Raley’s chief sets his sights on growth plans in Las Vegas

Phil Levine

Thursday, Oct. 7, 1999 | 11:47 a.m.

Raley's Chief Executive Michael Teel, a lifelong resident of Sacramento, says he felt right at home during his first visit to Las Vegas. But he admits he had a lot to learn about the town.

"I was really struck by the similarities between the two cities," said Teel, who is also president of West Sacramento-based Raley's Supermarket and Drug Centers. "I guess like many visitors I equated the Strip with the whole city. But once you get away from the Strip, the town reminded me a lot of Sacramento. They're both family-oriented communities where service is important."

Teel returns to Las Vegas Friday to celebrate the completion of his company's takeover of 19 former Albertson's stores here. A grand opening ceremony, featuring Las Vegas Mayor Oscar Goodman and Nevada Attorney General Frankie Sue Del Papa, is set for Friday morning at Raley's flagship store on South Buffalo Drive.

Las Vegas' "family-oriented community" fits well into Raley's format as a family-owned, community-oriented business, Teel said. As the grandson of Raley's founder Thomas Raley, Teel is a strong proponent of both family ownership and family values. And those are values he hopes to pass on to both his family and his customers.

Teel said growing the franchise is the best way to ensure continued family ownership; a key element of that continued growth is Raley's recent expansion into the Las Vegas market.

That expansion is likely to continue beyond Friday. Teel said more Las Vegas supermarkets may be in the cards.

"Over the course of the next year, we expect to expand both the number of stores and employees we have in Las Vegas," he said. "There are several (Las Vegas) areas where we're looking to develop new sites." For competitive reasons, Teel declined to specify the locations under consideration.

One topic Teel has no hesitation discussing is family ownership, and its business implications.

"As for merging or going public, a good businessman never says never," said Teel. "But I can say that my family and I are committed to keeping the company family-owned. Our employees value that, and being family-owned means we don't have to respond to every evaluation by stock watchers and can set our own profit goals. The values and culture of this company reflect the fact it's owned by our family."

Teel's return visit coincides with a raging debate over the prospective opening of "grocery superstores" in Las Vegas by retailing giant Wal-Mart. Raley's is currently enjoying good relations with the local unions, having agreed to honor Albertson's union contracts. Wal-Mart's retail stores are not unionized.

Teel is watching the Wal-Mart battle with great interest, but is cautious when asked to comment.

"I understand why some might cry foul (over Wal-Mart's grocery superstores) because of the creation of an uneven playing field," said Teel. "But I'm also a firm believer in competition and free enterprise. That's why we've taken a neutral stand on this issue."

Competing with Wal-Mart, and "dividing the (retail) pie into smaller slices is a significant challenge" for any retailer, Teel said. However, he's quick to point out that 40 percent of Raley's business is in "non-foods, so that means we're already competing with them in several markets."

In its efforts to solidify a presence in Las Vegas, Raley's is examining several business options. One looming question is whether to extend the existing contract between U.S. Bank and the 19 former Albertson's stores. The bank currently operates supermarket branches in those facilities.

"At the moment, our plan is to honor the existing (U.S. Bank) contracts," said Teel.

U.S. Bank spokeswoman Dotti Loader said each outlet in the former Albertson's stores has its own contract. "However, we will continue to have the same level of in-store banking no matter what happens (with Raley's.) It's a key part of our growth strategy in Las Vegas."

The bank situation is muddled because Bank of America operates in Raley's stores in Reno, but B of A is in Vons stores in Las Vegas. Wells Fargo, which is in Lucky stores in Las Vegas, is in some Raley's stores in California, along with B of A.

Teel said diversification of products and services is at the forefront of Raley's growth plans.

"Over the next little while, we plan to integrate several new sections such as our pampered pet department and an office products department," he said.

The company has no plans to introduce customer membership savings cards like those of competitors Lucky, Smith's and Vons. Teel said such cards remain an option for future consideration.

"We actually had a card program at some of our stores awhile back and decided to cancel it after about a year," he said. "It's unfair to consumers, and I don't believe that some customers should have to pay higher prices than others. We might consider a card plan down the road, but only if we could protect customers' privacy and be an industry leader in the area."

Prior to selling its stores to Raley's, Albertson's was the only major grocer in Las Vegas that didn't have such savings cards, opting instead to offer what it called every day low prices for all customers.

Boise-based Albertson's was required by the government to sell its local stores to comply with antitrust law after it purchased American Stores Co. of Salt Lake City, owner of Lucky and the Sav-On drugstore chain.

In developing a business plan for Raley's entry into Las Vegas, Teel consulted with several Sacramento-based businesses with experience in the local market. The results, he said, were most surprising.

"We wrongly assumed that Reno and Las Vegas would be very similar in that they were both 24-hour-per-day markets," said Teel. "What we found instead was that Reno -- a market we've been in for several years -- was a more laid back, Western type of town. There was much more of a Los Angeles-type of influence to be found in Las Vegas. However, the city's community structure -- with its many churches and families -- was also reminiscent of Sacramento."