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A7 Challenges Temper 20 Optimism

PGs editors reached out to members of the Retailers to focus on points of retailer community to ask them these questions: differentiation in 2017. >• What are your company's top priorities for 2017? >- What areas of the customer experience will you focus By Joan Driggs, Jim Dudlicek, on most closely? Bridget Coldschmidt, Randy Hofbauer, > What do you consider to be the greatest challenges Meg Major and Katie Martin and opportunities for the industry as a whole? > What impact do you foresee a new presidential admin• he bleak macroeconomic landscape, includ• istration having on the industry? ing deflation, and various regulatory issues, such as the Affordable Care Act, Fair Labor Standards Act and minimum wage laws, may The following retail executives shared be keeping retailers up at night, but grocers insights for our 2017 Retail Outlook: large and small are entering 2017 optimistic Maria Brous, director of media and community about the Trump administration, which is relations, Super Markets viewed as largely pro-business. Richard Cashion, VP of retail operations, One of the hallmarks of the grocery in• Healthy Home Market dustry is that hard times bring out the best in innovation. T Chris Coborn, president and CEO, Coborn's Inc. It will be called for in the coming year, as competition for the food dollar continues to expand to nontraditional John Cortesi, president and CEO, Sunset Foods outlets, including subscription services, e-commerce Kevin Davis, chairman and CEO, companies, and such nontraditional purveyors as home Wayne Denningham, EVP and COO, Cos. improvement and home goods retailers. Scott Drew, EVP of operations, Smart & Final Stores Within traditional grocery retail, deep discounters, in• Dan Clei, EVP of merchandising and marketing, cluding and , the latter of which will make its U.S. K-VA-T Food Stores Inc. debut by 2018, are a threat to retailers unable to compete Heather Isely, EVP, Natural Grocers beyond low prices. Lauren C.R. Johnson, CEO, Newport Ave. Market A point of difference in favor of traditional supermar• kets, most agree, is customer service, which will be a focal Art Potash, CEO, Potash Markets point for many retailers. Expect those committed to the Dan Shanahan, president and COO, Buehler's Fresh Foods customer experience to invest more in recruitment, training KirkStoa, EVP and CFO, Festival Foods and retention. Experience will extend beyond smiling faces Jimmy Wright, owner, Wright's Market to mobile communications and e-commerce solutions, but grocers admit the financial struggle of investing heavily in both in-store and virtual customer service. By and large, they share many common goals, face Assortment is also a focus for the coming year, as retail• common challenges and recognize common opportunities, ers indicate they'll be investing more in their perimeter while expressing what might best be described as cautious departments, notably fresh prepared food offerings. Grocers optimism about the retail landscape, the economy and what recognize that shoppers want the convenience of prepared impact a new presidential administration might have on both meal solutions paired with the speed of takeout. in the coming year. Their responses follow, edited for space ...

