A few years ago, it would have been hard for this reporter to praise Wal-Mart in the book of good corporate citizenship. While never misunderstanding the almighty clout and business tenacity of the planet’s largest merchant, for every successful earnings period or expansion effort there were nearly as many complaints and legal actions against the Bentonville, AR retailer.
Man, how things have changed. Whether by design or simply because it was a lot more practical to the torrent of negative publicity the chain collected, Wal-Mart, first under the leadership of Lee Scott and continuing with current CEO Mike Duke, is truly a different and better corporate organization than it was only five years ago.
Sure, there are still some thorny issues to overcome (not the least of which is its potentially billion dollar gender discrimination lawsuit – first filed in 2001 – that it is challenging), but Wal-Mart’s associate relations, its proactive practices toward the environment and its increasing flexibility with its thousands of vendors it deals with have all shown marked improvement in recent years.
Some of that ‘improvement’ can be reflected in its leadership, not only with Scott and Duke, but with its Region North president Hank Mullany. The former Genuardi’s president addressed the AMR/MAFTO at a dinner meeting on September 30 in King of Prussia, PA and in his gentle but direct manner told approximately 100 about Wal-Mart’s bold initiatives for 2011 which includes 81 new projects for his region (which covers 1,307 stores) and the importance of regional items.
It’s so rare to hear anybody outside of Bentonville talk about Wal-Mart stuff, but when the information disseminated is both regional in nature and delivered by one of the smartest and best-liked people in the industry, I think a lot of us who attended the meeting felt like we were receiving a bonus.
On a global basis, the Wal-Mart story is daunting by any measure. The mega-merchant currently operates approximately 8,400 stores and employs about two million associates, a number that is expected to expand by 25 percent in the next five years. Mullany’s region (one of the three U.S regions after a corporate realignment earlier this year), which encompasses about 40 percent of the U.S. population, includes 911 SuperCenters, 385 discount stores (“division one” units) and 11 Neighborhood Markets.
Mullany told the audience that his region is targeted for significant growth in 2011 with 81 new projects on tap (18 news stores, 46 expansions and 17 relocations). Heavily targeted will underserved urban markets such as Philadelphia, New York, Baltimore, Washington, DC, Boston, Detroit and Chicago. In the Delaware Valley alone eight new or converted stores will open next year.
Two main points that Mullany wanted to emphasize to the vendors centered on the company’s local flexibility and its soon to be unveiled “smaller formats” strategy.
Mullany noted that never in the history of Wal-Mart has the company focused on regional marketing, extending an opportunity to local suppliers that only previously existed in limited doses. He added that 15 percent of Wal-Mart’s product mix is now regional in nature and for the first time ever has local buyers based at regional offices. A further demonstration of its regional effort is in allowing individual store managers to make merchandising decisions on a store-by-store basis, adding that Wal-Mart’s new structure (which features Bill Simon as president and CEO of its U.S. organization) is built for speed and flexibility with a logistics that gives Wal-Mart the capability to be the fastest on the shelf when compared to other retailers
Mullany didn’t reveal many specifics about Wal-Mart’s soon to be unveiled smaller format plan, but noted that some of new units will be operational in 2011 and could be as small as 10,00-20,000 square feet in size. We do know that the company won’t be utilizing formats like its perishables driven Marketside banner (operational in the Phoenix area) to the Northeast, so expect a variety of different styles such as scaled down SuperCenters, smaller Neighborhood Markets and the possibility of units resembling the company’s Bodega stores, which are popular in Mexico and Central America and would fit well in the densely populated Northeast with a growing Hispanic presence.
Mullany’s talk was really refreshing. He delivered a strong message, patiently and politely answered every question from the audience and made its very clear that Wal-Mart’s 100 mile per hour fastball is about to be enhanced with a potentially effective change-up.
Boer, Schlicker, van der Laan Form Strong Operations Triad
Let me start this monologue by noting the strong contributions made by Ahold chief executive John Rishton and by the COO of its U.S. businesses, Larry Benjamin.
Rishton has truly been a leader. While his predecessor Anders Moberg might have laid the foundation to restore credibility to the once struggling, maligned Dutch merchant, Rishton is the executive who laid the bricks to build a new structure. His discipline, vision and financial acumen have led Ahold to one the industry’s strongest balance sheets, while allowing its home-grown talent to flourish under the aegis of “selling more stuff.” That he will be leaving in six months to assume the helm of one of Britain’s most prestigious companies – Rolls Royce (where he has been a director since 2007) – is not a surprise, given the opportunity to be closer to his roots and his family and to lead a company that is akin to running the New York Yankees (forgive me, Red Sox fans).
