page_01.indd 1
7/5/18 8:45 AM
page_02.indd 1
7/5/18 8:46 AM
2018
Wholesaler Innovator of the Year
The Supplier of Choice Innovation has been a mainstay at Supervalu since its inception in 1868. Today, innovation is everywhere at Supervalu, and it will continue at a heady pace going forward as the company continues to adapt, as it always has, to meet its customers’ needs. Supervalu wants its independent grocery customers to do what they do best: be merchants. Toward that end, Supervalu can offer as much or as little support behind the scenes as their independent customers desire. From a dizzying array of private brands to a catalog of courses offered by Supervalu University, the breadth and depth of its offerings are second to none. It is all part of Supervalu’s mission to be the supplier of choice for independent grocers across the country. Its focus now is on growing its core wholesale business with a three-pronged strategy that is as simple as it is challenging: keep customers; do more business with customers; add new customers. Headquartered in Minnesota, Supervalu serves more than 3,300 wholesale-primary stores operated by customers served by its food distribution business.
Supervalu’s Responsibility
At Supervalu, we believe socially responsible business practices have a positive impact on all our stakeholders: customers, independent retailers, employees, and stockholders. Enhancing our value to our constituents means taking actions to protect the environmental, social, and economic interests of the people we serve today and in the future.
“We’re a big, multi-billion-dollar publicly-traded company. We’re number 180 on the Fortune 500. But, at the same time, we serve families. We have customers we’ve served for 50, 60, 75 years, and we are very proud of those relationships. We serve independent families, and we never, ever should lose sight of that. This isn’t just a one and done. This is an ongoing relationship with those families.” —Supervalu EVP Mike Stigers
page_12.indd 12
7/9/18 3:25 PM
14
2018 Wholesaler Innovator of the Year
AUGUST 2018 • The Shelby Report of the Midwest
Supervalu Sees Unprecedented Wholesale Growth in Just Two Years Sales from Supervalu’s wholesale operations now are approximately 80 percent of the company’s total annual sales, up from about 44 percent just two years ago. Sales then were $8 billion or so and have since grown by at least $5 billion. To achieve that kind of robust growth, Supervalu deploys a three-part strategy that is equally as challenging as it is simple: retain current customers; gain new customers; and provide new services and products to existing customers. The company’s customer retention rate is at historic highs. Approximately 60 percent of its top 25 customers have been with the company for more than 20 years. “We’ve worked very hard to gain new customers but it all starts with taking very good care of our current customer base,” said Supervalu EVP Mike Stigers Mike Stigers. “We work hard to earn our customers’ trust, and we do that with two big ears and one small mouth.” The three-pronged strategy is paying dividends. Bill Chew, SVP of sales, has been with the company for 34 years. He said this past year was one for the record books. “Our wholesale business is going absolutely gangbusters,” Chew said. “I would say this was singularly the largest wholesale growth year I’ve ever been through.” Supervalu’s wholesale operation comprises three regions: West, Central and East. It also supplies U.S. military commissaries, particularly Bill Chew in the Northwest and Southeast, and has international business as well. Each of the three main regions has contributed significantly to the company’s growth. In the West, growth has been fueled in part by Supervalu’s acquisition of Commerce, California-based Unified Grocers in June 2017. The company
“We work hard to earn our customers’ trust, and we do that with two big ears and one small mouth.” —Supervalu EVP Mike Stigers
also has earned new business in Tacoma, Washington, and Billings, Montana. Supervalu now supplies 115 stores in Chicago in its Central Region just a decade out from a time when it did not supply even one single store there, Chew said. In December 2017, Supervalu completed its acquisition of Associated Grocers of Florida, whose reach extends to Central America, South America and the Caribbean. Also in the East, Greensboro, North Carolinabased The Fresh Market became a Supervalu customer and is supplied from multiple regions and distribution centers. It is not unusual to service customers from more than one distribution center or more than one area of the country, so consistency is of paramount importance. Supervalu operates 28 distribution centers. Some facilities are just a mile apart, but there are hundreds of miles between most of them. One of the things Supervalu does best is logistics. Chew said the company takes mileage out wherever possible so it can get product to retailers in the most efficient way possible. Supervalu also offers an impressive array of professional services that evolve along with the industry, consumers and demographics. Stigers said Supervalu has to be where its retail customers are, and maybe a bit ahead of them, to provide what independent grocers need to stay relevant in their communities. “Our job is to look not only down the street but around the corner so we can provide solutions,” Stigers said. He said Supervalu has three constituencies in its wholesale business: customers, vendor partners and colleagues. “If any one of those three is not aligned or in sync, then the overall programs struggle,” Stigers said. “A wholesaler provides a significant function for the vendor community; we get their products to market. To our customers, we provide guidance, solutions, suggestions and a path forward for them that they otherwise would not have. It really comes down to being open and honest. There are no hidden agendas. The strong collaboration between our customers, our vendor community and our colleagues makes this work.”