January 2017 I progressivegrocer.com I PROGRESSIVEGROCER's

ayne Denningham, EVP and always be anticipating opportunities to provide COO for Albertsons Cos., pin• remarkable service, even if it means deviating from points store conditions, private the routine way of doing things," Coborn says. brands and people as Similarly, at Festival Foods, a De Pere, top priorities for the Wis.-based chain of 26 stores, a major Boise, Idaho-based focus of 2017 will be improving the guest retailer, which has experience — specifically, empowering grown organically and through acquisi• What are your store associates to "wow our guests," says Wtions over the past few years. Kirk Stoa, the retailer's EVP and CFO. As part of Albertsons' quest to be the company's "It can best be described as 'random acts "favorite local supermarket" in each of of kindness' for our guests." the communities it serves, Denningham John Cortesi, president and CEO of says sales growth and profitability will be top priorities Sunset Foods, says that this year's priori• driven by "maintaining our focus on run• ties for his five-store chain in north sub• ning full, fresh, friendly and clean stores, for 2017? urban Chicago include a focus on fresh, as well as ensuring our products offer the including organics and prepared meals. quality and variety of natural, organic and "We're competing with the likes of Blue local products customers know us for," Apron and other subscription services. chief among which are its successful own We need to be more innovative, so brands like O Organics, Open Nature, we'll also be focusing on digital mar• Eating Right and Lucerne. keting, applications and solutions," will continue to Cortesi notes. "As we address Millen• serve as a critical component of nial shoppers, we're focusing more on Albertsons' future playbook, as will convenience and satisfaction." technology. "In 2017, we're going Art Potash, CEO of Chicago's to continue our focus on using Big Potash Markets, believes that growth Data and analytics to drive cus• — a major priority for 2017 — will tomer traffic and basket size through thoughtful price come as a result in investments in training and development investment, loyalty programs and personalized offer• of staff, as well as physical upgrades of equipment. ings," notes Denningham. "We're also going to invest in Lauren G.R. Johnson, CEO of Newport Ave. Market, our people and continue to be a company where people in Bend, Ore., minces no words when identifying her top want to come work and build their careers." priorities for 2017: "Increased sales. Due to new competition For Kevin Davis, chairman and CEO of Carson, Calif- in our area, we expect to remain flat through the first two based Bristol Farms, 2017 will be about increasing sales quarters, then experience a slight increase." at existing stores through more efficient promotion and Likewise, for Abingdon, Va.-based K-VA-T Food Stores merchandising, and improving the shopper service experi• Inc., which operates stores under the Food City banner in ence. The upscale grocer recently remodeled more than half Georgia, Tennessee, Kentucky and Virginia, 2017 will be of its stores, and while sales are up at all of those locations, about "growing sales, given the challenging headwinds of Davis believes it can do a better job introducing the newly deflation," as well as "improving the shopping experience remodeled stores and their added features to new customers and the solutions we bring to our customers," says Dan Glei, in communities it already serves. K-VA-T's EVP merchandising and marketing. This also will be the year Bristol Farms opens the first And Jimmy Wright, owner of Wright's Market, in of several new stores it will be debuting over the next 18 Opelika, Ala., says his top priorities are "finding innovative months, which, when completed, will mark the company's ways to grow profitable sales, in spite of food deflation and biggest growth in history. the competitive environment." A strong focus on people — internally and externally Of Healthy Home Market's newest store, Farm 2 — will be top priority this year for Smart & Final Stores. Family Foods by Healthy Home Market, set to open this Scott Drew, the Commerce, Calif.-based retailer's EVP month in Lenoir, N.C., Richard Cashion, VP of retail of operations, notes that his company will continue to operations for the Charlotte, N.C.-based chain, notes, focus on engaging and investing in associates through "With the new brand, our company is focusing on educat• continued education, internal promotions and new hires. ing traditional grocery customers about healthier lifestyles His company will also continue providing household and and selecting the best products to meet their needs." business customers with a differentiated offering and an Nutrition education always has been a major focus for updated, more convenient shopping experience. Natural Grocers, but 2017 will be a time to continue cre• Chris Coborn, president and CEO of St. Cloud, ating new, experiential ways to help customers know more Minn.-based Coborn's Inc., says his company's key focus about the foods they purchase, says Heather Isely, EVP will be further strengthening two of its core values: guest of the Lakewood, Colo.-based retailer. focus and executional excellence. "Our employees should Continued on page 58 >•

