Burd’s Discipline, Brain Power Made Him Game Changer
Steve Burd, Safeway’s soon-to-be retiring CEO, has plenty of industry critics. Over the years he’s taken his hits as an uncreative merchandiser, an executive with limited people skills and a leader whose acquisition skills were generally below par. Some of that criticism may be warranted, but to me Steve Burd is clearly a first ballot Hall of Fame member as an industry game-changer. No supermarket executive over the past 20 years has influenced and altered the way the industry analyzes itself more than Burd.
Obviously a charter member of the 30 pound brain club, Burd’s skills as a micro-manager, his financial and HR acumen, his tireless work ethic and tenacious approach to managing a business as large as Safeway’s place him in a special distinguished category in the food retailing business.
Remember, when Burd joined the Pleasanton, CA chain as president in 1992 (under then CEO Peter Magowan whose family has been connected to Safeway since the early 1930s), the company was bloated and directionless. The store base was old and small and, in most head-to-head battles with existing or emerging competitors (including alternate channel retailers), Safeway came out on the short end.
A year later when Magowan bowed out and the board named Burd chief executive, his approach to change was vastly different than the usual “huff and puff” style of the day. From his previous career as a management consultant (Bob Tobin, former Ahold USA and Stop & Shop CEO, has told me several stories about Burd’s diligence and eagerness to learn the grocery business after Burd was assigned by KKR – which acquired control of Stop & Shop in 1988 – to work at the company’s headquarters in Quincy, MA), he learned that the devil was really in the details and from a different purview could understand the significant waste and lack of efficiency that plagued the business and relegated to its “one percent of sales” earnings image.
From the unique perch, Burd analyzed every aspect of the business – logistics and distribution, in-store labor costs, better deployment of resources, (especially technology) and a review of its relationship with its many labor unions.
Steve Burd was relentless in his quest to eliminate waste and create an administrative template that had never been seen in any aspect of retailing, especially the supermarket segment. I can recall many financial meetings over the past 15 years when Burd’s execution before the analysts was akin to Michael Jordan’s performance on the basketball floor. Burd was that good.
However, once you take most of the cost out of the system, you’ve got to show the customer something else. And after the first wave of store enhancements, Safeway’s stores began to look more vanilla. With the help of then marketing chief Brian Cornell (now CEO of PepsiCo Americas), Safeway reinvented itself though its Lifestyle store formats. The company enjoyed a solid 10 year run with Lifestyle, but in the past few years the economy, the emergence of new and diverse competition and Safeway’s slowness to become more price aggressive have produced flat sales and a backsliding stock price.
Safeway could certainly use a more Kroger-like creative approach, one which features more merchandising creativity and which gives the divisions more clout and input into what affects their business in a given market(s).
Still, Burd excelled in areas that were intuitive to his strengths. The Blackhawk gift card network, Safeway’s deep dive into building its private label business, its proactive approach to health care and even its usage of digital technology (highlighted by its new “just for U” platform) are all indications that Burd remains the premier thinker in the business.
For years, we’ve heard analysts claim that Burd would never retire – he was going to be Safeway’s CEO for life – but I never believed it. He is still good at his job and for a man of 63, is incredibly fit and looks 15 years younger than his age.
And his comments as they relate to his future, especially with his deeply-rooted interest in health care, aptly summarized his situation: “While I still have the high level of energy and enthusiasm I brought to the company 20 years ago, I need more personal time and, given my extensive work in health care, I want to pursue that interest further.”
We wish Steve all the best in his next endeavor. I’m certain we’ll be hearing a lot more from a man who not only transformed his company over the past 20 years, but also changed how the industry is now run. That’s my definition of an innovator and a pioneer.
