Safeway excels implementing tactics within the retail food space. However, tactics no matter how good do not replace an integrated strategy. Safeway continues to suffer footprint malaise. Bigger is not always better.
Safeway when implementing its new “lifestyle” stores did a great job understanding the consumers focus on Ready-2-Eat and Heat-N-Eat fresh prepared food aka grocerant niche food. Legacy companies sometimes make legacy leadership mistakes and Safeway added new space to many stores adding the grocerant niche product offerings.
Consumers do not want larger footprints. Consumers are time-starved and research has indicated this for 20 plus years. Consumers want to get in and get out, so why did Safeway do it? Simple they wanted satisfy an outdated legacy Wall Street metric “basket size” utilizing a legacy mind-set bigger store, bigger basket. Foodservice Solutions® Grocerant Guru, Steven Johnson has stated “frequency trumps, basket size”.
In Canada from 2009 until 2011 the entire grocery sector capitulated very close to 2% of market share. While that was in Canada, the US experienced similar declines and Safeway was forced to sell its Canadian division this this year.
Safeway is the second-largest U.S. grocery-store chain it still suffers from footprint malaise all the while benefiting from 42+ million SNAP program subsidy. When the economy turns around and the number of people in the SNAP program diminishes; what then? That is not just a Safeway problem that is a grocery sector problem. Wonder where consumers are migrating to other than dollar stores, and C-stores? A recent Foodservice Solutions® study “Food Parity for America” found McDonalds is an aspirational brand for SNAP program consumers.
Joe Feldman at Telsey Advisory Group a New York based retail analyst said Safeway ”has cleaned up its business recently by agreeing to sell its Canadian stores and conducting an initial public offering of its gift-card unit. The moves may help increase its free cash flow, making it more attractive to private-equity buyers”, …“Maybe there’s the thought that with the cash flow you could take on more debt,”
Safeway, operates close to 1,400 stores in the U.S., last year it had free cash flow of $1.57 billion, a 69 percent increase from the previous year. The chain’s price-to-earnings ratio of 13.1 trails the 18.2 average ratio of S&P 500 Consumer Staples Sector Index companies. The numbers look good? But remember that in the past 10 years there are only 350 additional grocery stores in the United States. Safeway and the grocery sector are experiencing customer migration at an ever increasing pace. That can not last.
Yet during the same 10 year time period there were an additional 11,500+ dollar stores and 16,200+ additional C-stores each selling food, in a smaller footprint? C-stores selling more and more fresh prepared food in a smaller footprint and many consumers consider C-store food quality “restaurant quality”.While Fresh & Easy or soon maybe “Wild Oats” is on hiatus; Safeway will be getting a break in its strongest home territory. Food retailers that edify their brands within the Ready-2-Eat and Heat-N-Eat fresh food niche aka the grocerant niche will garner market share. Safeway has time to edify it’s footprint by not expand existing footprints, rather expanding Ready-2-Eat and Heat-N-Eat fresh prepared food aka grocerant niche food offerings.
Visit www.FoodserviceSolutions.us If you are interested in learning how the 5P’s of Food Marketing can edify your retail food brand while creating a platform for consumer convenient meal participation, differentiation and individualization.
Since 1991 Foodservice Solutions® has been the leader in the grocerant niche. Contact us via Email at: info@FoodserviceSolutions.us Facebook.com/Steven Johnson, Linkedin.com/in/grocerant or twitter.com/grocerant