Wednesday, Nov. 27, 2002 | 11:17 a.m.
NEW YORK -- To Larry Johnston, the grocery business is all about the little guy.
Johnston, chairman of Boise-based Albertsons, the nation's No. 2 supermarket chain, oversees 2,300 food and drug stores in more than 30 states including Nevada. His company has annual sales of $38 billion and employs 200,000 workers.
But it's the individual shopper that counts, Johnston says.
"People are very intimate with their grocery store," he said in an interview. "They're not the least bit shy to tell you, 'I like this, I don't like that.' Some of the best input we get is from our shoppers."
Johnston, a native of Corning, N.Y., who stands a commanding 6 feet 7 inches tall, left GE in 2001 to join Albertsons when the company was going through a tough time. Albertsons was struggling to integrate the American Stores chain it had purchased in 1999 while fending off increased competition from discounters like Wal-Mart and Costco.
In less than two years, Johnston has restructured management and sold off noncompetitive stores. He's committed to savings of $750 million by 2004. At the same time, Johnston is expanding Albertsons Internet shopping.
The groceries operate under the names Albertsons or Acme Markets or Jewel Food Stores. Many of the food stores are linked to Albertsons two big drugstore chains -- Osco Drug and Sav-on -- a tactic that Johnston says increases cross-selling by 30 percent. Albertsons also is expanding its Super Saver and Max Foods warehouse stores.
Johnston recently spoke to the Associated Press about the challenges of the grocery business.
AP: There's been a lot of consolidation in the industry in recent years, including Albertsons purchase of American Stores. Do you see that continuing?
Johnston: What's interesting is that half the business is still done by small mom-and-pops, regional chains and independents. So over the next 10 to 20 years, you're going to see pretty dramatic consolidation in this industry as local players decide they want to monetize their family assets.
It's also not globalized. ... The only company that has made much of a foray is (the Dutch firm) Royal Ahold. They're on the East coast with Stop & Shop, Giant Food.
So I think if you look at the industry, you're going to have U.S., North American and global consolidators, and we plan to be one of them.
AP: Talk a bit about your new Super Saver stores in Los Angeles.
Johnston: We have a big push on diversity in our company, inside and outside. We want our associate population to mirror our customer population at every level, from the executive suite all the way to the retail floor.
In the marketplace, basically what I want to do is draw a concentric circle around every one of our 2,300 stores, and I want the assortment in that store to match the ethnicity of the neighborhood it's in.
Some neighborhoods are all Hispanic, so we can put in a full Hispanic format. That's what Super Saver is. ... All the signage is in both languages, English and Spanish. There's a 100 percent Spanish-speaking staff in the store.
AP: How has the slumping economy affected your business?
Johnston: We do see, as all retailers do, the effects of the tougher economy. For instance, we see people trading down from steak to hamburger or to poultry, or from seafood to poultry. We see them buying more private-label products. Instead of buying a branded water, like an Evian, they'll buy our store water.
We also see their shopping patterns change. The average consumers visits a grocery store between two and three times a week. But during a recession or a tough economic period, the trips become less frequent, and they stock up at the beginning of the month. They're trying to plan it out.
AP: Still, holidays can be strong sales period for grocers, right?
Johnston: Between Thanksgiving and New Year's, we'll have 2 million customer trips to our stores. We'll sell over 3 million turkeys. We'll sell over 4 million pies, 12 million broccoli spears, 32,670,000 asparagus spears. I had them measure New York's Macy's parade route. It's 2 1/2 miles. We will sell enough poinsettias to cover the entire parade route seven times. And fruit's big around the holidays. We'll sell 40 million navel oranges -- with a combined total of zero seeds, I might add.
AP: How do you compete with the growing competition from Wal-Mart and warehouse clubs like Costco?
Johnston: I think these supercenters and these warehouse clubs are excellent competitors. Their strength is in their purchasing leverage, which they can obtain because of their sheer size. And they have some great technology.
I guess what's different about them from us is that these are destination retailers whose primary focus is on price. Thirty-five percent of the people who walk into a grocery store mention price as the No. 1 reason they buy. Interestingly, that's not the No. 1 reason overall. The No. 1 is convenient location. So while price is important, it's not the most important factor. And we have location. We're all over.
AP: You're a big promoter of technological innovation. What kinds of things are you looking at?
Johnston: There probably aren't retailers that use technology more effectively than grocery and drugstore companies. The first scanning actually started in grocery stores years ago.
When I joined the company, we trailed most of our competitors in technology. ... We've already begun to narrow the technology gap between ourselves and what I'd call best-in-class competitors.
I believe we're actually leading in the Internet retailing space. You can order online. Then, for $9.95, we deliver to your home. For $4.95, you can drive right up to the store and we'll put it in your trunk. ... When you give me your profile in the beginning, you'll say, 'I prefer this kind of ketchup; if you're out of that, I'll take this kind.' So we have all your default codes in the system. We know exactly what you want so when we deliver your order, it's 100 percent filled.
AP: What's coming next?
Johnston: When you arrive at the store, we'll hand you a personal digital assistant, which you'll plug into your basket. You'll put in your security code, and it (the PDA) will automatically bring up your shopping list, which you've put into your computer at your leisure at home. And you'll automatically be routed through the store efficiently, because we'll have global positioning systems. ... We'll alert you to specials as you go down the aisles. As you pull the product off the shelf, you'll scan it yourself in front of the personal digital assistant. And it will take it out of our inventory and automatically put it on your credit card.
The technology exists today. It is something that people will be working on in the future.
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