James McCann Legacy: Change Agent Or Culture Disruptor?
Over the course of the last three-and-a-half years I’ve had about two dozen meetings, dinners and one-on-one phone conversations with the man who resigned on October 4 as the chief operating officer of Ahold USA.
James McCann, arguably the most controversial leader of the Northeast’s largest grocery chain since Ahold first entered the U.S in 1981 with the acquisition of Giant/Carlisle, certainly left his mark.
There are those who say that mark was a gray one (trending towards black), but I would disagree. In the end, the 47-year old Brit was a devout and often stubborn executive who sometimes believed that his high level of intelligence could overcome challenges that might have been better resolved with a more humane approach.
I first met McCann in early 2012, shortly after he became AUSA’s top man in the U.S., replacing the admired and respected COO Carl Schlicker, who had retired. In fact, Schlicker and then VP-external communication Tracy Pawelski, who set up the meeting at a restaurant in Harrisburg, PA, also attended. Our editor, Terri Maloney, was also present.
The dinner was cordial and mostly all-business, and McCann was pleasant and professional (in fact, the many times that I often disagreed with McCann’s policy or approach, he was always professional). I called him a few days later to thank him and during our conversation, he made it clear that there would be many changes upcoming at Ahold USA.
That was a curious comment I thought, knowing that – despite challenges remaining from the company’s 2010 centralized reorganization to Carlisle – business was solid and the culture strong. Maintaining a robust company culture was always a top priority for Schlicker (who spent many years at Giant/Carlisle) and for his predecessors at Giant – Tony Schiano and Allan Noddle.
As the associates would soon find out, culture was not going to receive the priority it had in past regimes. And maybe that’s the way CEO Dick Boer wanted it – less personality, more process and a reduction of risk taking. While McCann wasn’t Dutch, he knew the European business mindset all too well having worked in food retailing for Sainsbury, Tesco and Carrefour previously.
As we continued our phone conversation that day, I cautioned McCann not to tinker too much with company morale. But, as I would soon learn, McCann made it clear that among the many changes needed, one of the first would be to dramatically alter the personality of the organization.
“If we don’t make these radical changes soon, then there will be no Ahold USA in five years,” he exclaimed. Wow, I thought.
And so it went for the better part of two years. The Carlisle turnstile was much utilized. Except for its Stop & Shop New York Metro division where Don Sussman remains, AUSA’s three other current division presidents were appointed during McCann’s tenure. When Mark McGowan was moved from EVP-merchandising to president of Stop & Shop’s New England division, the $26 billion company didn’t have a permanent chief merchandising officer for more than a year. The talented Erik Keptner, who was EVP-marketing for AUSA, was shifted back to the Giant/Carlisle unit and Amy Hahn, whose entire career had been spent at Hershey, was named to run AUSA’s marketing effort, despite having no supermarket experience.
In fact, McCann seemed to prefer to recruit new executive talent from outside the organization rather than promote from within, an approach that was 180 degrees different from his predecessors. Many in the old guard who felt they had helped build Ahold USA were resentful. Some left the company on their own, others were dispatched by McCann and his team, and still others (needing a job and a paycheck) unhappily accepted the change.
McCann didn’t really care. He had a mission, and in his mind, it was the right mission: make more money for the company and re-engineer the organization so it would be primed for long-term growth. In his mind, how he got there was less important as long as he played within the rules. Certainly he must have known there was a price to pay for such substantial change, but that price was secondary to the success of the mission.
A few years after our first meeting, I challenged McCann to spend a day with me visiting competitors’ stores in the Metro New York area. I teased him that he had acquired a case of tunnel vision by focusing so intensely on improving Ahold USA, that he needed a “live” view of how his primary competitors operated. I chose some of the market’s highest volume stores for him to observe – the Saker ShopRite in Woodbridge, NJ; Stew Leonard’s in Yonkers; Fairway in Brooklyn; and a recently opened Food Bazaar in Long Island City (Tracy Pawelski also joined us on the trip along with Kevin Gallagher who oversees our New York and New England business).
