At Jewel, there's a cleanup needed in aisle four. Aisles six and three, as well.
Actually, the whole supermarket requires attention. It's not just your neighborhood Jewel that's been upended. The whole industry has been shaken up. Dominick's has its own mess.
The longtime kingpins of the Chicago supermarket biz have been hit high by boutiques like Whole Foods and Trader Joe's, and they've been hit low by discounters like Wal-Mart and Target. Even drugstores like Walgreens and CVS have taken bites out of the food business.
If the stepped-up competition hasn't handed Supervalu's Jewel-Osco and Safeway's Dominick's their lunch, their own parent companies have done them no favors. Seeking national efficiencies at the expense of local and regional responsiveness proved costly. And despite recent moves to reverse the trend, the damage has been done.
"What we need is retailers to really understand shoppers," Phil Lempert, a grocery and retail industry analyst at SupermarketGuru.com, said Friday. "Parts of Chicago have a much different customer base than others. You have to know your market. You have to know your shopper. … Do you know what the needs of your community are? If you don't, they're going to go other places. That's the problem for traditional chains right now."
For the past couple of months, Minnesota-based Supervalu has been using Jewel's 180 outlets as a laboratory. It's discounting many Jewel items, seeking to increase the value of visiting Jewel apart from price and taking cues from consumers in others ways it's not ready to share publicly.
"Not only will (consumers) get competitive pricing, but they will experience something different than what they've experienced before, and I wanted to make sure that we take the necessary time to learn from Jewel," Supervalu Chairman Wayne Sales, who added the post of chief executive this summer, told analysts recently.
The company said last month, about six weeks into the experiment, it was moving more goods at Jewel, but gross profits had yet to improve. The idea is to take the lessons learned here, where Jewel remains a market leader, and eventually apply some of them to weaker chains in the company. But Sales seems to have learned the lesson of his predecessor as CEO, former Wal-Mart exec Craig Herkert. There will be no broad-brush approach to the company's problems.
"Its prior CEO came from Wal-Mart and his strategy was to look at geographies not banners, his strategy was to reduce inventory," Karen Short, a food retail research analyst at BMO Capital Markets, said by phone Friday. "That was the biggest mistake he could have made. … Supermarkets have to (vary inventory and approaches) because they have to be local and relevant. He was applying a (national) approach to something that requires very local expertise, and that's why he failed."
It probably didn't help that Supervalu's heritage is in wholesale rather than retail. "It's a different language, it's a different thought process," Lempert said. "Distribution is about efficiency. Retail is about the customer, and I'm not sure that's become pervasive through the organization."
The analyst community and investors in general have been very down on Supervalu, which is weighed down by chains like Albertsons. Cerberus Capital Management LP, with partners said to include Chicago's Klaff Realty LP, is weighing an acquisition, according to The Wall Street Journal. Hersch Klaff did not respond to efforts to reach him, and the group's intentions are uncertain. All Supervalu has said is that it has received interest and is in active dialogue with several parties. Whether that will result in a deal or not remains to be seen.
"Jewel is one (part of Supervalu) that can be salvaged, so taking Jewel as the banner in which to invest on price to try to revive was the right call because it's the one that does resonate and it has a fighting chance," said Short, whose research note on Supervalu was titled, "Too Little, Too Late." "I wouldn't say that's the case for many of the other Supervalu banners."
David Livingston, a Wisconsin-based supermarket analyst who heads DJL Research, pegs the downfall to the 1990s mergers that brought Dominick's into the Safeway family and tied Jewel to Albertsons. The bigger companies gained efficiencies but lost sight of what their customers wanted from them.
"This has opened up the market for more entries," Livingston said. "You've got Meijer moving in, Wal-Mart moving in, Target, Mariano's Fresh Market, Whole Foods, Trader Joe's. You name it. Everyone's moving in now because, (with) Dominick's and Jewel, it's like taking candy from a baby at this point."
Changing, too, is the profile of the consumer. Baby boomers, Lempert noted, grew up eating a certain meal one night each week. Millennials, he said, want to experiment. The older chains, like the older shoppers, have been slow to adapt.
"Grocery shopping was a human experience and what happened with efficiencies, and this is what happened with a lot of chains in the '70s and '80s, they piled it high and sold it cheap and …got rid of all the humanity," he said. "It's food. It's primal. Yes, we need it to live, but we love it. Look at the success of food trucks around the country. Why is that? Because it's fun and it's delicious and so on. That's what we need in our supermarkets. Some stores do it."
The more that registers with stores, the more their registers will ring.