Supervalu, Inc. Strategic Management

History and Background

Supervalu, Inc. is the third largest grocery business in the U. S. based in Eden Prairie, Minnesota. “Supervalu’s origin lie in the 1871 merger of the Minneapolis wholesale grocery firms B.S. Bull and Company and Newell and Harrison Company” (SUPERVALU INC, 2010) They currently owns and operate more than 1,550 stores over 40 states, with the combination of 850 food and drug stores. Supervalu also owns several brand names such as Save-A-Lot, Albertsons, Jewel-Osco, Acme Markets, Cub Foods and much more. Most of the multiple brands operated by Supervalu, Inc. are located in regional markets. Albertsons is mainly in the western states, Jewel-Osco is located in Chicago and in the Midwest, and Acme Markets is located in Pennsylvania. Supervalu’s wholesale business operates 33 warehouses and distribution centers. The warehouse supply products to 2,000 independent stores in 48 states and aboard. Supervalu has created a new approach to customer loyalty. The strategy for the customer is the loyalty card. “The grocer is experimenting with segmenting customers and predicting their behavior by overlaying loyalty-card data with demographic, psychographic, behavioral and economic information from external providers.” (Breandel, pg.7)

Industry Analysis

Industry becomes increasingly computerized to help maintain and track inventory. According to McCrea, “Supervalu turned to technology to streamline its yard operations, improve its docking capabilities, and shave a significant number of man hours from its daily routine.” (McCrea, pg. 30) Before this technology usage, Supervalu manually managed its high volume of traffic and logistical operations. There were often inefficient load movements and it took time to correct the errors due to the lack of visibility in the shipping operations. Trying to find the solution to stop these errors and proceed with shipping more accurately took a year. Supervalu examined four different YMS vendors and decided that PINC Solutions’ Advanced Yard Management was the best fit for the company. With the program, Supervalu is able to locate and track the movement of each trailer.

Sustainability Trend

Everyone might have their own definition to sustainability. “As organizations throughout the world engage in more activities related to the many aspects of sustainability, they are increasingly publishing reports on those activities and their outcomes.” Recently, Supervalu has been awarded for sustainability achievement. “The company is featured in the Carbon Disclosure Project’s (CDP) Carbon Disclosure Leadership Index, which honors companies for both environmental performance as well as transparency in this area.” (SUPERVALU Receives, 2012) Supervalu has a nine percent reduction in carbon emission since 2007 which they are on track to reach the goal of ten percent in collaboration with World Wildlife Fund. With the Fresh Rescue program, Supervalu has donated over 60 million pounds of food to help families in need. They have also committed to “300 zero-waste store during the current fiscal year; these stores recycle or reuse 90 percent or more of all the waste.” (SUPERVALU Receives, 2012) Despite if companies chose to report or not, it is beneficial and makes managers become more aware of business risk.

Unsuccessful Growth

In the past four years, Supervalu’s sales have only continued to fall. During 2008, Supervalu generated a total of $44.6 million revenue. In 2009, Supervalu’s revenue dropped 9.77 percent to $40.6 million. The next year in 2010, Supervalu’s revenue only continued to fall to another 8.16 percent to $37.5 million. In year 2011, Supervalu’s revenue decrease in 3.97 percent to about $36 million. As the years continue, Supervalu’s revenue only continues to decline in billions of dollar.

Competitors

Supervalu requires lots of different strategies to attract their customer. There are many competitive factors that include the quality, price, brand recognition, promotion strategies, store location and much more. Some of Supervalu’s competitors are The Kroger Company, Wal-Mart Stores, Inc., ALDI Group, Target and much more. There is also variety of formats that Supervalu competes with such as supermarkets, drug stores, discount stores and small local business. Supervalu “struggles to compete with new grocery units in big-box retailers like Target and Wal-Mart.” (Brown, pg.1)

Strengths Weaknesses

• Multiple Retail Brand

• Strong Supply Chain • Highly in Debt

• Product Recalls

Opportunities Threats

• New Brand

• Demands for Organic • Competitors

• Increase Price of Operating a Business

Strength – Multiple Retail Brand

With multiple different brands, Supervalu has definitely set a name for themselves. Rapidly growing, Save-A-Lot has approximately 1,300 locations in urban, rural and suburban areas across the United States. Save-A-Lot is offering value through their products. Supervalu has also succeeded with Acme Sav-on Banner with total units of 134 that include the combination food and drug stores and conventional supermarkets. “Jewel-Osco owns a sizable chunk of the lucrative Chicago market.” (Big shoulders, 2006) The Jewel –Osco has 200 successful stores that is a combination of grocery and drugstore.

Weakness – Highly in Debt

Supervalu Inc. is currently in a bad financial situation. “As of June 16, 2012, the company had $6.3 billion of debt outstanding including capital leases, according to the ratings agency.” (Bisbey, pg. 2) They have also “reported a steep drop in quarterly profit and falling sales.” (Brown, pg.1) Supervalu will also be cutting their expenses and capital expenditures. Supervalu is seeking in a $850 million term loan in seven-year and a $1.65 billion asset-based loan in five-year to help refinance the existing debt. Supervalu Inc. only continues to fall in sales and decrease its debt.

Opportunity – Demand for Organic

Consumers are gradually aiming for organic food. Consumers want something good yet fulfilling and healthy. Everyone is trying to lose weight and have a healthier life style. If Supervalu create a brand that mainly focus on organic food with different varieties, consumers will be attractive to the product. Launching a new brand and product is never easy but