Safeway looks at new depts. to drive growth
PLEASANTON, Calif. —Safeway says its Lifestyle remodels are still the key to its long-term growth, but it’s looking to drive sales with a variety of non-food items, as competition heats up on its home turf in California.
At a Lehman Brothers investor’s conference on Sept. 5, Safeway chief executive officer Steve Burd said the 1,740-store chain has remodeled about 50 percent of its stores to its Lifestyle format and expects the new remodels to continue to be a success.
“I think there’s been an assumption that we did our best stores first, and that’s true to a degree,” Burd said. “But we’ve learned some things and improved the stores along the way, so we expect the second 50 percent of our remodels to be as successful as our first 50 percent.”
Burd also noted that some stores in less-populated areas are getting modified remodels he called “Lifestyle Light” that don’t contain all the Lifestyle elements, but are producing improved sales numbers on par with full-scale remodels. The chain expects to have about 60 percent of its stores remodeled by the end of this year.
Burd also discussed Safeway’s O Organics line of organic foods that was launched in 2006, noting that it produced total sales of $160 million in its debut year and that sales in 2007 will “threaten $300 million.” The line now includes more than 150 products, including bakery, dairy and frozen foods, and will be expanded again in 2008.
And Safeway will launch a new program in October to encourage customers to get their flu shots at Safe-way pharmacies. For a limited time, people who get flu shots at in-store pharmacies will receive a coupon book with $150 in coupons for products throughout the store.
He also touched on how Safeway is looking toward non-food items to help differentiate the supermarkets and drive sales. One of those is Blackhawk Networks, a business Safeway founded five years ago that distributes gift cards and phone cards at Safeway stores and thousands of other locations. Burd said the distinctive flower stands in Lifestyle stores also are seen as both a traffic driver and a point of differentiation for Safeway.
As for the impending arrival of Tesco in Southern California and the Southwest, Burd said he’s waiting to see what the stores look like and how they’re merchandised before making a counter move, but added that Safeway has no plans to test a small-format store. Tesco is scheduled to open its first Fresh & Easy market in either Los Angeles or Phoenix in November, and plans to add 100 stores in the next year.
In other news, Safeway promoted Michael Minasi to president of marketing. Minasi, who had been senior vice president of marketing, joined Safeway in 1996 after a career at Toys “R” Us. It also unveiled its first-ever “solar-powered grocery store” in Dublin, Calif., on Sept. 13. Safeway said that one acre of solar panels on the roof of the 55,000-square-foot supermarket provides power for the entire store.