I also have to give Larry Benjamin his props. Quiet and introspective by nature, Benjamin’s selfless approach to his job has made him one of the most effective, yet unsung, senior managers over the past 15 years in the grocery business. A brilliant strategist, Benjamin’s real strength at Ahold over the past three years has been to supervise many of the behind the scenes details that were part of working for an international organization. He was the one who provided a buffer between the day-to-day U.S. business and the demands of corporate headquarters.
“Larry always has our back,” said Carl Schlicker, who will replace Benjamin as Ahold top man in the U.S in January. “He carried the load from corporate and freed us up to concentrate on selling groceries and building our U.S organization.”
While a business as large as Ahold’s ($38 billion annually) can only succeed with collaboration, Benjamin’s fingerprints are clearly seen in some of the company’s bolder recent moves – its acquisition of Ukrop’s and its U.S restructuring. And don’t forget that Benjamin’s role in restoring credibility to U.S. Foodservice after a major accounting scandal nearly sank all of Ahold in 2003. Moreover, Benjamin clearly was a prime engineer in getting U.S. Foodservice sold in 2007 for an impressive $7.1 billion. While he may be retiring from the grocery business, something tells me that his 30 pound brain may appear in another venue before too long.
While losing two of its key executives would rock most companies (and there’s no doubt that the departure of Rishton and Benjamin will be felt), Ahold is clearly positioned to absorb such a blow. By elevating Dick Boer to CEO, giving Schlicker the entire U.S platform, and promoting Sander van der Laan to oversee all of Ahold-Europe, the retailer will now be run by three executives who have a deep understanding and strong penchant for retail operations.
All three are merchants by nature and all possess very strong people skills.
It shouldn’t shock anybody that Boer was named to the throne – he’s been Ahold’s number one executive in Europe for quite awhile and he’s Dutch.
While some may have thought that Sander van der Laan’s star was descending based on his short stint as CEO of Giant/Carlisle, that was never the case. A series of circumstances led by the corporate reorganization created limited opportunities in the U.S. and dispatched him back to Amsterdam. For many years, van der Laan has been viewed as a prized executive at Ahold, and now at the age of 41 he gets to preside over a large, well-run and very profitable platform.
To Carl Schlicker a lot has happened quickly. For those of us who have known Carl for many years, the inherent talent and keen instincts about the business have always been clearly apparent. But it wasn’t until 2007, when Tony Schiano retired, that Schlicker got his first opportunity to run an enterprise. And believe me, this is not an “overnight sensation” kind of story. He wasn’t given his own “watch” until he was nearly 56 years old and, like a lot of people in this industry, he built his career by putting in the 70 hour weeks, working weekends and holidays. Schlicker honed his skills in the trenches and his fast track to arguably the second most powerful position at Ahold is well deserved. He understands people, can shift smoothly between the strategic and the tactical, and isn’t all that interested in process or politics. Oh, and if he’s got to get your attention, he can always turn on the “Jersey Carl” charm.
Ahold continues to be a very fluid company. In my view, that’s a very positive attribute when you’re in control of your own destiny and can make the fluidness work to your advantage.
Yes, Ahold is losing two key executives, but is replacing them with three other men who are at the top of their games. With a bundle full of cash in which to make acquisitions (one has to believe there are a lot of opportunities being brought to their table, although I wouldn’t expect anything until next year) and a motivated, focused team to sell more stuff, there aren’t many retailers who are in as enviable position as Ahold is today.