It was a great experience for both of us – McCann said he gained a different perspective with these “live” visits and I was impressed by his encyclopedic knowledge of the world in general and his international food experience (did you know that, in some parts of the world, eating grubs is considered a delicacy?)
Later, we dined at Wolfgang’s in midtown Manhattan and it was then that McCann let his hair down a bit. He talked about how he spent much of his younger years living in South Africa with his family. He disclosed he’s had a lifetime love of planes and helicopters. And he revealed while his tour of duty at Ahold USA was very important to him, it wasn’t going to be his lifetime career.
It was an enjoyable day and brought us closer, even though I think we both tacitly knew that he wasn’t going to change his philosophy or approach and I wasn’t going to change my criticisms if I felt they were warranted.
Over the next year, McCann continued to reshape Ahold USA, bringing in more new people and seeing the initial results of his hallmark marketing and merchandising program “Project Thunder” take hold.
“Thunder” would be McCann’s signature platform designed to change AUSA’s pricing, merchandising and customer image of all departments at nearly 800 stores. He openly spoke of “Thunder” being the core of what would take the company from “good to great” although he acknowledged that the “journey” would be lengthy and traveled in phases.
The results, in fact, were mixed. McCann would tout the success of “Thunder” when measuring the gains made in produce or bakery after that phase of the program was implemented, but overall Ahold USA’s ID sales were generally flat to marginally positive (and below the median of the retailer’s U.S. peer group).
By mid-2016, when Ahold announced it would merge with Delhaize, McCann had his executive team pretty much in place. Andrew Iacobucci, the former Loblaw’s executive, came on board as EVP-merchandising and the associates and vendors could recognize that some of the radical changes that occurred in McCann’s first three years had mainly stabilized. However, greater stability didn’t necessarily manifest itself in a better overall operating environment or produce significantly better results.
My criticisms of McCann and his organization continued to strike a similar tone: “You can’t win the race if you don’t invest in store labor or improve your associate training,” something to this day we haven’t seen. More importantly, is the shopping experience at Giant/Landover, Giant/Carlisle (Martin’s) or Stop & Shop perceived to be markedly better and positive? And is it a superior one than that which is delivered by most of AUSA’s competitors, including heavyweights ShopRite, Market Basket and Wegmans, retailers with a similar customer base than Ahold USA’s supermarkets that have all dented AUSA’s share in most of the company’s key Northeast markets?
And at headquarters in Carlisle, despite the more stable operating environment, associates would tell me that McCann sometimes still acted as a bully and that the culture generally consisted of two camps – those hired by McCann who were hesitant to challenge their boss and those holdovers who persevered during all the changes of the first three years and grudgingly accepted that Ahold USA’s “government” operated as a modified autocracy.
Many vendors and brokers also weren’t happy with some of AUSA’s new policies. Increased fees, aggressive solicitation of in-house programs and a big push toward private label sales did nothing to diminish the feelings from much of the supplier community that Ahold USA too often acted arbitrarily and unfairly.
And even now, after the merger of Ahold and Delhaize, vendors are irate over the retailer’s attempts to gain significantly more trade dollars through what they believe is a phantom trade equalization plan. To be fair, McCann and Ahold USA didn’t create that plan, but they are certainly key messengers in trying to implement it.
And then, surprisingly on October 4, the date of his 47th birthday, James McCann quit. Within 24 hours, he had updated his “LinkedIn” page to read: “Experienced CEO moving to a portfolio of NED (non-executive director) PE (private equity) advisory and charity roles.”
Kevin Holt, who previously oversaw Delhaize America (Food Lion, Hannaford) was quickly named to replace McCann at AUSA in what could be a preview for the future larger position of running all of Ahold’s and Delhaize’s U.S. business.
Holt’s got a lot of work to do. At store level, while sales have slightly improved over the past 18 months, the results are not good enough. Now, perhaps, as McCann told me in July, some of the $1.15 billion ($385 million a year) in synergy savings that Ahold Delhaize plans to reap in the USA will indeed be utilized to add store labor and improve associate training. I’m hopeful, but skeptical.
