business news in context, analysis with attitude

The Wall Street Journal reports that Supervalu CEO Craig Herkert “plans to double the size of the underperforming grocer's discount chain Save-A-Lot to about 2,400 stores over five years,” which he told analysts “is not an abandonment of traditional grocery; this is an acceleration of Save-A-Lot.” The Save-A-Lot format is similar to that of the fast-growing Aldi chain - it uses a small box to ell about 3,000 mostly private label items, offering no service and limited hours.

According to the story, “Supervalu has struggled to capitalize on its national scale since it acquired more than 1,100 Albertson's stores in 2006. A more centralized purchasing structure for the chain's 2,500 stores and the 1,800 supermarkets it supplies as a wholesaler should drive down nondiscounted, or everyday, prices of national-branded items. Mr. Herkert called the disparity between discounted and nondiscounted prices ‘out of whack’.”

Herkert, a former Walmart executive who moved over to Supervalu earlier this year, told the analysts: "Times are tough ... but we cannot and will not use the overall economy as an excuse. Supervalu must transform itself into a business that is customer focused, dynamic and agile enough to meet the evolving needs of customers, whatever the environment. Clearly we have not done that recently ... My sense is the American consumer's shopping habits have changed probably forever, certainly for a long time, and I don't think we are going to wake up in a few months and everybody will be back to 2006.”
KC's View:
The rumblings one tends to hear about Supervalu tend to focus more on the likelihood that the company is going to sell off one or more of its banners, and that the company’s new CEO is very focused on the value-driven brands that he thinks will allow the company to better compete long term.

The question is whether this strategy will work in the long term, or if he fighting a battle against the Bentonville Behemoth that he cannot win.