‘Round The Trade
Doug Conant, the Campbell Soup CEO who has done a superb job heading the large Camden, NJ packer for the nearly a decade, will retire next July. He will be replaced by Denise Morrison, president of the company’s North American soup, sauces and beverage business, who late last month was elevated to COO and appointed to the board. I’ve heard Denise speak at several industry meetings and she seems like a great choice to replace the very talented Mr. Conant. Also, it was great to see such a wonderful turnout at the Greater Philadelphia chapter of the Network of Executive Women (NEW) recent panel discussion “Leading In An Ever Changing Environment,” which was held at Campbell’s headquarters in Camden, NJ (Morrison provided opening remarks). Panelists included Dan Sanders, president of Acme; Ed Herr, president of Herr Foods, Inc.; Irene Chang Britt, president of Campbell Soup’s North American foodservice business. NEW’s Baltimore-Washington chapter recently held its second successful golf tournaments and on a national level, it named a new president at its Leadership Summit in Charlotte, NC late last month. Michelle Gloeckler, senior VP-merchandising execution at Wal-Mart will be the fast-growing organization’s new leader…it looks like the government is finally making some headway in its antitrust suit which targeted, Visa, MasterCard and American Express and their practices of charging usurious fees to their customers. Visa and MasterCard recently reached a settlement with the Justice Department (which still needs court approval). The settlement, merchants could offer their customers an immediate discount (or rebate) for using a specific type of payment that would potentially be less costly (for example, debit card vs. American Express). American Express did not settle and plans to continue to fight the antitrust suit. According to Leslie Sarasin, CEO of FMI, “This is a monumental development for supermarket retailers and most importantly, their customers. Supermarkets have been prevented by credit card companies from accepting less expensive forms of plastic, ones that do not require the merchant to pay excessive fees just for the privilege of accepting a particular card, thus essentially preventing competition. We believe this is a positive development when Justice Department action, supported by seven state attorneys general, mirrors legislation passed by Congress and intended to benefit consumers.” She speaks the Gospel…while private equity firms (which still have plenty of capital at their disposal) don’t seem very interested in any retail deals that may be on the table, according to Bloomberg, their priority might be on the manufacturing sector where Sara Lee, Clorox and ConAgra could be targets…and while I think the days of A&P remaining in its current form are numbered, I give new CEO Sam Martin credit for at least making some moves that are potentially positively impactful. The new replacement A&P, which opened last month in New Providence, NJ, was very impressive and now the company has announced a painful but important decision that in the least could save it millions. Unable to sell many of its Farmer Jack stores in the Detroit area after it withdrew from that market in 2007, A&P has decided to stop paying rent on 27 stores whose lease value is estimated at $150 million. Of course, there have been a slew of lawsuits stemming form the “stop payment” decision, but in truth, what else could the Tea Company do? When you’re in the fourth quarter and your team is losing 31-10, you’ve got to pull out all the stops in order to survive.
Local Notes
While the Farmer Jack rent default plan might not lead to A&P’s survival in the end, at least Martin and his team are making moves to cut its losses enhance (if ever so slightly) its consumer perception. That’s more than we can say about Supervalu, which is making more moves that don’t seem to enhance the company. Most recent is the musical chair effort at two of its Mid-Atlantic properties – Acme and Shoppers Food & Pharmacy. Bob Gleeson, Acme’s recently named senior VP-merchandising, is returning to Shoppers in his previous role (same title) and Tim Lowe, who left Shoppers only a few months ago, is returning as president, replacing Dick Bergman, who retired on October 1. So, Acme currently does not have a merchandising officer in place in Malvern, PA (a search is underway) and Shoppers, whose share of market, like Acme’s, has plummeted in the past two years, has a new president, who has never led a retail organization before and left Shoppers abruptly earlier this year. SVU’s second quarter earnings will be released on October 19 and my vibes aren’t good…another retailer struggling in the Delaware Valley is Genuardi’s, which recently announced it closed its Lansdale, PA store on October 16. This marks the fifth Genuardi’s unit to shutter this year (Glen Mills, PA: Newtown Square, PA; Chesterbrook, PA and Voorhees, NJ) and one wonders how much more shelf life this Safeway unit has left. You would think that by being non-union alone, that some of the Genuardi’s locations would be of interest to other retailers. However, it’s truly a sign of the times to note how overstored and soft the overall market remains… two alums from aforementioned Genuardi’s and Supervalu have re-emerged in the Mid-Atlantic. Don Ciotti, who spent many years at Genuardi’s (both pre and post-Safeway) is now running store operations at Bottom Dollar, which opened its first DelVal unit on October 8 in King of Prussia, PA (full report in next month’s issue) and Bill Gillispie, who was with Supervalu (and predecessor companies) for more than 20 years, is now VP-center store for A&P…a tip of the hat to Wakefern/ShopRite on being named winner of the Garden State Green Award. The award is given annually to organizations that have made a significant positive impact on the environment through daily business practices. And Wakefern’s second largest member, Village Super Markets (26 stores), saw its fourth quarter profit increase 33 percent to $8.9 million. Overall sales increased 10.2 percent, helped by an extra week of reporting and the opening of stores in Washington, NJ (replacement) and Marmora, NJ (full quarter reporting). However, comp store revenue was flat and the Springfield, NJ ShopRite operator, said that earnings dropped seven percent for its entire fiscal year which ended on July 31. It also predicted that due to changing consumer behavior (increased coupon usage, sale item penetration and trading down) caused by economic weakness, it expects same store sales in fiscal 2011 to range from 0-2 percent…criminal of the month (COTM) update: former COTM Franklin Brown (ex-Rite Aid vice chairman and chief counsel) will return to federal prison on October 18, after unsuccessfully seeking a new trial. Brown, 82, who was originally sentenced to 10 years in the slammer in 2003 for his role in the Rite Aid accounting scandal, will now have to spend only two more years in the penitentiary (he has already served five-and-a-half years) after sentencing guidelines have recently changed…according to Jeff Martin, executive VP-merchandising and marketing for Ahold USA, the recent acquisition of one of Ahold’s key consumer analytics vendors, EYC Group Limited by Symphony Technology Group, will have no bearing on the retailer’s customer centric marketing efforts. In fact, Martin, noted, “We look forward to an enhanced and uninterrupted relationship as a result of this announcement.”…bad luck of the month award goes to PLB Sports, the Pittsburgh based food marketer which has created a niche in recent years by developing food products linked to popular athletes (“Flutie Flakes).” However, its most recent effort featuring Cincinnati Bengals wide receiver Chad Ochocinco (a honey nut toast oats cereal) has turned into a nightmare. The phone number listed on the box was supposed to connect callers to Feed the Children, which benefits from sales of “Ochocinco’s.” But because the box has the wrong toll-free prefix, they got a seductive-sounding woman who makes risqué suggestions and then asks for a credit card number. That might be enough to want to change my name back to Chad Johnson…a few obits to note this month headed by the passing of Bob Burris, CEO of Burris Logistics, who died on September 19, four days before his 66th birthday. Like his father Jack, who died in 2004, Bob was a larger than life figure, but you’d never know the depth of the man unless you spent some time with him. Bob was an individual possessed of tremendous humility who helped and mentored many people in his brief time on Earth. He was also competitive and bright, but could always separate the family business (which he loved) from the real important things in life – family, friends and philanthropy. Bob Burris was highly spiritual, but never in a way that was preachy or intrusive. And the more than 1,000 people who attended his memorial service in Milton, DE can attest to the beauty and emotional impact of the ceremony, which truly reflected the essence of Bob. I’ll miss Bob and I know many of our readers who were touched by his grace will miss him, too. Several cinema legends also passed away in the past few weeks – one who was best known for being in front of the camera, and two who made their mark away from the lens. Tony Curtis (born Bernard Schwartz) died in his Las Vegas home at the age of 85. Although some people’s perception of the New York born actor was that he was either a lightweight Hollywood heartthrob (his early years) or a whacked out boozer and druggie (his later years), Curtis actually did some fine work on the screen, including his role as overly energetic Broadway press agent Sidney Falco in “The Sweet Smell of Success (1957)” and as Joe/Josephine, a jazz musician (sometimes in drag) in the great Billy Wilder comedy “Some Like it Hot (1959).” Leaving us at age 88 was Arthur Penn, who directed 19 movies in a career that began in 1953. Some of Penn’s best flicks include “The Miracle Worker (1962)”; “Bonnie and Clyde (1967)”; and “Little Big Man (1970).” Also departing the planet was Stephen J. Cannell, writer and producer of so many popular TV series including, “The A-Team, “The Commish,” and “Wiseguy” (a precursor to what many of us enjoyed about “The Sopranos.”). But Cannell’s talent can be fully realized in his creation of Jim Rockford (James Garner) in his biggest hit show, “The Rockford Files (1974-1980).” Garner played the title role as a sometimes hapless, but highly intuitive private investigator to perfection. One of the best TV shows of all time played by one of the best comedic actors of the past 50 years and created by one of the most prolific writers that the medium has ever produced. Cannell was 69. And if you’re an aging boomer like me, it’s scary to think that on October 9, John Lennon would have been 70 years old. So, in his memory, I’ll raise my glass to one of my favorite musicians of all-time and imagine that all he ever asked for was to “gimme some truth”! I can relate.