Safeway CEO Steve Burd has legacy as a risk-taker

PLEASANTON — After a forceful two decades of leadership, Steve Burd will step down from Safeway this week, leaving behind a company that he molded into the nation’s second-largest supermarket chain.

He shepherded the grocery retailer through its most tumultuous period, and the company now bears little resemblance to the floundering operation he took over in 1993.

Some say the road to this transformation was paved with innovative ideas and calculated risks, while others criticize Burd for cost-cutting tactics that alienated employees and customers. Where labor relations, customer service and health care are concerned, Burd has a mixed record, according to interviews with analysts, grocery industry leaders and labor advocates.

But where they all agree is this: Burd took a company on the brink and turned it into a formidable supermarket giant, made a profit while dozens of other grocers succumbed to bankruptcy and kept thousands of workers employed in union jobs.

“He kept the company afloat,” said Mike Henneberry, spokesman for the local chapter of the United Food and Commercial Workers union, which represents Safeway employees, and which has had a strained, but also productive, relationship with the company and its CEO. “They were in a very precarious spot. He kept a lot of people employed and in good jobs for a long time, and now the company continues on.”

Burd, who announced his retirement in January, will say farewell at the company’s annual stockholder meeting Tuesday. He declined to be interviewed for this report. His successor, longtime Safeway executive Robert Edwards, 57, waits in the wings.

Burd leaves Safeway on solid financial footing. The Pleasanton company has posted profit gains for four of the past five quarters and continues to expand in the western U.S. and Canada. Since 1997, sales have doubled to $44.2 billion and its stock has jumped from about $3.35 a share in May 1993, when Burd became CEO, to more than $24 today. Last year, Safeway earned almost $597 million.

Building Safeway into a national chain started early in Burd’s tenure. He went on a buying spree starting in the ’90s, scooping up Dominick’s in the Midwest, Carr-Gottstein Foods in Alaska and a number of others.

He fended off Walmart by sending store managers to city council meetings to fight each new store the mega big-box retailer wanted to build, said Burt Flickinger III, managing director of Strategic Resource Group and a national expert on the supermarket industry. Walmart has been blamed for about 30 of the top 150 supermarket bankruptcies.

But perhaps where Burd distinguished himself the most is in the final years of his career as he focused on reforming the nation’s health care system. Under Burd’s leadership, Safeway health care benefits were converted to an incentive-based plan to encourage healthy habits like losing weight and exercising. Workers who smoke, are obese or fail to meet other standards of health pay more.

Burd took this plan to Capitol Hill and sold it to the Obama administration, and soon the “Safeway Amendment” was added to the Affordable Care Act as a way to cut costs for employers.

“He’s the kind of guy where if he sees a problem that he wants to fix, he stays very focused and intent on fixing it,” said Ronald Fong, president and CEO of the California Grocers Association and a friend of Burd’s.

But many health care advocates say Burd’s plan passes the cost of health care onto employees who need it the most. Morgan Downey, editor of the Downey Obesity Report, which publishes research and news on public health, says Safeway employees could end up paying up to $1,500 a year more for failing to meet what he calls arbitrary health targets.

“The plan is not so much motivated by promoting wellness but to reap the financial benefits,” Downey said. “People don’t like being asked their weight by their employers or being docked their pay because they didn’t lose 60 pounds.”

From the beginning, Burd’s cost-cutting tactics created a hot-and-cold relationship with labor.

Ron Lind, president of UFCW Local 5, said the Southern California supermarket strikes in 2003-04, which included thousands of workers from Safeway-owned Vons, left a bitterness that still remains.

“For the most part, our members do not have warm feelings for Mr. Burd,” Lind said. “But in fairness, it’s hard to find happy employees in unionized grocery stores these days.”

But Henneberry countered that the relationship between Burd and labor improved because he preserved many of the health care and pension benefits that other supermarkets were quick to eviscerate.

Shoppers, too, have been frustrated by Burd’s penny-pinching. Bob Reynolds, grocery analyst with Reynolds Economics and a former Safeway employee, said stores are under pressure to cut labor costs, which leaves them short-staffed. Customers have noticed — Safeway was ranked third-worst among retailers in the American Consumer Satisfaction Index, an independent national benchmark of customer satisfaction published in March.

Safeway challenges the study: “Safeway has a well-earned reputation for excellent service, and we will continue to invest heavily in this important part of our business,” the company said in a statement.

Safeway said its digital coupon program is on track to have 6 million users by the end of the year, and Flickinger said that is evidence of improved customer loyalty and more shopping trips per family.

But Walnut Creek native David Falicki said he dropped into a Safeway in Southern California one evening to pick up a quart of milk, and after waiting in the one open line for about 20 minutes, gave up and went to Trader Joe’s.

“When there’s 15 people in line and there’s one clerk, somebody get a clue,” Falicki said. “All the goofy club cards don’t mean a thing in the world when you get there and you’re just pissed off.”

Fong said Safeway’s record on customer services isn’t spotless — Burd’s experiments with new technology and cost-cutting didn’t always go as planned. But, Fong said, Burd was always willing to try something new to keep the supermarket a step ahead of the competition.

“He took a lot of risks, and with risks there come failures,” Fong said. “The point being that he’s willing to take that risk.”

Contact Heather Somerville at 925-977-8418. Follow her at Twitter.com/heathersomervil.