Jim Donald’s Career Comes Full Circle As He Returns To Albertsons As President, COO
I’ve communicated with Jim Donald quite a bit over the past six months. Beyond our normal conversational tone of mutual needling and self-deprecation, I was convinced that one of the industry’s greatest motivators had finally hung up his apron and was content to sit on a few boards and continue to deliver speeches in his typical upbeat and storytelling manner (after all, not every non-grocery industry group has heard Donald’s “salmon” yarn).
While his exuberance was still very apparent, he also told me several times he was a bit weary from the more than 40 years of high-level game action and was enjoying his lifestyle of travel and control of his own destiny.
Then Albertsons CEO Bob Miller called. If Jim Donald is the retail food industry’s version of the Energizer Bunny, then Miller is the best salesman and recruiter in the business.
Miller had just helped engineer the biggest industry deal of the new year in fusing his $60 billion supermarket organization with Rite Aid Corp., the nation’s third largest drug chain that was discreetly seeking a partner after selling about 45 percent of its stores to Walgreens late last year.
The fit between the two companies was already a strong one with Miller having previously served as Rite Aid’s CEO and board member. Miller was also close to Rite Aid chief executive John Standley (who will become CEO of the newly combined company when the deal is completed later this year), having worked with him at Fred Meyer, Pathmark and at the Camp Hill, PA drug chain.
With much of the focus on the acquisition, there would have to be some shoring up at Albertsons, too. The company’s most recent president and COO Wayne Denningham retired at the end of last year and Miller, who will become chairman of the new enterprise, clearly needed a dependable and proven executive to guide the company’s 2,300 supermarkets.
Miller and Donald’s relationship dates back more than 40 years. After a few years working for Publix in his native Tampa, FL, Donald joined Albertsons where he stayed for 16 years advancing his career primarily in Florida and Texas. In 1991, Sam Walton reached out to Donald and asked if he’d be interested in heading a new concept at the Bentonville, AR company- the company’s fledgling SuperCenter division. Donald remembers those days as extremely exciting and very exhausting.
In 1994, he was recruited by another Hall of Famer – Steve Burd – to run Safeway’s Eastern division, a unit that for decades had served as a stopover for more than 10 Safeway executives as they ultimately advanced their careers in other markets for the big chain. Donald’s career at Safeway was much different than almost all of the others (the exception being the great Don Smith who helmed the Eastern division in the early 1980s). Donald’s tireless work ethic was quickly apparent; he made it a priority to engage with the associates, from store level to the third shift in the warehouse. He was a difference maker.
A few years later, Jim Donald was presented with an opportunity to finally run his own show, although the showroom was hardly in great shape. I can vividly remember dining with Jim 22 years ago at a great Italian restaurant in Baltimore when he shared with me the opportunity to become CEO of Pathmark. Even though I knew he wanted the challenge of heading his own company, he asked me what I thought about the opportunity to run a once great regional supermarket chain that had been financially decimated by the greenmail actions of the Haft family several years earlier. As part of my reporting duties, I knew Pathmark well and encouraged Jim to take the job even if it came with some risk. Donald was the right age, had the proper training and necessary experience – his time to lead was at hand.
He did a fine job at the Carteret, NJ-based chain for six years, instilling his unique personal brand of leadership which changed the culture and financially stabilized an organization that had endured 44 consecutive quarters of negative comps prior to Donald’s arrival (Pathmark was sold to A&P in 2007; today neither chain exists).
In 2002, Donald got a call from Howard Schultz, founder, chairman and CEO of Starbucks. He successfully pitched Jim on joining the iconic coffee merchant as president of the company’s North American division. Three years later he was named chief executive with Schultz remaining as chairman.
He stayed as CEO for three years, before being summarily ousted by Schultz as Starbucks was victimized by a declining economy which led to significant decrease in the company’s stock price and overall value.
I talked to Donald shortly after his dismissal. I was expecting to hear some bitterness in his voice, but he would have none of that. Instead he noted that Howard Schultz founded the company and remained its boss, so he could do what he wanted. In fact, he praised Schultz for giving him the opportunity to head such a dynamic and innovative company such as Starbucks.
In truth, Jim Donald’s firing was the best thing that could have happened to his career. His six- year stint in Seattle put his name on the road map of corporate America; he was now a known entity especially on Wall Street.
His ability to take the high road even in challenging times and also learn from his all-star mentors – Miller, Walton, Burd and Schultz – would create future opportunities that even Donald couldn’t have predicted.
For the next year, Jim devoted a lot of energy to developing a career as a speaker while also serving on several corporate boards. He also got involved with the Haggen family, which owned 33 stores in Washington and Oregon. Like many independent operators and small regional chains, Haggen was a company struggling with industry change and family-related challenges. Donald was brought in to change the culture and also to find a potential exit strategy for the high-end merchant. It took a couple of years, but Donald used his Wall Street connections to engineer the sale of Haggen to private equity firm Comvest.