‘Round The Trade
We’re hearing that a Supervalu-Cerberus announcement is imminent and a deal of this magnitude would certainly eclipse any acquisition that took place in 2012. Last year, other than Bi-Lo Food’s (Lone Star Funds) acquisition of Winn-Dixie, Tesco’s year-end announcement it would shutter its Fresh & Easy division and Giant/Carlisle’s purchase of 15 Genuardi’s stores, there wasn’t much M&A activity. In the meantime, Supervalu has settled its “non-compete” case against Leon Bergmann, former president of the SVU’s independent business unit. The Eden Prairie, MN retailer/wholesaler filed suit against Bergmann, who left the company about two months ago, when it was later announced he would be joining California-based Unified Grocers, a competitor of Supervalu’s. But everything was worked out and Bergmann, who spent many years at C&S, is now free to ply his trade as senior VP-sales at the Commerce, CA-based wholesale co-op…back to Minnesota: I was surprised to hear of the departure of Christopher Brown (another Supervalu alumnus) as president and chief operating officer of Minneapolis based wholesaler Nash Finch. Brown was replaced by Kevin Elliott, who most recently was senior VP-merchandising, logistics and marketing at Dallas based 7-Eleven. Brown’s departure ends a long working relationship with Alec Covington, Nash Finch’s CEO, which began nearly 25 years ago. But sometimes long-term successful relationships run their course, necessitating change (ask Andy Reid). I spoke with Christopher late last month and he was upbeat about his future prospects, and why not? Brown is one of the most intelligent and tireless workers in the business and, given his track record and age (50), he will end up in a senior leadership position before too long…on the manufacturing front, ConAgra has agreed to acquire Ralcorp, giving the Omaha based packer one of the best-balanced portfolios of branded and private label products of any food manufacturer. The transaction is valued at approximately $6.8 billion, including the assumption of debt. The acquisition will create one of the largest packaged food companies in North America, with sales of approximately $18 billion annually. It will also position ConAgra Foods as the largest private label packaged food business in theU.S., with combined private label sales of approximately $4.5 billion. “The acquisition of Ralcorp is a logical and exciting step for ConAgra Foods. Adding Ralcorp provides us with a much larger presence in the attractive and growing private label segment and accelerates our ‘Recipe for Growth’ strategy,” Gary Rodkin, chief executive officer of ConAgra stated.
Local Notes
Rite Aid posted its first profitable quarter in more than five years when it earned $60.5 million in its third quarter ended December 1 (compared with a $54.5 million loss in the corresponding period in the prior year). The Camp Hill, PA drug chain last posted black ink in May 2007 and has gone through a series of tumultuous management and operational changes that really dates back to the late 1990s when Martin “My Ass Is” Grass, corruptly served as Rite Aid’s chief executive (his father Alex founded the company in 1962). In her seven year tenure as CEO, Mary Sammons was unsuccessful in changing the scorecard at Rite Aid, but the nation’s third largest drug retailer seems to be finally on the right track under the guidance of John Standley, who took the helm in 2010 (he also served as CEO of Pathmark from 2005-2007). Still, big challenges remain as overall sales fell 1.5 percent and same store sales dipped 1.2 percent. Rite Aid said it was helped by increased prescription sales (which were aided by Walgreens’ dissolution of its agreement with Express Scripts for most of 2012; it has subsequently resumed its relationship with Express Scripts) and rising sales of general merchandise products at its nearly 4,600 stores. And the unexpected good news pulled Rite Aid out of the “penny stock zone” – its stock price rising from 97 cents a share on December 6 to its current value of $1.40 per share (the earnings announcement wasn’t issued until December 20)…about 200 miles west of Camp Hill, PA, Pittsburgh-based Giant Eagle has acquired two formerly franchised stores in the Johnstown, PA market. The Pittsburgh based retailer will acquire units from owners Basil, Edward and Carmen Trovato, whose relationship with Giant Eagle dates back to 1986. Of Giant Eagle’s 230 supermarkets, about 55 stores are franchised…Village Super Markets, which has struggled at its two Maryland ShopRites (Silver Spring, Lutherville) since they opened 18 months ago, saw its first quarter earnings dip 13 percent to $5.9 million in the period ended October 27. Overall sales increased 4.5 percent to $358.2 million. Same stores sales also rose 2.8 percent. The Springfield, NJ ShopRite operator attributed the decreased earnings to higher expenses and lower gross margins, even with a boost in revenue from Superstorm Sandy. Village currently operates 29 stores in New Jersey, Pennsylvania and Maryland and is the second largest member of Wakefern and its only publicly-traded retailer…UNFI, the largest natural and organics wholesaler in the country, and a distributor that has also seen its specialty foods division grow exponentially in recent years, posted a 42 percent earnings jump in its first quarter which ended on October 27. The Providence, RI- based firm earned $21.5 million on sales of $1.41 billion (a 16 percent gain). While expressing satisfaction with the solid results, UNFI CEO Steve Spinner had some concerns, too: “Despite moderated inflation and higher than anticipated product shortages, strong consumer demand continued to drive steady growth for our products and services during the quarter. We anticipate growth for the holiday season should remain strong as consumers continue to move towards a healthier lifestyle.” While UNFI’s earnings continue to be healthy, 168 members of Teamsters Local 