Number of Vendors Doubles for 2018 National Expo Supervalu independent grocery customers will be able to see for themselves all that the company offers at its fifth annual National Expo, July 24-26 at the RiverCentre in St. Paul, Minnesota. More than 5,300 attendees are expected, and the number of vendors will double this year to 600. Offerings from Market Centre will make their debut on the Expo floor. The event also will include keynote speaker Captain Chesley “Sully” Sullenberger, the pilot who performed what has been called the “Miracle on the Hudson” in January 2009. He and his crew safely guided US Airways Flight 1549 to an emergency water landing in New York City’s Hudson River. Singer and songwriter Gavin DeGraw will perform as well.
The National Expo kicks off with an Education Day featuring workshops on topics that span the grocery industry and the entire store. Retailers and the Supervalu team will discuss relevant topics and share best practices with one another in an environment where everyone is focused on sales and innovation.
page_14.indd 14
7/9/18 4:44 PM
page_15.indd 1
7/5/18 8:34 AM
16
2018 Wholesaler Innovator of the Year
AUGUST 2018 • The Shelby Report of the Midwest
Innovation Is Continuous in Supervalu’s Private Brands Facility Supervalu has more than 5,000 items in its private brand portfolio. In each of the last five years, Supervalu has added 325-350 new items. Innovation happens every day in private brands. There are three key elements that Supervalu’s private brands strive to provide for its inde-
The building where Supervalu’s Private Brands is located is next to the company’s Hopkins distribution center. pendent customers: a point of difference, improved profitability and leverage with consumer packaged goods (CPG) partners. They comprise a virtuous cycle. “If you are driving share and sales with a strong private brand program, that’s differentiating you from your competitors, that is increasing profitability for you,” said Bekah Swan, VP of private brands. “When it’s really working, the national brands will come and say, ‘I’ve got some extra dollars.’” The team’s mission is to ensure that national brand equivalents perform just as well as their counterparts. Team membShpers take great pride in that effort and work with suppliers to make it happen. “We have a team of about 35 folks that live and breathe private brands,” Swan said. “Usually about every other week we host a key customer, a key internal group, like new hires, and our sales teams come here quite often. Our favorite thing to do is to feed and host and to drive brand awareness and create brand ambassadors.” Supervalu sets high standards for its private brand products and for the Bekah Swan is VP of Private Brands at Supervalu. companies that make them. Products that do not meet certain requirements will not make it onto store shelves, and safety comes first. “All of our suppliers need to have on record proper audit status. We prefer SQF Level 3, but we do not do business with suppliers that do not meet our audit criteria,” Swan said. “The audit is table stakes.” Beyond safety, there are sensory goals to meet. The private brands team performs blind taste tests on products like ketchup. The most populated private brand line is Essential Everyday. Its ketchup was tested against a national brand with 50 people, including some retail store directors and key customers. The results in that case were just what the company likes to see: a 50-50 split. “Ideally, what we want is for our product to perform on par with the national brand equivalent target,” Swan said. “Occasionally, we fall short. If we do, then we take it back to the supplier and we reformulate and push ourselves to make sure that we’re hitting that mark.” The majority of the new products fall under one of the company’s core brands, which, in addition to Essential Everyday, include Wild Harvest, Equaline and Culinary Circle. Springfield, a private brand lineup popular on the West Coast and in Mexico, was added to the portfolio when Supervalu acquired Unified Grocers last year.
Essential Everyday Essential Everyday is Supervalu’s powerhouse brand. It is the national brand equivalent that runs the gamut, with more than 2,500 products across 250 categories. Essential Everyday represents approximately 65-70 percent of total private brand sales. Products in the line currently are going through a redesign. Supervalu uses a design firm, as well as consumer insights, to test different concepts and decide on the new look for packages. “This is a soft conversion or rollout, so we started launching under the new design in January
page_16-18-20.indd 16
Essential Everyday is Supervalu’s powerhouse private brand. Products in the line are getting a new look this year. of this year,” Swan said. “We will take about 20-22 months to cycle through all 2,500 items in the portfolio.”
Swan holds “before and after” Essential Everyday cereal boxes. Swan shared a cereal box as an example. The new cereal box will carry on with certain elements—its prominent purple color, in this example—so consumers who are used to looking for that color will easily find their cereal of choice in the new packaging. The day The Shelby Report visited the private brands team, Matthew Albers, a brand manager, Please see page 18
7/9/18 3:49 PM
page_17.indd 1
7/3/18 10:17 AM
18
2018 Wholesaler Innovator of the Year
AUGUST 2018 • The Shelby Report of the Midwest
From page 16
and other team members were sampling new potato chip flavors. He said the private brand salty snack category measures about 12 feet of aisle in-store. Albers previously was on the CPG side of the industry, working seven years for a snack food manufacturer. Coming to Supervalu and working on its private brands team has “been a great joy,” he said.
Culinary Circle Culinary Circle occupies the specialty/gourmet/premium space and was created with the food adventurer in general and Millennials in particular in mind. There are more than 250 items in the line, which can be found in dairy, frozen foods, grocery, deli and specialty cheese. The brand also is leveraged for holiday items. Supervalu is “leaning in on pumpkin,” Swan said. “Pumpkin is still growing.”
