Q&A: Albertsons CEO Vivek Sankaran sees growth phase ahead

Vivek Sankaran has been president and CEO of Albertsons Cos. since April 25, 2019, when he succeeded Jim Donald, who became co-chairman. Sankaran joined the Boise, Idaho-based supermarket retailer from PepsiCo Foods North America, where he had served as CEO since December 2019, part of a 10-year career at PepsiCo.

On June 26, Albertsons made its debut on the New York Stock Exchange after launching an $800 million initial public offering. The event not only came after two previous attempts in recent years to take the company public — including through the terminated merger deal with Rite Aid in 2018 — but also provided icing on the cake for a strong 2019 fiscal year.

For the fourth quarter ended Feb. 29, Albertsons’ net sales and other revenue climbed 10.1%, including the ninth-straight quarter of identical sales growth and a 32% jump in digital sales. The full 2019 fiscal year saw sales rise 3.2% to $62.46 billion, with identical sales up 2.1% and digital sales surging 39%. Other achievements for the year included 243 store remodels, 300 more Drive Up & Go curbside pickup sites (to reach 1,600 over the next two years), 900 new Own Brands products (to a total of more than 12,000 items under nine main brands), and 26% growth in registrations for the Just for U loyalty program (to nearly 21 million households).

Related:Albertsons debuts as public company in $800 million IPO

Sankaran sees Albertsons as a company well-positioned for omnichannel retailing and the changes in consumer behavior since the COVID-19 outbreak, which elevated the importance of the grocery industry. Supermarket News Senior Editor Russell Redman interviewed Sankaran via phone on the day of Albertsons’ public debut. Here are excerpts of the discussion.

SUPERMARKET NEWS: Congratulations to Albertsons and its entire team. What does Albertsons’ public debut mean for the company?

VIVEK SANKARAN: Ratification of all the hard work that our teams have put in over a decade. If you go back, this is a company that has been built by putting many different retailers together. And there was a period of integration of all of these retailers — the last big one being when Albertsons and Safeway got together [in January 2015]. After that, there was a period of transformation, more recently in last year-and-a-half to two years or so. That transformation has been part our strategy. It’s about the different investments we’ve made, about the talent brought onto the team, the culture and the support. With the IPO, we are signaling that a whole new set of investors said, ‘I want to be with this company.’ And that to me is a great [development] for everyone.

Related:Albertsons comp sales jump 47% in March after strong fiscal 2019 close

SN: In recent years, Albertsons has made a couple of attempts to go public. Why was this IPO successful?

SANKARAN: There are myriad factors.The last time, in 2015 [following the Safeway merger], there were some market forces that took the wind out of the sails. And, interestingly, when you think about it, we just IPO’d the company in one of the biggest crises we’ve faced in humanity. And in this crisis, certain investors said, ‘Oh, I could get into [this company].’ I think it works because we’re also a stronger company. And I think for investors, they’ve seen that we actually did put Albertsons and Safeway together in a very effective way. It started out having to believe in it, and then there was the proof that we did it. And we are a stronger company and are the performing in the marketplace that way. That contributed to it, I’m sure.

Albertsons 'is a company that has been built by putting many different retailers together,' said CEO Vivek Sankaran, including the merger of the company with Safeway stores in 2015.

SN: When you took the reins as CEO last year, Albertsons was in a tough competitive position, just over a half-year after the Rite Aid merger fell through and with mixed financial results. Still, the company had a strategy in hand, and now it appears to be firing on all cylinders, including much improved financial performance. What’s going right for Albertsons now?

SANKARAN: When you are a company that’s going through an integration, and that integration requires you to change systems, you can imagine that while it’s still the same team that loves to compete and understands what they need to do with customers, there’s always the distraction of large-scale integration and all the things that come with that. We came out of the 2017-2018 time frame with that behind us. So we could now focus on performance. And then as the agenda came together, we were able to focus on priorities: growth, productivity, technology that enables everything, developing our talent, diversity and input. And we’ve been driving that hard.

SN: One of the areas where Albertsons has drawn much attention is e-commerce, especially the expansion of pickup service and efforts to build a nimble, automated infrastructure to fulfill online grocery orders. Where is Albertsons at right now in its transition to becoming an omnichannel retailer?

SANKARAN: If you looked at us before the COVID crisis, we were working very hard to catch up. We made a step change with COVID — a step change. We’ve done incredible things, raising the capacity and the capability across our footprint for customers. But what excites us is that we have even more headroom. We have much more room to grow that business, and not just expanding the capability of Drive Up & Go [curbside pickup]. Those are all big products for us. So we’re excited about it. And what’s amazing for us is that we’re able to give that fantastic portfolio you get at an Albertsons, fresh [foods] and the breadth and variety. There are custom cakes, if you want it. We can give you all of that and with the immediacy of omnichannel.