117 have walked off their jobs at the company’s Auburn, WA distribution center in a job action that began early last month…a tip of the hat to Tom Dempsey, former president of Utz Snack Foods, who retired at the end of the year. Me thinks that Dempsey, who spent 24 years helping grow the Hanover, PA snack food firm, still has a lot in his tank and will emerge again as a key contributor in this business…it’s official: Harris Teeter will open its fifth Montgomery County, MD store in Clarksburg, MD in October. The Matthews, NC retailer will anchor a 109,000 square foot center to be called Clarksburg Village and will be 53,000 square foot in size. Further south, HT has begun to deal with its biggest competitive threat in years as Publix enters the Charlotte, NC market. With two stores opened late last year in north-central South Carolina (that are part of the Charlotte metro area), another new unit planned for next year in the tony Ballantyne area of Charlotte, Publix recently announced it has signed a lease to open another Charlotte unit (South Boulevard and Iverson Way) which is slated to open in late 2014…sadly, a lot of obits to report this month. The great general Norman Schwarzkopf has passed away at the age of 78. A 1956 West Point graduate, Schwarzkopf served in the U.S. Army until his retirement in 1992. Stormin’ Norman was best known for his role in leading the U.S. effort in Operation Desert Storm in 1990. His quiet but steely demeanor made him popular as a no-nonsense take charge leader in America’s first Mideast war. After his death was announced on December 27, President Barack Obama said, “With the passing of General Norman Schwarzkopf, we’ve lost an American original. From his decorated service in Vietnam to the historic liberation of Kuwait, and his leadership of United States Central Command, General Schwarzkopf stood tall for the country and the Army he loved. Our prayers are with the Schwarzkopf family, who tonight can know that his legacy will endure in a nation that is more secure because of his patriotic service.”…and from the world of entertainment passing on was character actor Charles Durning, 89, who also served his country in a heroic fashion. Durning, who appeared in more than 200 movies, television shows and theatrical roles, is best known for his roles as a corrupt police officer in “The Sting” (1973) and as Dustin Hoffman’s wannabe boyfriend in “Tootsie” (1982). Although he didn’t make his mark as an actor until he was nearly 50, Durning had quite a career as an infantryman in the U.S. Army during World War II. He was among the first soldiers to land on the Normandy beaches during the D-Day invasion of June 6, 1944. Durning was wounded in battle three times, captured by Nazi troops and escaped a deadly massacre of U.S. troops during the war. He later helped liberate the Buchenwald concentration camp. He also fought in the Battle of the Bulge and was bayoneted eight times. Durning was awarded the Silver Star, Bronze Star and three Purple Hearts…Ravi Shankar, a man who did as much for his instrument (sitar) as any musician in history also passed away. The Indian born virtuoso passed away last month in San Diego at the age of 92. Shankar influenced dozens of famous musicians including George Harrison (who nicknamed him “The Godfather of World Music”), David Crosby and even John Coltrane. Shankar was also the father of American pop singer Norah Jones…Jack Klugman has also died. His portrayal of sloppy sportswriter Oscar Madison on the TV series “The Odd Couple” (1970-1975) defined Klugman’s image as an actor (he reprised the role originally played by Walter Matthau in the 1968 movie of the same name). But Klugman’s talents transcended his iconic character. He starred in the TV show “Quincy, M.E.” from 1976 to 1983, but also had strong co-starring roles in Sidney Lumet’s “Twelve Angry Men” (1957) and Blake Edwards’ “Days of Wine and Roses” (1962). Klugman, 90, was born and raised in Philadelphia…Fontella Bass, 72 has also died. The former R&B singer had only one major hit during her long career, but what a voice she possessed. Her own composition “Rescue Me,” rose to the top position in 1965 (the song featured one of the great bass lines in R&B history – performed by Louis Satterfield, who later was with the band Earth, Wind & Fire). Bass, who began her professional career in her native St. Louis in 1957, continued to perform until 2005…from the food industry, Berthold Albrecht has died. Along with Theo Jr., the brothers presided over an international empire of grocery stores (Aldi, Trader Joe’s) that made them among the richest men in the world (the brothers’ fortune has been estimated by Forbes at $17.8 billion). Bertho
ld Aldi, who was only 58 years old, earned his money the hard way – he inherited it from his late father, Theo Sr. who along with his uncle Karl, 92 (who is reported to be the richest man in Germany with an estimated net worth of $25.4 billion) founded the company in Essen, Germany shortly after World War II ended…also leaving us was Mark Hollis, 78, former president of Publix. According to Publix CEO Ed Crenshaw, Hollis made “significant contributions to the growth and success” of Publix, adding that Holllis was “a Publix icon.” Hollis began his career at Publix in 1946 as a potato bagger. He worked in a variety of roles, including company president from 1984 to 1996. He was elected to the Publix board of directors in 1974 and served there until 2005, when he was honored as director emeritus…and just before presstime, we learned that A&P is very close to finalizing a deal for its Food Emporium unit (16 stores in Manhattan). We’re hearing that private equity firm Angelo, Gordon & Co. is in the mix, which would reportedly include multiple buyers. That would be great news for our friend, Judy Spires, CEO of Balducci’s and Kings, both controlled by Angelo, Gordon. We’ll keep you posted. Happy New Year!
Jeff Metzger can be reached at [email protected]