The grocery giant’s Twin Cities chain says price is important, but it isn’t everything. Will shoppers buy it?
As Brian Audette toured Cub Foods’ Stillwater store, the supermarket chain’s president often used words like “variety” and “fresh.”
To describe a display of golden Opal apples. To point out clams, mussels and fish fillets on ice. To rhapsodize about doughnuts baked at the store and available in 40 iterations.
It’s this full-serve approach across the store, coupled with what Audette calls “value,” that Cub hopes will help turn the tide in the Twin Cities grocery wars. Cub’s market leadership has eroded over the years as low-price leaders Target and Wal-Mart gained ground.
With the recent retooling of Cub’s corporate parent, Eden Prairie-based Supervalu Inc., Audette and his co-workers at Cub have reason for optimism. Struggling Supervalu shed its four largest — and in some cases, most troublesome — conventional chains, leaving five smaller ones. The firm can focus more resources on Cub, now its largest traditional chain.
Supervalu “is a smaller company, but we are a healthy company and we are frankly moving to a more decentralized model,” said Audette, a 22-year Supervalu veteran. “We can really put together a very specific plan to go to market for Cub.”
Still, analysts point out that the fundamental problem facing Stillwater-based Cub, its local rival Rainbow Foods and most conventional grocers nationwide has not changed. They’re stuck in the middle.
Low-price competitors are only growing, as Wal-Mart builds new supercenters and retailers from dollar stores to drugstores roll out more grocery offerings. On the market’s higher end — where top-flight produce and meat offerings matter most — traditional Twin Cities heavyweights Lunds and Byerly’s have held their own, while Whole Foods’ local presence is growing.
“What does Cub do better than any other retailer?” asked David Livingston, a Wisconsin-based supermarket consultant. “What compelling reason does Cub offer customers [to shop] than any other retailer? I don’t know what it is, and I don’t think customers know what it is.”
Still, Livingston noted that Cub’s long presence in the Twin Cities works in its favor. “Loyalty is one of the things they have going for them.”
John Dean, a Twin Cities supermarket consultant, said Cub has continued investing in its properties — remodeling and upgrading them over the years. “If you look at the stores they have, they are pretty much in good shape,” Dean said.
That hasn’t always been the case at some of the chains Supervalu sold, which analysts say suffered from underinvestment.
Shift in strategy
Cub marked Supervalu’s first major foray directly into retail grocery. Supervalu, a food wholesaler since the 1920s, bought Hornbacher’s supermarkets in Fargo-Moorhead in 1975 and five years later picked up Cub and its five Twin Cities stores.
Hornbacher’s stayed small. But Cub grew to 140 outlets in 12 states, before pulling back mostly to its home turf in Minnesota, where it now has 67 stores.
Supervalu remained more of a wholesaler than a retailer until 2006 when it bought the bulk of Albertson’s Inc., including its Albertsons, Jewel, Acme and Shaw’s chains. But last summer, after years of declining sales and a plummeting stock price, Supervalu put itself on the auction block. The result this winter was the undoing of the 2006 deal, with a $3.3 billion sale of the four former Albertson’s chains to Cerberus Capital Management.
Now, Supervalu will once again derive almost half of its sales from wholesale, with its discount national chain Save-A-Lot making up 25 percent of sales and its traditional regional chains, including Cub, making up the rest. While Supervalu doesn’t break out financial data for Cub, it’s the firm’s largest conventional chain by sales and has been consistently profitable, Audette said.
Not that this is easy. “Making money in Minneapolis is challenging,” said Jim Hertel, a managing partner at supermarket consultant Willard Bishop. “It’s a very fragmented [grocery] marketplace.”