Publix Offers Successful Strategies in Action an Industry Insider Provides Dave Diver Is a Former Vice a Glimpse Into Publix’S Business Philosophy
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RETAIL PRODUCE PROFILE Publix Offers Successful Strategies In Action An industry insider provides Dave Diver is a former vice a glimpse into Publix’s business philosophy. president of produce at Hannaford Brothers and a BY DAVE DIVER regular columnist for PRODUCE BUSINESS. or years, Publix Super Markets, Inc., a Lakeland, FL- ing in 2007 shows Publix stock investment gaining 198 percent based chain with 929 stores, has made consistent while the peer supermarket group increased 70 percent and the sales and earnings gains. Its earnings have reached a level S&P 500 rose 85 percent. approaching 5 percent after taxes — far surpassing To understand Publix’s operation, one needs to view the chain’s pro- Kroger Co., the Cincinnati, Ohio-based chain operating duce operation up close and speak with its associates. I had the opportu- F2,507 supermarkets either directly or through subsidiaries. Although nity to do this during a store opening in late March in Savannah, GA. Kroger’s volume, at $70.2 billion, is approximately three times as great as Publix took over this particular 40,000-square-foot location in an Publix’s, and its after tax profits are about 1.5 percent or $1.18 billion, it existing strip mall, and the store’s footprint falls short of the chain’s typi- barely matches the Publix net profit of $23 billion of sales. cal footprint of approximately 45,000-square feet for stores built ground The 10-K report Publix supplied to the U.S. Securities and Exchange up. In contrast, Kroger has two 70,000-square-foot locations within a 5-to- Commission (SEC) provides a general description of its business philoso- 10-mile radius from this store. phy. In the 2007 report, Publix identifies competition as based on price, Wal-Mart Stores, Inc., the Bentonville, AR-based chain with more than quality of goods and services, convenience, product mix and store loca- 2,500 stores, also has a location nearby. While the new Publix store could tion. It lists its core strategies as customer service, product quality, shop- be described as tight, it has nearly everything any conventional consumer ping environment, competitive pricing and convenient location. would want in the slightly reduced space allocation. Although the company’s stock — owned by present and past employees — is not publically traded, it is priced quarterly, thus provid- Produce Personnel ing a financial comparison with peer supermarket companies and those Training Opportunities included in the S&P 500 Composite. The most recent 5-year period end- Arriving prior to opening provided me an opportunity to meet with JULY 2008 • PRODUCE BUSINESS 75 RETAIL PRODUCE PROFILE exceeding many in the Publix’s Culture industry. Built On People Training in how to dis- play, handle, allocate, mer- The culture and strategy at Lake- chandise and insure variety land, FL-based Publix prevail across stands out. Developing all departments. Dave Bornmann, ordering skill is mandatory vice president of product business to maintaining freshness. development for grocery and non- The ordering schedule foods, spoke at the 2008 Retail Exec- allows placing an order utive Conference hosted by the approximately 24 hours or National Frozen and Refrigerated less prior to delivery and is Foods Association (NFRA), Harris- enhanced by having deliv- burg, PA. “We need actionable ideas eries seven days a week, that are Publix-customer centric, that enabling departments to 1 COLORFUL, INVITING DISPLAYS ARE A PUBLIX HALLMARK. fit within our market position and achieve a 1 2⁄ -day inventory culture, including improving the level objective. overall shopping experience,” he Procurement specifica- explained. About the chain’s expecta- tions by item are equally tions of suppliers he related, “Not important for providing surprisingly, it’s the basics first — freshness and flavorful 100 percent order fill rates, on time taste. For fruit, the focus is delivery, accurate inventory and having a specific high level timely communications for new items of sugar, which ensures and promotion. consumer confidence and “To grow our joint business, we increases repeat purchas- need suppliers who are flexible with es. Product safety is also a price and non-price funds to permit priority. Publix to differentiate itself from the competition,” he added. “When we’re Maintaining items, organic groupings, wall cases out of stock, so are our customers. A Pleasant or display tables — the distinctive We also expect a sincere interest and Shopping colorful arrangements catch con- involvement in improving our joint Experience sumers’ attention. supply chain. The Publix culture is At this store’s entrance, When it comes to eye appeal, our joint improvement. At Publix, the a mammoth display of nothing is left to chance. Deeper objective is beneficiaries for suppli- oranges and mangos, into the department, color, size ers, the retailer and the customer.” bunches