A year later, his Wall Street contacts provided him with a unique opportunity. Private equity firms Blackstone Group, Centerbridge Partners and Paulson & Co. had acquired residential hotel chain Extended Stay while it was in bankruptcy in 2010. After 18 months of less than desired results, the three PE firms hired Donald as chief executive, even though he had little knowledge of the hotel business. It really didn’t matter, because once Jim learned the mechanics of the business, the one staple of any labor intensive retail business is the culture of the company and the associates who create that culture. It’s a people business – and Jim Donald by now was arguably the greatest practitioner of creating a workplace that was fun and interesting and one where management really did care about the associates. His door was always open.
By 2015, Extended Stay Hotels’ turnaround was obvious and it successfully launched an IPO, which achieved the primary goal of its investors and allowed Jim to step down and seek his next opportunity.
Except this time, after more than two years as a free agent and several conversations about his future, I though he was really done with corporate life.
And then Bob Miller called.
A Tale Of Two Retailers: Albertsons, Tops Heading In Opposite Directions
Fear and loathing in the grocery business in the U.S. Never in my 45 years as a reporter have I seen the levels of uncertainty and competition intersect to the degree we’re currently witnessing. Based on the events of the past 18 months coupled with the fragile psyches of many retailers, things are going to get worse or more uncertain in the near future.
I’ve written a lot lately about how challenging it’s been for those retailers who for years have not offered their customers clearly defined points of difference. The survival rate in the “mushy middle” has diminished greatly and in the past week, one such struggling retailer – Tops Markets – waved the bankruptcy banner as it seeks to reorganize.
It’s true that Tops’ management, which acquired the regional chain from PE firm Morgan Stanley Private Equity for a discount, inherited the tremendous debt that Morgan Stanley created when it acquired the Buffalo-area retailer from Ahold USA in 2007. But Tops’ problems aren’t going to go away even after it receives financial relief. The company has good locations, but much like many other conventional supermarket chains, its physical store base needs refreshing, it’s behind the curve with its perishables offerings and its digital/ecommerce efforts are below average. Throw in a significantly underfunded Teamsters pension plan (inherited from Tops’ 2010 acquisition of Penn Traffic), shrinking population in the region and some fierce discount competition from Walmart and Aldi, one has to wonder – where do the future “wins” for Tops lie?
Tops isn’t the only regional chain whose future looks foggy. We’ve also written about the financial woes of Southeastern Grocers (which has some significant loan obligations to deal with in the next month). According to Bloomberg, Chapter 11 is a possibility as is the consideration to close as many as 200 stores. Much like Tops, the company’s Bi-Lo and Winn-Dixie stores are smaller and older and offer less differentiation than most of its competitors in Florida and the Carolinas. And comparatively, just as Morgan Stanley didn’t have a clue about operating grocery stores and even did a bad job in its supposed strong suit – financial management – SEG’s parent, Lone Star Funds, has proven even more inept for a longer period at operating grocery stores. If SEG does file for bankruptcy, it will mark the third time in Lone Star’s 13-year tenure as a food retailing entity. Pitiful!
On the other side of the mountain lies Albertsons, which I believe really helped itself with the acquisition of about 2,500 Rite Aid stores. It wasn’t so long ago that the large Boise, ID-based chain was also in the same “mushy middle” puddle that Tops, SEG and other retailers now occupy. Sure, they were much bigger and had the clout of a successful and powerful PE firm – Cerberus Capital Management – to support them. But in reality, Albertsons operated about 2,300 conventional supermarkets that lacked pizzazz. It had tried to go public in 2015 and ultimately decided not to move forward with an IPO effort. Sales declined, too, and as large as the organization was, it also lagged in e-commerce and overall innovation.
However, things began to change about a year ago when the merchant directed significant focus and capital on its digital space and technology. Late last year, Albertsons acquired meal-kit provider Plated to create an offset space for it to explore and potentially grow.
And now comes the move to acquire the third largest U.S. drug chain which sold about 1,900 of its stores to Walgreens earlier last year. This deal checks a lot of boxes for Albertsons and Cerberus (which now can exit from its 12-year ownership of the company).
With an acquisition of this size, Albertsons can now be a substantial player in the drug chain derby by expanding its free-standing Jewel-Osco banner into other parts of the country (particularly on the East and West Coasts) and by utilizing the Rite Aid brand for its in-store pharmacies and HBC/GM private label.
Additionally, this is the best option that Cerberus has to exit ownership and allow Albertsons to gain publicly-traded status automatically since Rite Aid is already on the New York Stock Exchange. And for many of the Albertsons leaders who took a flyer and joined company in 2013 when it acquired many of Supervalu’s struggling retail assets, their faith and loyalty will be rewarded.