Maybe Holt’s style will be less autocratic and more inclusive – uniting the corporate troops would result in a big intangible positive.
As for James McCann, on a personal level, I wish him all the best. When he wants to return to the full-time workforce he will be an asset to some organization. His 30-pound brain alone separates him from most of the pack, and his multi-national experience is also invaluable. At only 47, he’s got a lot left in the tank.
While much of this piece will likely be perceived as critical, on a personal level, I enjoyed my interactions with James. As noted earlier, he has always been professional, always dedicated and always accessible.
And as to headline of this article – “Change Agent or Culture Disruptor?” – the answer, of course, is both.
Now it’s firmly in the hands of Kevin Holt to continue to implement Ahold’s USA policy while also creating a legacy of his own. We wish him success, too.
‘Round The Trade
FMI Connect, once the industry’s largest supermarket trade show, will be disconnected beginning in 2017, CEO Leslie Sarasin announced late last month. Despite some heavy lifting from Sarasin and her team in recent years to revive what was once the most important trade convention in the industry, those efforts ultimately proved to be unsuccessful. “We also recognize that in recent years this event has fallen short of achieving the precise formula necessary for meeting today’s industry needs, particularly as the industry continues to change and evolve so quickly,” she stated. Attendance has been dwindling and the show’s “exposition value” seemed directionless to many suppliers and retailers we polled in the last two years. Perhaps the most visceral test was that the co-located United Fresh show, which operated across the hall in McCormick Place in Chicago, drew larger crowds and seemed significantly more vibrant. I chatted with Leslie about the decision and, as always, she was candid in her assessment: “We tried very hard to make this work and it just didn’t meet our expectations or the expectations of our members.” She added that she and her team are already working on several ideas for an event in 2018. As you probably know, I’m a big fan of Leslie’s and her leadership skills and high energy level have been key components in FMI’s turnaround in recent years and, while FMI Connect fell prey to more targeted national trade shows that focused on produce, seafood, c-stores and private label, FMI continues to run one of the best “meeting” confabs in the entire business – its Midwinter event. As for United Fresh, its Chicago show will continue as planned June 13-15 next year…my sources are telling me that Canadian private equity firm Onex is the leading candidate to acquire Supervalu’s Save-A-Lot unit. SVU reportedly will shortly conclude the auction of its most saleable (and monetizable) unit and my insider network informed me that the Onex folks were recently in the Boston area “kicking the tires” at some local S-A-L stores. Analysts believe that Supervalu’s extreme discount stores – about 1,370 of them (licensed and corporately-owned) – could fetch in the $1.6-$1.8 billion range. Stay tuned. Not such wonderful news for Supervalu’s core wholesale business as it received a stern warning letter from the federal Department of Health and Human Services over “serious food safety violations” at its seafood processing facility based at its large Denver, PA distribution center complex. The federal agency found six violations at the warehouse, including failure to properly regulate storage temperatures for different types of fish and the absence of an allergen prevention program. The letter, sent to Beth Kroutch, general manager of the entire 1.7 million square foot Denver depot, added that if these violations were not corrected in a prompt manner Supervalu may face regulatory actions without further notice including “seizure, injunction and/or prosecution.”…from the badly kept rumor department comes word that Weis Markets has officially acquired the former Nell’s Family Market in East Berlin, PA from C&S. That store was formerly a corporately-owned unit of AWI (which C&S acquired in 2014) and marks the second Nell’s store that Weis has acquired from the nation’s largest wholesaler (it purchased a store in Hanover, PA about a year ago). Weis is also about halfway through its Food Lion conversion program with its 13 Virginia stores on tap for the rest of this month. An early examination of a handful of conversions indicates that the Sunbury, PA retailer did a nice job of brightening the stores, adding a broader mix and expanding their perishables presentation. More work will be needed, however, which Weis executives told me is planned down the road…in a recent Forbes story, Sears Holdings chairman and CEO Eddie (“The Dreamer”) Lampert, speaking on the subject of Kmart store closings and the potential shuttering of the entire Kmart network, said: “I can tell you that there are no plans and there have never been any plans to close the Kmart