DeDe Cooke and Matthew Albers test potato chips. To keep the salty snack category fresh and to keep up with the national brands, new products are introduced every 12 to 16 months, Albers said.
Wild Harvest There more than 700 products in the Wild Harvest line, the company’s second-largest private brand. Featuring organics and free-from products, it is the fastest-growing of the core brands. The best-selling item is packaged salad. Recent new additions include Chicken Pad Thai and Tikka Masala in frozen foods. “As you can imagine, based on our customers looking for free-from, organic, healthier options for themselves and their family, that’s a big focus from an innovation standpoint,” Swan said. Each year, USDA Certified Organic products roll out under the brand. Last year, 60 percent of the items in the line were certified. This year, nearly 70 percent of them were.
Culinary Circle products are for the food adventurer.
“Our produce and meat offering here is very important, along with our dairy offering, as a gateway into the category,” Swan said. All of the eggs offered in the line are from chickens raised cage-free. Another key for this brand is identifying for consumers the people behind the products. One example is Shawn Bula at Bula-Gieringer Farms in Wisconsin, whose entire crop is grown just for Wild Harvest. In late summer and into fall, Wild Harvest Organic Potato Chips are offered for a limited time in stores.
Culinary Circle includes products such as specialty meats and cheeses, marinades and sauces, oils and vinegars, refrigerated soups and more. Frozen pizza is a popular product in the line that goes well beyond the typical meats and cheeses, which also are available. Supervalu EVP Mike Stigers said Culinary Circle pizza is the No. 1 brand in many of the markets the company services. “You get into some flavor profiles that are absolutely phenomenal,” Stigers said. “We New beverages in the Culinary Circle line. manage the quality and the taste, and it’s all done through partnerships. That’s a real strength, and it takes an incredible team to manage that.” Please see page 20
Category Brands Abound Category brands are part of Supervalu’s private brand portfolio. They include:
• Stone Ridge Creamery—More than 50 products, including ice cream, novelties, sherbet and light churned ice cream. • Super Chill—More than 150 products, including regular and diet sodas, sparkling water, regular and diet seltzers and mixers. A recent popular product in this line is unsweetened sparkling water.
• Baby Basics—More than 60 items across the baby and toddler categories, including diapers, wipes, training pants, shampoo and body wash, formula and snacks, lotions and powders and wellness items. Baby food and beverages were moved into the Wild Harvest line.
• Arctic Shores Seafood Company—More than 70 responsibly sourced frozen shrimp, fin fish and breaded seafood items, including frozen shellfish, frozen fish fillets, breaded fish and value-added items such as Shrimp Scampi, Coconut Shrimp and Caribbean Jerk Shrimp.
• Stockman & Dakota—Hand selected and trimmed, this line features USDA Choice Premium Angus Beef in fresh grinds and cuts and frozen burgers.
page_16-18-20.indd 18
7/9/18 3:49 PM
page_19.indd 1
7/5/18 8:36 AM
20
2018 Wholesaler Innovator of the Year
From page 18
Equaline Equaline is the company’s personal care brand that includes products like first aid items, hand sanitizer, over-the-counter medicines like analgesics, cotton swabs, toothbrushes, hand & body care, razors, sports nutrition, vitamins and more. There are more than 800 health, personal care and OTC items in the line.
AUGUST 2018 • The Shelby Report of the Midwest
Rationalizing the mix
New products debut in four cycles every year—in January, April, July and October. Some will be on the show floor in July for the Supervalu National Expo. Of course, with all those new product introductions, there has to be some rationalization at the store shelf to make room.
Springfield brand cereals.
There are more than 800 products under the Equaline brand name. Product Development Manager DeDe Cooke manages the line. Cooke, a chemical engineer, also has previous experience with manufacturing companies. Equaline products are scrutinized by the Food & Drug Administration and, here, too, safety comes first.
Springfield The Springfield private brand came to Supervalu via its Unified Grocers acquisition. It is on par with Essential Everyday. There are about 800 SKUs in the Springfield line. Some will be incorporated into Essential Everyday, but the brand also stands on its own. “We’re excited to have a second national brand equivalent in our portfolio so that as we look out to the future in markets where we might have independent customers that compete with other channels of trade, whether it be a home goods store or a c-store, we’ll have a second brand to leverage for those customers,” Swan said. Springfield is the No. 1 brand from an export standpoint, she added. It does very well in Mexico.
Shoppers Value There are more than 300 everyday items and family staples at an opening price point under the Shoppers Value label. It spans many categories and departments, with items such as household paper products, canned goods, cookies and crackers, dog food, spices and herbs, pickles and olives, bacon and packaged meats, coffee, food storage and wraps, dry pasta and candy. About 16 more products will be added to the Shoppers Value line this year.