I Progressive Grocer I Ahead of What's Next I January 2017 PROGRESSIVEGROCER's

>- Continuedfrontpage 54 nage and shelf tags in the coming year will focus on or the past 86 years, Lakeland, Fla.-based the many ways that Festival Foods creates value for Publix Super Markets has prioritized the its shoppers. From the Tot Spot free child care while customer experience in its stores, shopping in the store, to curbside pickup, through its "stellar customer Festival's new tag, "It's the little things...," service [and] quality products will help draw attention to these extras. at competitive prices," in the Festival is also focused on store words of Maria Brous, director What areas growth through acquisitions and new of media and community relations, and stores. Stoa notes that competition in Fthat's not about to change now. Addition• of the , which has seen growth from ally, according to Brous, "we continue to larger regional players like Hy-Vee and look towards providing meal solutions for customer , and the acquisition by our customers, convenience, grab-and-go of Roundy's, continues to squeeze small items and omnichannel [solutions]." experience independents. "You swim harder, swim Albertsons' banners, meanwhile, will faster and be the consolidator, or get offer online ordering and home deliv• swallowed by those sharks," he says. "So ery in eight of the nation's top-10 most wiI you focus we're focusing on growth." populous MSAs by the middle of next Sunset's Cortesi says he sees consum• year, according to Denningham. "Our on most ers — particularly Millennials — as own employees are involved at every desiring to be self-sufficient. "Customers step of the process, from packaging to closely? want to get in and get out [of the store]," delivery," he explains, because "we believe he observes. "Look at the revelation tak• e-commerce should be an extension of ing place with [the] Go store. the in-store experience, with the same We want to create the speed and effi• high level of customer service and quality ciency customers are looking for." fresh products that our customers have Sunset already offers a wide variety come to expect from us." Albertsons will of prepackaged prepared foods, he notes. also "continue to enhance and upgrade "Now our goal is [to] merchandise ef• our stores and our health-and-wellness fectively to satisfy the needs of consumers. services across all our banners in the new We already have the full kitchens on site, year," Denningham adds. so we want to compete against foodser¬ 2017 won't be without its trials for vice," Cortesi notes. "We can change Bristol Farms, the greatest centering on quickly and come up with healthy options consumers' continual perception of a flat that address a variety of health issues." or slow-growth economy, Davis admits. Prepared foods is more than a catch- Additional pressure will come from ever-increasing operating phrase at Potash Markets, as the small Chicago indepen• costs from various new government regulations taking effect, dent "continues to strive to be the most relevant we can be including new minimum-wage laws, overtime changes, the for our customers," Potash asserts. Food Safety Modernization Act and new menu-labeling laws, When it comes to improving the customer experience, in addition to rising health care costs. K-VA-T is interested in "expanding meal solutions in the "Our focus remains on developing product categories fresh departments, growing the center store through events with strong potential to build customer visits, such as that drive basket size on stock-up trips [and accelerating] our natural and organic ... private label offerings, which snacking options throughout the store," Glei notes. resonate with customers and are attracting new ones," Drew The new year will see Natural Grocers also responding says. "Additionally, we are executing customer growth to increased outreach from customers on social media. The initiatives through our delivery platform relationships with retailer plans to make it even easier for patrons to connect Instacart and Google Express, which appeal to the Mil• and engage via its various channels in this area. Similarly, lennial customers, and are introducing Smart &c Final to a Wright says he'll be focusing on tech improvements in POS mostly incremental new audience." technology and online shopping. Coborn says providing his customers "an exceptional shop• To enhance the customer experience at its four stores, ping experience" is a top priority. "We will continue to seek Healthy Home Market plans to concentrate on "new out more fresh, healthy options for our stores; our registered health trends, educating customers on a healthier lifestyle, dietitians will continue to provide creative new ideas to inspire online shopping, and our relationship with local growers healthy eating strategies for our guests; and we will continue to and producers," Cashion notes. evaluate our practices to make sure we are living this vision." Come what may, Johnson affirms that Newport Ave. As with many retailers interviewed for this feature, Stoa Market's top focus, "as always, will be on customer service. believes that people help deliver extra "value" to the shopper. We believe that is one of a handful of advantages we have Marketing efforts, including online advertising, in-store sig- over our competition.'