It’s a great strategic deal for Bob Miller, the old warhorse who has the unique skill of understanding the intangible dynamics that make companies work while also having gained savvy and skill as a dealmaker over the last 20 years.
And while Wall Street has questioned whether Miller’s age, 74, would prove to be detrimental as Albertsons plays catch-up in the strange new world of retailing, his tailor-made successor John Standley is not only one of the smartest people in the food and drug industry, he’s someone who Miller has known and trusted for more than 20 years. Don’t ever bet against Bob Miller.
‘Round The Trade
We thought we might have heard some official word by now on the status of Farm Fresh, the beleaguered Virginia Beach chain owned by Supervalu. A meeting with associates that had been slated for February 27 was abruptly cancelled and has not yet been rescheduled. We think the delay is temporary and believe that, when all is said and done, Kroger/Harris Teeter will be the biggest winner in the potential selloff…I think we all know that there’s tremendous waste in our food assistance program and the last three presidential administrations have all trimmed the subsidies available to those economically unable to afford food. Fighting hunger remains one of our nation’s biggest challenges and President Trump’s proposed $17.2 billion cutback of SNAP benefits for 2019 represents a 22 percent reduction from last year’s budget allocation. The reduction, which is actually $200 million over 10 years, is not only cruel, it’s ridiculous to boot. Trump and his bobblehead buddy “Slip Him a Mickey” Mulvaney, the director of the Office of Management and Budget, have concocted a plan that would offer SNAP qualifiers a meal-kit of products that would be delivered directly to the homes of those who are eligible for food assistance. The program, called U.S. Harvest Boxes, would provide shelf-stable milk, juice, cereal, pasta, peanut butter, canned meat, canned fruit and canned vegetables which would all be American-grown and produced. Politically speaking, this is a presidential administration that can barely walk a straight line on any initiative. Politics aside, does anybody think a project as labor intensive and nuanced as this has any chance of being executed at a competent level? Sadly, this could be “I Love Lucy” meets “Monty Python.”…according to the Belgian newspaper De Standaard, current Ahold Delhaize CEO Dick Boer could retire as soon as later this month. The story noted that current deputy CEO Frans Muller will be elevated to the top job at the Dutch retailer. Boer would then become chairman of AD’s supervisory board replacing Mats Janssen, former Delhaize chairman. Ahold would not comment on the possible changing of the guard, but it makes sense given Dick Boer’s age (he’ll be 61 in August) and the fact that the integration of Ahold and Delhaize is now complete. It’s likely that a detailed succession plan was negotiated as part of the merger of the two large European-based chains whose primary holdings are in the U.S. More Ahold Delhaize news: Peapod, the grocery delivery service unit of Ahold Delhaize USA, has opened a “wareroom” in North Coventry, PA in conjunction with its Giant/Martin’s banner that will allow it to serve 25 percent more customers in the Philadelphia area. This is the fourth Peapod “wareroom” to open in Pennsylvania and will bring an additional 120 jobs to the area…earlier this month, the Salvation Army opened is first non-profit grocery store in its history. The new store is called DMG Foods (Doing the Most Good) and is operating in a 7,000 square foot warehouse on East 29th Street in Baltimore. DMG Foods will provide fresh and affordable “healthy” food to about 1,200 families who live in that food desert area of northeast Baltimore. It will be working with the Maryland Food Bank (MFB) in offering daily meal solutions and cooking demos. BTW, I had an opportunity over the past month to meet new MFB CEO Carmen Del Guercio, who after many years in the banking business in Baltimore is now devoting his energy to improving the lives of many economically challenged Old Line residents. It’s been a few years since I’ve toured the MFB facility on Halethorpe Farms Road and I was very impressed by the improvements in the building and learned about some of the ambitious plans Del Guercio has to reduce hunger in Maryland…a tip of the hat to the National Grocers Association (NGA) on another strong annual convention in Las Vegas. I continue to be impressed by the improvement of its annual showcase every year. NGA is still small and nimble enough to provide its members (independents and regional chains) with a qualitative balance of larger forums, smaller breakout groups and an exhibitor showcase. Interestingly, just as the trade show was ending, NGA announced that it has sold an equity stake at its annual event to Clarion Events, a UK-based expo company. Next year’s show moves to a new city – San Diego – after being held in Sin City for many years. In other trade association news comes word that Pam Bailey, president and CEO of the Grocery Manufacturers Association (GMA), will be stepping down after a 10-year tour of duty leading the big group. In my opinion, Bailey did a good job leading the association up until about two years ago when the industry began changing rapidly and became more competitive, global and complex for many manufacturers. In the past year, large corporations such as Campbell’s, Tyson, Cargill, DowDupont, Unilever, Nestle, Dean Foods and Mars all dropped out with some of those suppliers citing conflicting views with the association over issues such as GMO labeling and overall transparency regarding ingredient and nutritional