format. In fact, we’ve been working hard to make Kmart a more fun, engaging place to shop, powered by our integrated retail innovations and Shop Your Way.” Work harder and keep dreaming, dude…one company operating in a more sane and successful planet is Costco, which posted better than expected fourth quarter earnings (ended August 28) of $779 million, a 2 percent increase. While U.S. comp store sales were down 1 percent, the Issaquah, WA club merchant said if foreign exchange rates, gas and deflation were figured in, comps would have risen 2 percent. In the follow-up analysts conference call, the always candid Richard Galanti, Costco’s CFO, acknowledged that its initial credit card affiliation switch from American Express to Visa (Citibank) sparked an initial glitch, but added, “The new card is fantastic for our members. And it’s also great for us in terms of driving member value in sales over the next years and, of course, lowering our effective cost of accepting credit and debit cards,” Galanti said. Approximately 11.4 million American Express co-branded cards representing about 7.5 million accounts that were transferred over to Citi during the conversion. More than 85 percent of transferred accounts have now been activated for Costco, and over 1.1 million members have applied for the new card, he said. Galanti noted his concern over Amazon as a competitive threat, admitting that Costco was not “Amazon proof,” but added that online selling depended on individual categories and the warehouse model was impacted less because of its unique membership model. He declared that fresh food remains a challenge for online merchants. “We’re glad that fresh is difficult.” Even though financial analysts (you know the folks who rarely visit stores) have been critical of Costco’s reliance on its core bricks and mortar model, I’d go to the $50 window and bet on Costco anytime…kudos to Ahold USA’s Tom Cormier, who in late September was given the Louis Goldstein award by the Maryland Retailers Association. The award, named for the legendary Comptroller of Maryland who served for 40 years, honors individuals and organizations for their extraordinary contributions to retailing, including not only their business accomplishments, but also for contributing to the vitality of the industry and giving back to their community. Less than 10 days later, Cormier also received the 2016 “Good Government” award from the New Jersey Food Council. Notable achievements to one of the good guys and real pros in our business…a few obits to report this month. Former Giant/Landover CEO and long-time Stop & Shop executive Dick Baird has passed away at the age of 74. Baird was the choice of former Ahold USA CEO Bob Tobin to run Giant after Ahold purchased the company in 1998. Even though he and I sometimes clashed about cultural and policy issues, he was a nice man who I often felt didn’t really want the job (he lived in New England his entire life and essentially commuted to Landover every week), but because of his devout loyalty to his peers and friends at Stoppie, dutifully accepted the challenge. Dick Baird placed family above everything else and did his best to blend Giant into a changing operating model that was not of his own choosing. May he rest in peace…and from the world of sports, it’s sad to report the passing of two great athletes – one emerging and one an icon. Miami Marlins pitcher Jose Fernandez was only 24 when his boat crashed into a jetty in Miami Beach, killing him and two of his friends. Perhaps the best young pitcher in the game, Fernandez’s personal story is much more remarkable. He escaped from Cuba by boat on fourth attempt with his family. During that successful journey, made at night, someone on his boat fell overboard. He jumped in the open ocean waters to attempt a rescue, which he did. It turned out the person he saved was his mother, Maritza. A life too early taken. And althoug
h he appeared frail in recent months, the death of Arnold Palmer, 87, was still surprising. “The King” simply changed an entire sport – golf. Not the most talented of all players (but highly skilled), Arnie’s competitiveness, creative shot-making and persona resulted in more than 60 wins on the PGA tour, including seven “majors.” Those were the stats and they speak for themselves. The rest of the story is Arnold Palmer – the businessman, the philanthropist and the friend to so many people, both in the game of golf and outside of it. Palmer was the first athlete in any sport to earn $1 million from endorsements and, even in 2014, many years after he retired, his endorsement take was estimated to be $42 million, his personal record. And what other athlete has a beverage named after him? “He took the game of golf from one level to a higher level, virtually by himself. Arnold always had my back and I had his. We were always there for each other. That never changed. He was the king of our sport and will always be,” said his fiercest rival and one of his best friends Jack Nicklaus. Long live the King!