A look at the freezer where products under the Stone Ridge Creamery, Wild Harvest and Culinary Circle labels, among others, are kept cool. Swan said her team is reminded of this every day because private brands is housed in a facility that is adjacent to one of Supervalu’s largest distribution centers. “Our Hopkins DC right here is a daily reminder that we do not have unlimited slots or unlimited space in the stores,” Swan said. “So, we need to make sure that we’re keeping that portfolio and that item assortment as healthy as possible. This year we have a target of launching about 300 new items. We’ll hit that 325 mark and then discontinue about 400.” Sales is an important metric when deciding whether to pull a product. New products are given a year before they are assessed to determine whether they have earned their spot. With about 5,000 items overall, the private brands team strives to maintain a healthy portfolio, which Swan described as one that “makes sense and is good business for Supervalu and for our customers.”
page_16-18-20.indd 20
7/9/18 3:49 PM
This calls for a celebration! Congratulations to SuperValu for being named the 2018 Midwest Wholesaler Innovator of the Year!
Congratulations from your friends at
®, ™, © 2018 Kellogg NA Co.
Kelloggs_WIOY_MW082018.indd page_13.indd 1 1
6/19/18 7/3/18 10:16 10:22 AM
page_22-23.indd 22
7/6/18 3:29 PM
page_22-23.indd 23
7/6/18 3:29 PM
24
2018 Wholesaler Innovator of the Year
AUGUST 2018 • The Shelby Report of the Midwest
Professional Services Designed with the Independent Grocer in Mind Supervalu offers a host of professional services for its independent customers. It has a wide range of capabilities that allow independent grocers to do what they do best: be merchants. Supervalu can help independents with marketing, merchandising, business services and systems and more. It delivers comprehensive creative, advertising and promotional services to help drive traffic to its independent customers’ stores.
Randy Burdick When it comes to marketing, the list of services Supervalu provides is long and includes brand strategy, direct mail, in-store signage and audio programs, loyalty and rewards programs, digital marketing, mobile marketing, social media strategy, media placement, annual planning with event and cause marketing, and much more. “This also is where you can bring vendor funds to the table,” said Randy Burdick, EVP of professional services
and CIO for Supervalu.“That gets to be a pretty complex area. How do you leverage the funding from the CPG companies to go in and promote certain products, and what else should be in a particular ad?” Supervalu can take care of that. “It really takes you from soup to nuts,” Burdick said. “We can do your books for you. We can do your payroll for you. We can do training. We can operate large portions (of their businesses), and they can cherry-pick what they want to do.” Supervalu EVP Mike Stigers pointed out that many independent customers use the payroll services provided by Supervalu. There are about 23,000 Supervalu employees, but the number of paychecks generated by the company each week tops 200,000. “It’s foundational services, technical services, merchandising services, store schematics, remodels, store design. We do everything from A-Z,” Stigers said. Supervalu also can help grocers stay in touch with their shoppers through social media and mobile marketing. Supervalu can devise an entire e-commerce strategy. The goal is to help independents engage with their shoppers where they are, and nowadays that is likely on their cell phones. “Whether they’re on your mobile app, whether they’re on Facebook or Twitter or whatever the latest social media trends are, we’ve got the expertise, the scale. We know how to put it all together for them,” Burdick said. “If you’re not engaging your customers in all of these media and giving them a consistent experience and engaging them in a way where you recognize who they
An independently-owned Supervalu store in Pequot Lakes, Minnesota. are or what they are interested in, you’re really going to miss the boat in this area, and it’s not trivial.” Supervalu offers its independent customers a “virtual back office” with services like HR screening, financial statement preparation, inventory scheduling and other services too numerous to list here. Supervalu can help independents save money on transaction fees—a big expense for every retailer. As Unified Grocers has been integrated into the company, the electronic payment services have been converted to Supervalu’s. That conversion saved millions of dollars for customers who had been using Unified Grocers’ payment services, and about a quarter of them were. “You hear a lot about the fees, how they keep going up,” Stigers said. “We have what we feel is the best change rate for any of our customers, so we’re able to manage cost through our size.” Other services provided by Supervalu’s technology group include shrink-prevention services, strategic retail pricing, labor management and scheduling, succession planning and custom shelf pricing management.The technology team offers independents the ability to be in a Tier-4 data center— meaning, among other things, that it is extremely reliable—no matter how small an operation they run. It definitely is a step up from a closet with computers in it, which in some cases is all the IT department is in a grocery store. Supervalu can provide scale management so that prices at the point of sale are automatically updated each time they change. Supervalu’s store development team works with retailers to create a plan that fits the needs, vision, market niche and consumer base of an independent grocer. “We can help design your store of the future,” Burdick said. “If you need help in that area, we have a
store design team that will help you. IT will help you with the layout. It will help you with what you need to carry. It will help with where you locate it. It will help you with the construction process. We can fill it up with equipment for you if you need us to do that.” Stigers said Supervalu architects and the design team meet with independent grocery customers, get to know their family and the community before they begin the project. “They’ll come back with a store design that absolutely reflects the personality of each generation of the family owner plus the communities they serve, and it’s just absolutely incredible,” Stigers said. Supervalu aggregates its buying power to keep the cost of remodels and new equipment down for its customers. For Burdick, the biggest challenge in professional services is “staying on the forefront of what our customers need while at the same time not forgetting that one of the things they need is cost-effectiveness.” Supervalu provides a full complement of services for independents, like propane if a grocer would like to offer it to its customers, or Coinstar, Redbox or KeyMe. Supervalu can even set up an Ace Hardware or Bass Pro Shops section in stores. The services offered by Supervalu get as close to home as pest control. It has national contracts with exterminators. “For every aspect of what it takes to run a grocery store, we work hard to have a solution for our customers behind the scenes that we’ve already vetted for government compliance or for liability, and then also we provide the best cost of goods possible,” Stigers said. “We’re very proud of the work that the professional services team does. We put all the assets of Supervalu at the disposal of our customers, so that does put them at par with any of the major national retail companies.”