I Progressive Grocer I Ahead of What's Next I January 2017 PROGRESSIVEGROCER's

hen assessing the industry's mobile experience, which Stoa sees as both a foremost challenges and opportu challenge and an opportunity. nities, Albertsons' Denningham Food safety "continues to be one of those things says that regardless of that keeps retailers up at night," admits how the grocery indus• Potash, whose stores are located in down• try evolves or innovates, town Chicago. Other major challenges he "it's always going to be cites include compliance and more govern• a business built on pennies and very small What do you ment regulation and oversight. Wprofit margins. But what we have learned In that vein, Natural Grocers' Is- over the last decade ... is that customer consider ely suggests that perhaps the greatest service drives sales. challenge will come from the Safe and "While our industry is about driving to be the Accurate Food Labeling Act of 2015 — what the customers want," Denningham called by some GMO labeling advocates notes that "it's also about remembering greatest "the DARK (Denying Americans the who our customers are, and maintaining Right to Know) Act" — which bans those relationships. That isn't something challenges states from requiring food manufacturers that you can mandate as a corporate mis• to label food ingredients that come from sion; it needs to happen organically, store genetically modified crops. But while by store. That's both the greatest challenge and these types of rulings are worrying, Isely and opportunity throughout the industry." stresses that they also present an oppor• Challenges aside, Davis is certain opportunities tunity to reward vendors that choose to that Bristol Farms, as it does every year, be transparent. "Retailers who continue will head into 2017 with optimism and a forthe to educate their customers and require strategic plan to do better, no matter what transparency from their vendors will see the circumstances, pointing out that tough industry as a greater customer loyalty," she asserts. economic conditions can sometimes help Newport Ave. Market's Johnson efficiently run companies perform even whole? points to "increased competition with better. And although new competition will other retailers — including restaurants enter California, continued grocer consoli• — especially as the big chains improve dation will act as a buffer against sales loss in the specialty category." And at Publix, to these food retailers, he adds. "increased competition and new competi• According to Cortesi, Sunset's tors entering existing markets remain a challenges for 2017 include deflation. focal point," Brous says. "Food costs are low; profitability is For his part, Cashion sees potential much different," he says. "There are ahead. "One of the greatest opportuni• many regulations in the industry. We're ties in our industry is the ability to reach challenged in finding good people, so a large market of consumers and test new recruitment and training will be some• trends," he asserts. "We pride ourselves on thing we focus on in the coming year." not doing the same thing as everyone else." Likewise, Coborn says lingering defla• Despite the challenges of rival industry tion continues to be a challenge. "While players, Glei remains optimistic. "Super• changes like this are cyclical, and eventually things will get markets that provide a relevant offering, coupled with [a] better, the long duration of this trend has created a tough en• great customer experience ... will continue to grow in spite of vironment for grocers across the country. However, even with an intensely competitive landscape," he asserts. "Our chal• challenges come great opportunity," he notes, pointing to the lenge and opportunity is to better anticipate, understand and company's new Marketplace format (see this issue's Store of deliver what our customers expect than our competition." the Month, starting on page 42). Dan Shanahan, president and COO of Wooster, Ohio- Wright considers deflation and a "hypercompetitive based regional grocery chain Buehler's Fresh Foods, con• operating environment" the top challenges grocers will face tends: "It's possible that we need to be more things to more in the new year, with innovation being the key opportunity: people and we need to expand our core competencies, per• "Difficult times always bring out the best in us." haps by looking for creative new partnerships, collaborations Although a changing grocery landscape and recent and alliances. Making things better for our core base while deflationary pressures have proved to be major challenges simultaneously embracing these multiple significant trends for the overall grocery industry, Smart 8c Final finds its will allow us to stay relevant and lead the way." PG greatest opportunity in its differentiated model to serve both business and household customers. Over the years, it How do retailers feel about the new has successfully maintained its community approach. presidential administration? Find out at progressivegrocer.com/trumpretailers. Festival Foods is investing in its e-commerce and

£o I Progressive Grocer I Ahead of What's Next I January 2017