labeling…Kohl’s will soon begin a 10-unit test in which it will house Aldi stores within its four walls as part of continuing effort by the apparel merchant to build traffic and drive overall sales. Aldi will essentially rent space from the Menomonee Falls, WI retailer and independently operate its “store within a store.” If the beta test is successful, the concept could be expanded to an additional 200 stores later this year. Kohl’s has proven it is willing to experiment with other retailers’ products when it began selling Amazon products at about a dozen of its 1,150 department stores last fall…sorry to see Wall Street financial analysts continue to punish retailers if a small part of their measurable metrics doesn’t meet projections. Such was the case with Walmart, whose most recently completed fourth quarter was very good by all accounts, except to the desk jockeys who reside in lower Manhattan. The Behemoth’s stock price took a slight hit the day after the world’s largest retailer posted an e-commerce sales increase of “only” 23 percent compared to a 50 percent jump the previous quarter. However, CEO Doug McMillon saw the dip in online sales as temporary, stating: “We have good momentum in the business, with solid sales across Walmart U.S., Sam’s Club and International. We’re making real progress putting our unique assets to work to serve customers in all ways they want to shop…we’re making decisions to position the business for success and investing to win with customers and shareholders.” I agree with him – Walmart is clearly trending in the right direction and is investing heavily in its IT and digital infrastructure which will allow it to remain a powerful organization for many years. Walmart is also developing a technology called “Eden” which inspects produce for defects and can accurately predict the exact date when that item will spoil. Walmart believes it can save as much as $2 billion over the next five years. “Eden” is currently being used in 43 Walmart DCs and will shortly be brought to the retailer’s supplier farmers. Walmart has also entered the meal kit business with 10 different meal varieties available in about 250 stores. By the end of 2018, the meal kit offerings will be expanded to about 2,000 units. Prices of the prepared meals will be in the $8 to $10 range…just before presstime, Target said it would raise its minimum hourly wage to $12 by this spring, the first step of a broader, more long-term initiative that would ultimately boost the mass merchant’s minimum wage to $15 per hour by 2020… we have a few notable deaths to report this month. Vic Damone, 89, whose smooth baritone made him the king of all saloon singers – Frank Sinatra – to once state “he had the best pipes in the business” died earlier last month in Miami Beach, FL. Damone, who began singing professionally at the age of 14 in New York, recorded more than 2,500 songs. His bi
ggest hits included “You’re Breaking My Heart” and “On The Street Where You Live.” Except for Tony Bennett, the crooners from the golden age of lounge singers, including Sinatra, Dean Martin, Perry Como, Jerry Vale and Mel Torme, have all died… the Reverend Dr. Billy Graham has left us to visit a higher authority. The charismatic North Carolina pastor whose evangelizing crusades took him to 185 countries where he preached to an estimated 215 million people, died last month at the age of 99. Graham began his ministry in 1939 and provided counsel and prayer to 13 presidents beginning with Harry S. Truman in the 1940s. Among his closest friends was Dr. Martin Luther King Jr., who once said of Graham: “Had it not been for the ministry of my good friend Dr. Billy Graham, my work in the civil rights movement would not have been as successful as it has been.”…and from the world of sports, we lost two unique personalities. Former Baltimore Oriole pitcher Sammy Stewart has died at the age of 63. Stewart was indeed a talented pitcher who was a key contributor to the O’s championship season of 1983, but what made his career memorable were both his on-the-field presence and his off-the-field problems. Known as the “Throwin’ Swannanoan,” (his hometown was Swannanoa, NC), Stewart set a major league record at the time by striking out seven straight batters in his 1978 major league debut. In the 1983 World Series against the Phillies, he pitched three times in relief and was not scored upon. After he retired in 1987, his life sadly spiraled out of control. He was arrested dozens of times as he dealt with addiction to crack cocaine. He pawned his championship ring, became homeless and spent more than six years in prison before being released in 2016. By that time, he had turned his life around and became re-associated with the Orioles’ alumni network. And for you old folks out there (including me), Roger Bannister has passed away at age 88. That would be Dr. Roger Bannister, who had a long and distinguished career in medicine. But, he was far better known for an achievement that many athletic observers thought to be impossible at the time. On a cool, wet and blustery English day in May 1954, Bannister ran four laps around a cindered track in his hometown of Oxford in 3:59.4, making him the first person to run a mile in under four minutes. Bannister’s record stood just 46 days and he retired from competitive running less than a year later to pursue his medical career. “I wouldn’t claim to have made any great discoveries, but at any rate, I satisfactorily inched forward in our knowledge of a particular aspect of medicine,” he said about his post-athletic career. “I am far more content with that than I am about any of the running I did earlier.” By the way, the current world record for the mile is now 3:43.13.
