy those items while they were already in the supermarket."

The stores involved in a pilot program recorded an 8.5% increase in storewide sales and a $1.56 rise in average storewide sales per transaction during the test period, which lasted for a year and a half, Noddle said. The 20 product categories studied in the pilot posted an average sales increase of 38.7% and a gross profit dollars advance of 77%. The results came from focusing on the "five P's of category management," which Noddle said are product, price, placement, promotion and procurement.

The items chosen for the test were among those hit hardest by the loss of supermarket market share to mass merchants and drug stores, he said. These products were known-value items that were very familiar to consumers.

Supervalu set out to improve results by creating efficient, high-impact assortments with fewer sizes and larger packs. In addition to SKU reduction, the company accelerated new-item introductions.

Supervalu launched frequent, competitive price checks in the markets and made sure it was competitively priced on all know-value items. The distributor became more flexible by creating varying strategies for different categories.

"For instance, for some categories we chose everyday-low price and for others, promotional. We did this without compromising the total-store strategy."

The product-placement strategies were fine-tuned by ensuring prominent placement of known-value items. The more profitable items were placed in key positions, and the company re-allocated space to reduce out of stocks.

More effort was given to promotion, including in-store communications and merchandising plans. On the procurement front, the company negotiated everyday-low cost for EDLP items.

Noddle cautioned that this approach isn't appropriate for all stores, adding that upscale retailers in particular require different strategies.

RESULTS OF SUPERVALU 20-CATEGORY PILOT PROGRAM

Total store sales up 8.5% in pilot stores

Average storewide sales per transaction increased $1.56

Average sales of 20 categories up 38.7%

Average gross profit dollars of 20 categories up 77%