of cut flowers and a large display of and shape contrasts between tomatoes and egg- Publix produce departments defi- cored pineapple welcome shoppers. This gives plant on the promotional table greet customers. nitely embrace this culture. There is consumers an idea of what to expect once they The side of one island case devoted to bulk no magic to the Publix produce oper- reach the produce department at the far corner potatoes, onions, tomatoes and assorted items ation. It’s been developed over the of the first aisle just past the deli, bakery and hot of contrasting color provides a rainbow effect years to meet the company’s core takeout foods sections. Additional visits reveal and subliminal shopping hints. Island displays of strategies. Even cleanliness in all that while produce sometimes occupies less citrus and apples are equally appealing. areas throughout the store appears space in the front-of-the-store display, fresh fruit Photos of product line the wall cases. Each 4- to be a major priority. Everyone is and vegetables are always promoted there along foot section is organized to provide the greatest trained and programs are imple- with tie-ins from other departments. potential for shopping impact. Not only is there mented to achieve freshness, variety Consumers approaching the produce depart- a substantial wall case allocation for organics in and value. pb ment are drawn to multiple refrigerated, stair- the Greenwise Market area, but there is also an stepped island display cases containing in-store end-cap display containing more than 15 organ- prepared cut fruit. Publix’s definition of the cost ic items in baskets arranged for maximum and obtain insight from the produce manager, of goods sold, which includes inbound freight, impulse. The narrow, rectangular display tables the division vice president and everyone in warehousing, allowances and the cost of in-store provide a subtle “down on the farm” message. between. All articulated the same concept of production, provides a clue to understanding Tie-in displays do not end there. They’re pro- importance — people are important, important this strategy. Looking at this approach for fresh- moted on end-cap displays and grocery shelving as consumers, important as associates and cut, one quickly understands one reason why throughout the store. Fresh fruit and vegetables important as suppliers. nearly 100 percent of pre-cut fruit and variety cannot escape a consumer’s mind. Publix has For associates, knowledge of produce and vegetable trays are prepared daily in the depart- cleverly integrated a sampling station, identified the produce industry is paramount, so under- ment. chainwide as Apron’s, at the end of a gondola standing product sources and seasonality is part Color and convenience are highlights near the front of the store. Each week, a new of the training. Experience gained over the long throughout the department. No matter where recipe is prepared, and most of the ingredients term is crucial; nearly 50 percent of Publix’s consumers look — end caps with advertised are displayed nearby in a special upright refrig- 144,000 employees are full time — a ratio erated case. Consumers can pick up a list of the 76 PRODUCE BUSINESS • JULY 2008 RETAIL PRODUCE PROFILE time. And the deep red color is the brightest Mother Nature can produce.” The ad says it all — flavor, freshness, relative- ly locally grown with no mention of price, just the value story. Incidentally, a few days earlier the regular weekly flyer had tomatoes featured for 99¢ a pound. On this same day, when a large competitor advertised tomatoes for the same price, a store visit revealed the competition’s tomatoes were from Mexico. Thus the advantage is to a regional operator capitalizing on the image-building, locally grown, flavorful message. In the last week of May, blueberries were fea- food items, required utensils, cooking times, tured at two full pints for $5 while most of com- sequences and preparation steps, as well as petition was still displaying 4.4-ounce packages shortcuts and tips. During this visit, one recipe at a similar or higher price point. Timeliness is included five produce items. key to attracting consumers and Publix’s holiday promotions, such as the aforementioned Offering Value Memorial Day blueberries, have proven to draw And Competitive Pricing reputable farms in Florida. Take for example our many consumers into stores. Special seasonal advertising is important, partnership with H D Budd Farms [Inc.] in Plant Competitive pricing does not mean price particularly when price breaks can make an City. For 38 years, the Budd family has grown, matching. It’s a combination of selection, prod- impact. On May 11, after many weeks of high- handpicked, hand packed and personally deliv- uct quality and service, which leads to value or priced tomatoes, Publix devoted a full page ad ered their farm-fresh tomatoes to Publix. And competitive pricing. Media presentation and headlined, Florida Grown Vine-Ripe Tomatoes At right now, they’re bringing in their best, most fla- selection are important.