Despite drop in earnings, Supervalu CEO Herkert sets sights on price strategy
MINNEAPOLIS The current economy appears to be tempering tomorrow’s shopper as a more value-oriented shopper, Craig Herkert, Supervalu CEO and president, suggested to analysts Tuesday morning during the company’s third-quarter analyst call.
“In my 30 years of retailing I’ve never seen the intense discounting” evident today, he said. But become too promotional, and a retailer risks significantly impacting operations. The price tactics that were used to drive traffic in the past “are now driving lower transaction size and margin erosion,” Herkert suggested.
Herkert’s leading two “items of importance” during the analyst call addressed this price-strategy evolution — identifying a profitable promotional strategy and pursuing a value-oriented overall pricing strategy.
The past quarter had been a tough period of difficult decisions in “striking the right balance between sales and promotional investments,” Herkert said. Supervalu succeeded in increasing its promotional mix by some 350 basis points without sacrificing margins, he said.
Supervalu also is currently pursuing more of a value-oriented, everyday low-pricing strategy, narrowing the gap between promotional pricing and nonpromotional pricing. With regard to the company’s actual EDLP banner, Save-A-Lot, Herkert reiterated plans to double that banner’s footprint in the coming year.
Closer conformance to an EDLP strategy may become a cost of entry for all retailers going forward, especially considering a recent Motorola survey. Already, 51% of consumers globally are using their mobile phones as a shopping tool while shopping.
Supervalu reported third-quarter fiscal 2010 net sales of $9.2 billion, down 9.8% compared with the year-ago period, and net earnings were down 17.4% to $109 million.
“Sales were softer than we had anticipated, but earnings per share, even before the impact from the Salt Lake City retail market exit, beat [analyst] consensus,” Herkert stated.
Drug Store News spoke with Tom Finnegan, VP sales, diagnostics and health care for Homedics, about how the company’s newly acquired line of Obus Forme backrest support products can help drug retailers position themselves as a wellness destination for customers.
Drug Store News: What does the acquisition of Obus Forme bring to the Homedics portfolio of products?
Tom Finnegan: The acquisition of Obus Forme is a natural for the Homedics family of health-and-wellness products. Obus Forme already enjoys a long-standing history and reputation across Canada for its renowned line of backrest supports, ergonomic seating and supportive sleep products. As the world’s No. 1 brand in consumer health and wellness, Homedics is widely known and respected. With the Obus Forme by Homedics brand, the marketplace benefits from a more inclusive product offering, and the two brands will benefit from the close synergies that exist.
DrSN: How do you see the brand fitting into drug stores?
Finnegan: The Obus Forme by Homedics brand is a great fit for today’s drug store environment on several fronts. More than ever, the consumer is looking for quality and affordability with every health-related purchase. Obus Forme by Homedics products are designed with a holistic approach in mind, applying a thorough understanding of the human anatomy to create the innovative products that address the complete wellness needs of the consumer.
As a brand, Obus Forme by Homedics is recommended by healthcare practitioners, as well as leading health-related associations across Canada, so it’s an established brand in the backrest support category. It’s a perfect fit for today’s drug retailers who want to provide a holistic approach to comfort, and [provide] health to their consumers.
DrSN: Do you think a better selection of backrest supports can help position drug stores’ image as wellness centers?
Finnegan: Today’s drug store retailer offers shoppers the opportunity to review a wide range of products to meet their overall health needs, and Obus Forme by Homedics fills an important piece of that puzzle by serving as the “therapeutic” arm of the Homedics family of products.… The credibility of this line of noninvasive, highly effective products resonates with consumers and retailers, and allows drug stores a new opportunity to better meet the needs of their consumers. It’s a solid growth opportunity.
We have distribution through Cardinal Health, Complete Medical and H.D. Smith, and this allows us to penetrate more than 10,000 independent pharmacies and durable medical equipment dealers.
An early health/wellness adopter, Ukrop’s will be a ‘Giant’ for Ahold
RICHMOND, Va. —As this issue went to press, it seemed Ahold had emerged as the winner in its bid to add the 72-year-old Ukrop’s supermarket chain to its Giant-Carlisle division.
Apart from the stores and pharmacy files themselves, of course, Ahold inherits a variety of health-and-wellness programs that Ukrop’s had developed for its customers.
One area in which Ukrop’s has made a name for itself is in immunizations. The stores offer vaccinations for influenza and pneumococcal disease, and prides itself on being one of the first pharmacy operators in the country to offer vaccinations. It also offers travel vaccinations for such diseases as Hepatitis A, Hepatitis B, yellow fever, Japanese encephalitis and rabies—diseases that are uncommon in the United States but are widespread throughout much of the world, particularly in developing countries. The chain offers travel vaccinations in a small number of its stores, but the presence of the service provides a convenience to customers. The program has earned the praise of pharmacy leaders.
In October 2009, American Pharmacists Association CEO Tom Menighan reviewed the chain’s vaccination program on a store tour with Ukrop’s director of pharmacy and health services John Beckner. In a blog entry on the APhA’s Web site, Menighan remarked, “While each location had a generally similar feel, the pharmacists and technicians were proud of their unique services, their teamwork and perhaps most importantly, their connection with their patients.”
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The travel vaccination program will soon be expanded to other stores via a “hub and spoke” model. Another area Menighan praised was the chain’s medication therapy management program.
Ukrop’s has branched out into retail clinics as well. In May 2008, it opened a clinic in its Salem Church store in Fredericksburg, Va., through a collaboration with the Pratt Medical Center. The clinic, staffed by a nurse practitioner, was the first for Ukrop’s and the sixth for Pratt.
Diabetes also has a position of high importance at Ukrop’s. According to the Virginia Diabetes Council, nearly 2 million people in the state are diagnosed as diabetic or pre-diabetic. The state’s government-run Virginia Diabetes Prevention and Control Project ranks the condition as the sixth leading cause of death among state residents.
Ukrop’s began offering diabetes education classes early in the decade on such subjects as blood-glucose monitoring, nutrition, exercise and other topics to obtain certification from the American Diabetes Association. While it doesn’t offer the classes anymore, it has retained its focus on the disease, offering screenings for blood sugar and blood pressure, and pharmacists who double as certified diabetes educators can offer counseling to patients. Meanwhile, the pharmacists serve as liaisons with in-store dieticians who can provide additional education and support.
“Certainly, a lot of it is on the patient to do what they can themselves, and if we can provide them with the tools or roadmap to negotiate the store with respect to the wellness services that are offered, then we feel like we’ve done our job,” Beckner said.