“We do so many things behind the scenes. We are able to provide our customers tools and information and data and the execution of things not in their wheelhouse. So, for example, for them to go buy a new point-of-sale system or a new payroll or accounting system or to comply with a new food safety management government requirement—it’s just overwhelming. Our job is to accept responsibility for all that and to provide offers of solutions and options for our customers to help them make that decision.” —Mark Gross, Supervalu President and CEO
page_24.indd 24
7/9/18 4:43 PM
page_25.indd 1
7/3/18 10:18 AM
26
2018 Wholesaler Innovator of the Year
AUGUST 2018 • The Shelby Report of the Midwest
Instacart Relationship Gets Independents into the Delivery Game For the past several years, Supervalu operated a grocery delivery service from Hornbacher’s stores, its corporate-owned retail banner in North Dakota. The experience provided powerful learnings for the wholesaler, according to Supervalu VP of Digital Thomas Kraus. “We’ve learned a lot about the operations and how to optimize them, but we’ve also learned that it can be challenging to run,” he said. Supervalu turned to Instacart, arguably the best and certainly the largest grocery delivery service in the country, for its expertise. Kraus said Supervalu has been pleased with the service Instacart has provided for its corporate-owned banners, which, in addition to Hornbacher’s, include Cub Foods in Minneapolis-St. Paul and Shop ’n Save in St. Louis. Thomas Kraus Initially, there was some concern on the store level that employees would not be picking the orders and that customers would be unhappy. But according to Kraus, more than 90 percent of the company’s retail banner customers said they would order from the service again. “The great thing is that we’re able to test these types of services with our retail banners,” Kraus said. “We can experiment to find what works for us and then recommend it for our independent grocers.” Supervalu announced in June that it had entered into a reseller agreement with Instacart to provide a turnkey solution to the more than 3,000 independent retail stores it supplies, as well as to other retailers across the U.S. in the more than 240 metro areas where Instacart operates. “We’ve been working with them for about two and a half years now, so we’re constantly trying to push the envelope with Instacart,” Kraus said. “It’s such a complicated landscape out there, and for independent grocers—who are experts in grocery—it is a complicated space. It’s a great opportunity for independent grocers to get into the game very quickly with a very low investment and to see a positive impact on the business.” The Shelby Report happened to be in Kraus’ office one hour after the first independent retailer—an operator in Florida—signed on for the Instacart service. “Instacart solves a big problem for most smaller operators,” said Randy Burdick, Supervalu EVP-professional services and CIO. “It is how do you get that last mile, as they say. How do I get it from the store to the home in a cost-effective way? Instacart has a very efficient model.” Working through Supervalu will get independent grocers into the Instacart fold for less money than if they did it on their own, he added.
Instacart delivers more than groceries
Instacart is known to online shoppers for its grocery delivery service. For Supervalu—and for the independent retailers who will sign on for it—Instacart has value-added benefits. One is proven marketing expertise. Supervalu has seen the difference that makes at its corporateowned stores. “All of our marketing for, say, Cub Foods, drives people to our Cub.com website—all the emails, social media—but a high, high percentage of the e-commerce comes through Instacart. com,” Kraus said. “You’ve got the marketing muscle of Instacart behind all of it.” Kraus advises even retailers who already offer delivery to get on Instacart.com. “When a shopper goes to Instacart.com and types in their zip code, all the retailers that deliver in that area show up. You want your logo up there. Walmart (which has its own delivery service) is not there. Target (which owns Shipt) is not there,” he said. “You can decide later whether you want to integrate it with your current website experience.” Supervalu does plan to bring some independent retailers who have been offering their own delivery service to Instacart in the coming months. “My theory is that they’ll do more business on Instacart by accident than they’re doing themselves on purpose,” Kraus said. “We’ll see what happens.” Supervalu recently completed a survey with Instacart that asked shoppers questions like, “If you had not ordered online from [a Supervalu store], how would you have purchased the items that you ordered?” “Fewer than half said they would have come to our store and bought them,” Kraus said. “The rest of them would have found a way to buy it online. Some even said that they would have gone to a competitor’s physical store.” These are not the customers independent grocers want to lose. According to Kraus, multichannel shoppers are very valuable customers. “It’s a substantial amount of incremental sales volume,” he said. “It’s a substantial amount of market share that you’re protecting. That is why it is so important for the independents to be there. If you’re not there, you’re losing market share.”
