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satisfy an outdated legacy Wall Street metric “basket size” utilizing a legacy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
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
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.
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
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