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Supervalu tries to persuade investors and analysts

A new private-label brand replacing in-store brands, color-coded nutritional labels developed with a Harvard Medical School affiliate, a “hyper local” approach to neighborhood stores, more fresh produce and baked goods on the shelves, increased in-store food demonstrations and initiatives to reduce inventory losses are all in the works for shoppers at Supervalu chains across the country.

Supervalu Inc. CEO Craig Herkert, speaking to investors and analysts in Chicago Tuesday, described the ambitious plan as “a significant business transformation to reverse our sales decline [and] get everyday base pricing in line with the competition.”

Herkert and his executive team laid out the details of the plan in the first session with investors and analysts since he joined the Eden Prairie-based company in 2009 from Wal‐Mart.

CEO Craig Herkert
CEO Craig Herkert

Herkert described the initiatives as “fundamentally changing the way we do business.” Supervalu has been challenged by the growth of discounters such as Wal-Mart, Target and Costco in grocery sales.

Last February, the company reported more than $37.5 billion in sales and a loss of $7.15 per share for fiscal 2011. In a reflection of how much work the company has to do to win Wall Street’s confidence, SVU traded down $0.61 per share Tuesday to close at $10.77. The stock is down more than 27 percent over the past twelve months.

The new private-label brand, Essential Everyday, will replace in-store brands such as Albertsons, Cub and Jewel brands, and will be sold in the companies’ multiple store chains, Herkert said. The move is intended to save on packaging and promotional costs while allowing Supervalu to take a more national approach to advertising the brand. The company will retain specialty brands such as its Wild Harvest organic foods, officials said.

The company told investors it has targeted private-label sales to increase by 1 percentage point over each of the next three years from its current 19.3 percent.

In addition to the single private-label brand, other initiatives Supervalu executives described include:

  • improving freshness of produce through better inventory tracking and shelf space allocation;
  • giving local store management more freedom to match store formats to local neighborhoods and demographics;
  • providing a color coded in-store nutritional labeling scheme developed jointly with Joslin Institute, a diabetes clinic affiliated with the Harvard Medical School;
  • streamlining vendor relationships; and
  • funding promotional activity by initiatives such as  lowering in-store shrinkage by 0.5 percentage points over the next three years. “Shrinkage” is an industry term to describe merchandise that disappears due to shoplifting, employee theft, paperwork errors or supplier fraud.

In addition, Herkert laid out two growth initiatives. Supervalu plans to add 160 Save-A-Lot stores in fiscal 2012 in addition to the 92 it is building this year. The company also has targeted expanding its wholesale distribution business and seeking new affiliations with independent grocery chains to expand its geographic reach.

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