The next level Kraus said Instacart has been a good business partner in terms of innovation and, as the relationship grows even stronger, the companies will work together on promotions and other marketing tactics. Members of Kraus’ team, some of whom have been involved in billiondollar e-commerce operations, continuously vet, reevaluate and work to improve all of the digital solutions Supervalu offers. They ask independents to define what they want—a website if they don’t have one, a new website if they do, e-commerce capabilities and clickand-collect and/or delivery. Are they using email and social media? How could that be improved? “We can take all those pieces and put them together,” Kraus said. “That is what we bring to the table. We have a team with vast digital expertise.” Another added benefit Instacart provides is information, including email addresses, home addresses, what shoppers buy and other data—all without a loyalty program. Many in-store transactions at independent grocery stores today are “blind” and inhibit the retailer’s ability personalize the shopper’s experience. “You can’t really market to them in an targeted manner,” Kraus said. “But with this data, all of a sudden you start to understand, ‘oh, they’re buying dog food and they’re buying diapers,’ and you can start to do some segmentation on the marketing side. That’s the next level that we would want to bring to the independents. How can they maximize that data so they can be smarter?”
CONGRATULATIONS Midwest Wholesaler Innovator of the Year from your friends at
Advantage Solutions_WIOY_MW082018.indd 1 page_26.indd 26
6/21/18 8:47 AM 7/9/18 4:09 PM
page_27.indd 1
7/3/18 10:19 AM
28
2018 Wholesaler Innovator of the Year
AUGUST 2018 • The Shelby Report of the Midwest
Supervalu Goes Phishing for Kowalski’s Markets If a department head at Kowalski’s Markets clicks on a phishing email, it is possible that it came from Supervalu, its wholesaler. The company has been working with Kowalski’s Markets on a phishing campaign designed to bring awareness to a serious security issue. Deb Kowalski, who has worn many hats with the company and today serves as administrative director for Kowalski’s Markets, knew there was a problem. She was getting calls from department heads complaining about how slow their Deb Kowalski computers were running. “It was a virus that had infiltrated through their email,” she said. “We can fix that, of course, but how long did it take them to even make the call to me? How long were they dealing with this sluggish computer? And then it’s always at least a tech call; at least 35 bucks every time a computer has been hacked.” With nearly 400 separate department head email accounts, it was a big problem and, in some cases, the employees were using email at work for the first time in their careers. “These are people who are experts at their crafts—they might be a bakery manager or a deli manager—so they’re very intelligent, knowledgeable people, but not all of them are very tech-savvy,” Kowalski said. “It was definitely an opportunity to have an educational component.” Sandy Caravelli, director of security, governance, risk and compliance for Supervalu, worked with Kowalski’s Markets to come up with a phishing email campaign that would be educational for employees. It was not Sandy Caravelli designed to make anyone feel incompetent. “We put out the educational materials
page_28.indd 28
ahead of time,” Kowalski said. “Even with that, in the first round of the first campaign, a lot of people clicked on it. When they clicked, they got more educational material. It didn’t feel like a big ‘gotcha,’ but it made people much more aware.” In the second round, fewer department heads clicked on the phishing email. In the third, fewer still, but an anomaly showed up. An email seemingly from Microsoft Office 365 was actually a phishing effort from outside the company. It fooled several department heads. “It looked like it was from Microsoft, and that one caught a lot more people. These guys come out with something new all the time,” Kowalski said. On the fourth round, only one person clicked. Caravelli said the so-called “phishers” are getting craftier. Addresses can appear to be a co-worker or acquaintance. The scams are becoming so much more sophisticated that even tech-savvy employees can be pulled in. “They’re no longer the emails that have the poor spelling or grammatical errors,” Caravelli said. “They’re hiring people who are well educated and can craft a good email, so they look very legitimate.” As a result, Caravelli said the training must be continuous. It is not a “one and done,” she said, but more of constant reminder. Mother’s Day provided an opportunity for an educational phishing campaign. Caravelli created a phishing email for Kowalski’s Markets with content about flower orders for the holiday. The email stated, “Thank you for the order for your Mother’s Day flowers. Click here to review order.” “A lot of people clicked on that because they love their mothers and it happened to be around Mother’s Day,” Caravelli said. When they clicked on it, more educational material came up from Supervalu. Caravelli said she will usually include information about what should have alerted the user that it was a phishing email. Had they checked the sender’s email address? Had they actually ordered
