Upsized chain keeps local touch

With the merger of Albertsons and Supervalu in June 2006, a new giant stood astride the U.S. food and drug marketplace. And with its first year of combined operations behind it, the energized Supervalu and its nearly 200,000 employees are learning to run a new kind of retail entity by weaving together the best elements and scale of diverse retail holdings without sacrificing local market brand identification.

By adding some 1,100 stores owned by Albertsons to its holdings, the deal instantly propelled Supervalu to the upper ranks of U.S. food retailing, making it the nation’s third-largest supermarket retailer and the eighth-largest retail pharmacy operator, with approximately 900 in-store pharmacies. Supervalu will have some 935 in operation by the end of its current fiscal year, company leaders predict.

The merger gave the 137-year-old retailer and wholesaler enviable reach, with a 2,500-store retail empire that stretches from New England and the mid-Atlantic region to the West Coast under a total of 15 distinct store banners, including Albertsons in the West and Northwest, Lucky in Southern California and Nevada, Cub Foods in Minnesota, Jewel-Osco in Chicago, Acme in Philadelphia, Shaw’s and Star Market in New England and Shop ‘n Save in St. Louis. Not included in that total are two drug store nameplates with deep ties to Midwestern and Western consumers—Osco Drug and Sav-on Drugs.

The network also includes a diverse group of nearly 1,200 corporate and licensee stores operating under the Save-A-Lot banner, and served by Supervalu’s massive distribution network. What’s more, the company retains massive clout as a wholesale grocery distributor, supplying nearly 5,000 customer end points across the United States and adding both expertise and economies of scale to the company’s supply-chain activities.

Perhaps lesser-known are some of the other food-store nameplates under the Supervalu corporate umbrella—names like Farm Fresh in Virginia; Shoppers Food & Pharmacy in the District of Columbia and Baltimore; Bristol Farms in Southern California; Hornbacher’s in North Dakota; and Sunflower Market in the North Central and Midwest region. Though less well-known nationally, those regional players have gained strong and loyal followings among local consumers.

In the words of Supervalu chairman and chief executive officer Jeff Noddle, “Our new business model now represents a national food and drug retail and supply chain powerhouse with a footprint that spans the United States. With the addition of the Acme, Albertsons Southern California and Inter-mountain West, Bristol Farms, Lucky, Sav-on, Shaw’s, Star Market and Jewel-Osco brands to our multi-format retail portfolio, we are now positioned as a national player and can take advantage of our retail scale.”

Inside the stores, the acquisition of Albertsons’ premier properties also brought to Supervalu a newly developed and powerful pharmacy system, ARx, long in development by Albertsons’ pharmacy team and considered one of the most advanced automation platforms in any prescription center, capable of gathering and storing HIPAA-compliant patient data accessible to healthcare professionals and patients themselves. Equally significant was what the merger brought to the new company in terms of management expertise and culture—particularly in such areas as pharmacy and combo-store retailing. The acquisition brought to Supervalu such well-regarded pharmacy and nonfoods leadership veterans as Kevin Tripp, now serving as executive vice president and president of Midwestern retail operations for the 2,500-store chain; and Chris Dimos, who became president of Supervalu’s fast-growing pharmacy division. Many others, including influential clinical-care pharmacy leader Anthony Provenzano, also made the transition from Albertsons to Supervalu.

With that migration came Albertsons’ long history of experimentation and expansion in pharmacy-based patient care and disease management. Provenzano now leads a multi-pronged clinical-care initiative at Supervalu Pharmacy in such areas as diabetes management and medication therapy management, under the active promotion of Tripp, Dimos and other pharmacy leaders.

“If you look across the supermarket channel, you see pharmacy kind of shoehorned in a lot of different places in the organization—reporting to merchandising, reporting to here or there,” Tripp said. “Jeff [Noddle] and the leadership of Supervalu clearly see pharmacy as a strategic tool for the future. And to have a president of pharmacy who reports directly into the leadership of the company ought to send the message that pharmacy is clearly an important part of our business. And it has a lot to do with the way we organize the business, with Chris [Dimos] reporting to me and myself reporting directly to Jeff.”

Beyond that, he said, Supervalu employs what Tripp calls “an efficient but robust organization that supports our 900-plus pharmacies.”

Under Dimos, the pharmacy operation is run by an experienced staff, led by Gerry Bay, senior vice president of pharmacy operations, a veteran of Albertsons management based in Chicago. “Our company is basically broken into three regions—East, Midwest and West,” Dimos explained. “Our pharmacy operations group breaks down the same way, with a vice president of pharmacy operations for each region.”

Carolyn Sieraski is vice president of pharmacy marketing and strategy. Dan Salemi, another veteran of Albertsons and American Stores, is vice president of pharmacy central services, in charge of managed care, procurement and analytics.

“He buys it, sells it and figures out if we made any money on it,” Dimos joked.

In charge of clinical programs is Anthony Proven-zano, while government relations and pharmacy professional services is under the direction of Vic Vercammen. Randy Mound is vice president of pharmacy systems and process redesign.

The Supervalu pharmacy team also includes financial support staff and a vice president of pharmacy human resources, Chris Irmscher.

It’s clear that the company’s far-flung and diverse portfolio of retail brands will demand new thinking and new solutions from its management team. “Supervalu operates in some of the nation’s largest and most densely populated urban areas, including Boston, Chicago, Los Angeles, Philadelphia and Washington, D.C.,” the company noted in a report. “Serving a broad demographic spectrum demands that Supervalu is a flexible, dynamic retailer that is in tune with cultural and customer trends and responsive to local demands.”

To that end, Noddle has laid out four performance milestones that he says will guide the company’s future decisions, strategies and initiatives, “and our new culture of service.” They include:

Delivering economically by leveraging economies of scale, best practices from each retail banner and rising sales to bolster profitability;

Serving customers through a better understanding of their needs, according to Noddle, and by better responding to changing demographics and demand trends. Part and parcel of that process is an aggressive campaign to remodel stores, rejuvenate and keep fresh the merchandise mix and keep the focus on local retailing and new customer-service programs.

Creating a new company culture to energize employees and keep them, in Supervalu’s parlance, “customer-focused, passionate about the grocery business and committed to delivering our customers the best possible shopping experience.”

Investing in the store network through store renovation and new construction. Along those lines, the company has created a “Premium Fresh & Healthy” strategy for its new store and remodeling effort