SN: Albertsons also has been refreshing its base of stores and fine-tuning its retail formats. What are some of the initiatives going on there?

SANKARAN: Think of it as a drum beat of investment our stores. You never want to lose momentum on reinvesting in your stores. We’ve done that every year, and we’ll continue to do that every year. And it’s various things. Sometimes it’s a full remodel of the store. Sometimes it’s small — we think of it as modules, where you remodel portions of the store to make it more contemporary and give you a better, clearer return. That’s how we think about it. It has been happening for years, and it will continue for years.

SN: Albertsons already has established itself as a force to be reckoned with in private brands. What’s next on this front for the company?

SANKARAN: Our Own Brands portfolio, which we’re so proud of, is not about an opening price point and we’re giving [consumers] a compromise. That’s not what we believe. We believe in giving you a great price but even more in innovation and excitement. O Organics is one such brand. And frankly, in some categories, we’ve got the brand of choice, and we love it. And there’s more room for expansion into new categories, more room for expansion in our geographies. Again, it’s one of the drivers of growth for us. And in every one of those, we see more headroom.

SN: When the coronavirus outbreak hit the U.S., Albertsons responded quickly and comprehensively. The company also worked closely with UFCW to establish ‘first responder’ status for grocery workers and provide extra compensation, benefits and protections for employees during the pandemic. What was the company’s approach in dealing with this crisis?

SANKARAN: Back in February, we learned from retailers outside the U.S. and were able to move quickly to ensure the safety of our associates. That was a time when we were, in many cases, ahead of the recommendations coming out from county and state [governments], the CDC, etc. We learned very quickly about social distancing. We learned about putting in plexiglass. We moved so quickly because our first priority was the safety of our associates, because we knew that if the stores are safe for our associates, then they will do the right things and it will be safe for our customers. That continues to be my No. 1 priority. My singular priority is the safety of our associates and our customers. We continue to innovate around it. We continue to find new ways to do it. And we continue to maintain energy around it. You know, we never want anybody to become complacent on that issue.

SN: Despite disruptions in operations and the supply chain, the retail grocery industry has seen big sales gains amid the COVID-19 pandemic. Where do you see this trend going?

SANKARAN: It’s hard to put a fine point on what will happen. But if you think about what’s changed with customer behavior — eating and cooking at home, what’s happened with work from home and all of us getting more comfortable, probably working more and being more productive, and in some cases you don’t have to commute back and forth — some of those behaviors are likely to stay even after COVID. Maybe instead of eating three times at a restaurant, we’ll all eat two times at a restaurant. I don’t know. But it’s likely that instead of going everyday to work, we can go two days a week to work. And when you do that, you eat more lunch and breakfast at home. So it’s more likely that people will eat more at home. And if you eat more at home, it’s more likely that a chain that sells great products and great fresh groceries will do well.

Because of the coronavirus and more people eating at home, Albertsons CEO Vivek Sankaran says, 'And if you eat more at home, it’s more likely that a chain that sells great products and great fresh groceries will do well.'

SN: Within the past year, Albertsons has named a new chief merchant (Geoff White), a new Own Brands leader (Chad Coester), and a new chief customer and digital officer (Chris Rupp), among other executive appointments. How do you feel about where the executive leadership team is right now?

SANKARAN: We have a great team. We have a great mix of people, including [Chief Operations Officer] Susan Morris, [Chief Financial Officer] Bob Dimond and [Chief Merchandising Officer] Geoff White, who have deep experience in grocery and deep experience at Albertsons and Safeway. So we’re a team that now has the best fresh thinking from outside the industry and deep experience within the industry. I’m delighted about the team. And I have to say, that team has been playing a big role in what you’ve seen us do over the last several months.

SN: Grocery retail already was a fast-changing industry before COVID-19 hit. But now it’s changing even more. What do you see as Albertsons’ leading strengths going forward?

SANKARAN: If you look at our [retail store] banners, they have been around for a long time. We have a strong legacy with our customers and great locations. I’m a firm believer that, if you’re a retailer, at the end of the day, the customers will come back to you because you have great products, a fabulous fresh portfolio, great variety and a great own-brand portfolio — and service that comes with it, such as a special cut of steak, somebody to bake you a custom cake, someone to make you a flower arrangement the way you like it. Those things matter, and we believe in that. Now, if you take that strength and you put e-commerce on top of it, you put a loyalty engine on top of it, and you put an own-brand portfolio on top of it, you become a distinctive retailer. That’s the journey we’re on.

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