flowers for their mother? If they had, would they have used their corporate email address? “The message that Sandy and Deb use, they collaborate on The fraudulent practice of sending that, and whether it’s seasonal or what’s going on in the email purporting to be from reputable world, they craft their companies in order to induce the recipient phishing campaign accordingly,” said John Kelly, field to reveal personal information, such as sales manager, profespasswords and credit card numbers. sional services for large accounts at Supervalu. “As you can see by the results, even though the awareness is much higher, The fraudulent practice of sending their messaging is also getting very targeted as emails ostensibly from a known or well, so it’s just a constant trusted sender in order to induce reminder to people that ‘hey, you’ve got to be very diligent targeted recipients to reveal out there and phishing can be confidential information. very tricky.’” The harm these scams can do goes well beyond a sluggish computer. Ransomware is an issue organizations of all types are having to deal with today. “Ransomware is most commonly spread through phishing emails,” Caravelli said. “If the systems through the phishing campaigns, you click on a link in the ransomware, the they can cause a lot of trouble within the malware is in the email, then they demand that organization.” you pay a ransom to be able to get your data Kowalski said she has been pleased with unencrypted.” Supervalu’s efforts from the beginning. She Kelly said other Supervalu customers preferred the managed offering. have signed up and are “Others had tools they could provide, but executing on the phishDeb didn’t want to become an expert in ing program as well. He phishing and wanted some extra resources to added that the slughelp guide the program. That was a big hotgish computers that button for Deb when we were talking,” Kelly Kowalski’s Markets said. “She is a very methodical person, and the department heads expeapproach that we took with Kowalski’s was rienced were something very methodical.” like canaries in coal Kowalski received reports detailing the mines. results of the campaign. The retailer would John Kelly “They’re kind of lucky know quarter over quarter whether there that it was just at the computer level,” Kelly were repeat clickers who needed additional said. “If people get into the network and into training. The reports also show how quickly people click on a link in a phishing email. Caravelli would send out a fake phishing email at 8 a.m. and know whether someone clicked on it at 8:01 a.m. “If that had been a true phishing email and had malware in it, that’s how quickly it could spread. Now, if you have 40 people clicking within just a few minutes, that’s 40 computers that could have been impacted by malware,” Caravelli said. “The continued awareness, making people stop and think, ‘should I click on this?’ That really helps your company alleviate some of those issues with malware.” For Kowalski’s Markets, helping employees become more aware of phishing emails has paid off in at least two ways. One outcome has been that when an employee sees something suspicious, he or she will contact Kowalski or send out an email warning others about it. “Everybody’s got each other’s backs,” Kowalski said. The second is that the campaign helped improve operations. “It’s really helping our businesses,” Kowalski said. “There are other services out there that do the same thing, but this was very reasonably priced. We wanted to see what the campaign would do, what kind of effect it would actually have. Would it be a lasting educational resource for us? And, so far, it is definitely a successful campaign.”
Phishing
Spear Phishing
7/9/18 3:37 PM
page_29.indd 1
7/3/18 10:19 AM
30
2018 Wholesaler Innovator of the Year
AUGUST 2018 • The Shelby Report of the Midwest
Born on the West Coast, Market Centre Delivers the Goods Nationwide
Supervalu is based in Minneapolis, but that doesn’t mean that the best ideas come only from there. One key to the company’s success has been respecting the cultures and diversity of all of its retail customers, wherever they are. With that in mind, it would be difficult to overstate the importance of Supervalu’s acquisition of California-based Unified Grocers, the company that created Market Centre. Now a Supervalu subsidiary and still based in Commerce, California, Market Centre has three main areas of focus: multicultural; natural and organic; and specialty and gourmet. The key to bringing Market Centre’s success to Supervalu customers across the country has been to allow those who are the best at what they do to stay in place. Supervalu calls it “Centers of Excellence.” Cultural foods, such as Hispanic, Asian, Kosher and Middle Eastern products, are procured in Los Angeles. Natural and organic products are strong in Seattle, and that office buys those products for the whole country. Gourmet foods are purchased in an office in Livermore, a city in the San Francisco Bay Area. Supervalu President and CEO Mark Gross said those decisions were instinctive. “In our putting together these teams, we did come with the perspective that they do this well, so they’ll do it for all of Supervalu,” Gross said. “People talk about Centers of Excellence, but it’s the real doing it that matters.That’s one of the things I’ve been most proud of that we’ve been able to do here.” Supervalu EVP Mike Stigers, who was born and raised in Los Angeles, was a Unified Grocers customer for 18 years. Some of the same people who supplied him as an independent customer now work with him. He is very familiar with the diversity on the West Coast and is pleased that experts there will procure those types of products for Supervalu. “You’ve got the cultural customers in Southern California, and then you’ve got specialty and gourmet customers in the San Francisco Bay Area, then natural and organics in the Pacific Northwest.Those are some huge demographic shifts,” Stigers said. “We really have looked at the decision-makers and asked, ‘where do they need to be to have the most relevancy for our customers and our shareholders?’ and that’s where we’ve staffed. That’s what we’re working to achieve. “The idea is not to make Minneapolis the be-all, know-all, because that’s just not true,” Stigers added. “We have watched that happen way too much, so I think we’re very sensitive to the work that we bring in here and the work that we leave out in the field so that it is a very strong balance.” With the addition of Associated Grocers of Florida, Supervalu also brought in expertise around serving customers from Mexico and Central and South American countries.
page_30.indd 30
There are profound differences between East Coast and West Coast Hispanic customers. “All those cultural flavors—Mexican or Cuban or Puerto Rican or Honduran or Guatemalan— it is exciting that we are able to provide that,” Stigers said. Supervalu SVP of Sales Bill Chew said that Associated Grocers of Florida “has that same institutional specialty and ethnic knowledge. “All of these new foods come inward, and we’re right there on the cutting edge for it,” Chew said. Chicago’s diverse customer base qualifies Supervalu to be able to satisfy customers in other major metro areas like Detroit and New York. Chew said the retailers that Supervalu supplies in the Chicago area are some of the best operators in the country. The wholesaler began shipping Market Centre products out of its Joliet, Illinois, facility in April, and it will support eight other distribution centers. Market Centre also will come to Supervalu’s Carlisle, Pennsylvania, distribution center. A facility will be commissioned for Market Centre in Florida as well. Chew said bringing those popular products into a warehouse and shipping them out is the easy part. “The tough part is having the people with the knowledge around the biggest area of growth in the business, which is specialty, natural and organic, and multicultural,” he said. “That’s really what we’ve grown with AG Florida and with Unified Grocers and the Market Centre piece.” Market Centre will be part of the Supervalu National Expo in July. There will be 208 specialty vendors at the show; 600 vendors—double the count from last year—and 5,300 attendees are expected overall.
7/9/18 3:38 PM
page_31.indd 1
7/3/18 10:20 AM
32
2018 Wholesaler Innovator of the Year
AUGUST 2018 • The Shelby Report of the Midwest
Supervalu Offers Extensive Educational Opportunities Supervalu University is one part of an extensive suite of professional services Supervalu offers retail professionals. Supervalu EVP Mike Stigers calls it “the gift of education and lifelong learning.” The opportunity is there for those who want to participate. “People in our industry—many of our employees and many of our customers’ employees— get into the grocery business while in high school,” Stigers said. “That’s how I started, as a junior in high school. Many people never thought they would stay in this industry, but then here you are. A lot of times, education took a back seat because you had to work. You can find yourself without a degree or without a formal education.” Supervalu University offers industry-specific programs taught by seasoned professionals who understand the business requirements of retailers. The Supermarket Directors Institute is an intensive training program conducted at Supervalu’s headquarters designed to enhance the skills of store owners, directors and managers. It is a non-consecutive three-week program with emphasis in specific areas. The first week is devoted to analyzing financial reports and includes courses on topics such as recordkeeping, presentation skills and supermarket security.
The Supermarket Directors Institute is an intensive training program conducted at Supervalu’s headquarters designed to enhance the skills of store owners, directors and managers. The second week’s emphasis is on consumer marketing and merchandising. It is designed to help participants understand consumer behavior and how it impacts the store, managing shrink, and visual merchandising and store design techniques. During the third week, leadership skills are at the forefront, with courses on recruiting and engagement, coaching and feedback, dealing with conflict, generational issues and more. Participation in the Supermarket Directors Institute includes books, materials and a graduation plaque; access to more than 4,000 online courses; more than 130 hours of professional instruction; and a laptop computer, if needed, during training.
page_32.indd 32
Supermarket-specific training programs are available in a variety of formats, and can be customized. These educational opportunities are of value even to employees who are very successful in their careers. Supervalu offers a pathway to an undergraduate degree or even graduate programs. “It is amazing when employees will take that leap. They haven’t been to school in 30 years and now it is all computerized. It can be scary,” Stigers said. “And you watch them as they complete a class, they stand a little bit taller. They have a little more self-confidence.” Supervalu has relationships with community colleges across the country through the Western Association of Food Chains (WAFC), whose primary mission is to provide educational opportunities for food industry associates and ensure employees have the skills they need for success in a retail leadership career. Supervalu is very involved through the WAFC. Stigers has been an adjunct professor for one of the classes, Cornerstone Retail Management. Supervalu and independent grocers’ employees can earn a Retail Management Certificate with the completion of eight classes, including HR/organizational behavior, computer applications, business communication skills, principles of management, principles of marketing, HR management, financial management and budgeting, and retail management. “We have about 200, 250 employees going through that at any given time,” Stigers said. “When they complete all eight, it’s like graduation. When we had the graduation here (in Eden Prairie) for the first class, we had 40-, 50-year-old store managers and warehouse workers and their parents were here. How Supervalu University classes are taught by seasoned retail professionals. cool is that?”
7/9/18 3:48 PM
The Shelby Report’s
2018 Midwest Wholesaler Innovator of the Year
page_21.indd 1
7/3/18 4:17 PM
Pace Target_WIOY_MW082018.indd 1
7/3/18 9:31 AM
page_75.indd 1
7/5/18 8:47 AM
page_76.indd 1
7/5/18 8:48 AM