Dairy Marketing Practice | Contributing Columnist

 


Thoughts for the Coming Year

Dan Strongin ASQ CMQ/OE Uncorporate Consultant

February 10, 2017


 

The independent supermarket chain Andronico’s sold itself to Safeway, a large chain, itself once independent but now part of the consolidated Albertson’s chain. I worked at Andronico’s, which was based in Berkeley, CA, for over 11 years as the director of foodservice and delicatessen.

Those were grand days, when the economy was flush, and the company was growing. It grew from three stores to eight while I was there and our department was regularly in the trade press as a stellar example of innovators in grocery, along with the rest of the store. We sold gobs of cheese, and were the first supermarket in Northern California to have an American Artisan and Farmhouse Cheese section. We were making good money. We had a great management team and long-term loyal employees.

So what happened? What went wrong? And how does it apply to cheese? Conventional wisdom would say that there is a constant competition between the chains and the independents. The chains, like most large organizations, are conservative by nature. They resist change if it involves investing or changes in the use of investments already made. The independents drive innovation, testing new ideas that the chains are reluctant to try, until such time the independents prove they can be profitable.

To succeed as an independent requires agility, and a commitment to change, because as soon as they prove an innovation works, the chains will create a version of it. To survive on low price is difficult as they lack the buying power of the larger chains. They must survive on different products and better service as they will make less profit on their mainline grocery items.

In turn, the independents follow the small gourmet stores, copying their innovations once they see if consumers buy them. It is a system that works fairly well to rejuvenate the industry. When it functions well, there is a cycle that varies from the chains making headway against the independents and vice-versa.

But when it doesn’t consumers lose, family fortunes are lost and big chains are consumed by bigger chains, all at the cost of innovation.
The simple truth is, despite best intentions, the dynamic of large organizations with intense investment in inventory is to be change-averse.

California lost two independent chains recently, which is huge. It is a loss for the system, for those involved, even for Safeway, perhaps.
The chains need healthy independents to keep them honest. Otherwise their inertia weighs them down and they begin to erode their customer base.

 

To succeed as an independent requires agility, and a commitment to change, because as soon as they prove an innovation works, the chains will create a version of it. To survive on low price is difficult as they lack the buying power of the larger chains. They must survive on different products and better service as they will make less profit on their mainline grocery items.


Based on my experience, something more than just the normal ups and downs of the cycle is involved. When a company forgets who they are, and who they serve. When they forget what niche of consumers, they put themselves at risk. This often happens to independents that play the extremes and not the middle. There is a lesson in this for the cheese industry.

What do I mean by play the extremes? Anything that is out of your core identity as a business. For example, slotting allowances and incentives make good money, but too much reaching for them erodes your core. Using them for the benefit of your customer base would be closer to playing the middle. Delivering good products or services that your customers want or need is dead on middle. When companies seek the extremes at the cost of the middle, they may die slowly, but they are walking dead.

I left Andronico’s in part because I could see trouble ahead. The company had asked me to change my buying habits and buy more on low price, rather than quality and good service. They were playing the extremes, mistaking the sudden growth in sales at the time as an opportunity for robust growth. They were mistaking luck for skill. In a robust economy growth is easy, sales are up, and you can slip on service or quality without losing sales, but what happens when the economy goes sour, as it always does?

The company grew too quickly, putting stores too close to each other, competing with itself. They thinned the ranks of those who knew what the stores once stood for, opening stores rapidly, spreading experienced people around, bringing in new managers with different outlooks, and the stores inevitably lost some of what made it special. 2008 sealed its doom. A sudden and frightful drop in the economy, when they had a great deal invested in risky expansion perhaps, but disregarding their consumer base for certain, who had since moved on to Whole Foods or to the many single-unit specialty stores that rise when the independent chains lose their way.

Playing the middle would be to remain focused on their consumers.
On serving them, and finding the things that would delight them. And carefully taking advantage of the opportunities that arise, only if they allow you to remain who you are. I told that to the company when leaving, and I am sharing it with you now. I feel deeply for the owners and all those who worked with and supplied them. DS

 

Dan Strongin

Dan Strongin is a former president of the American Cheese Society, chef and business coach for small to medium value added businesses, and the owner of the sites learn.managenaturally.com, and the Facebook group Enjoy Cheese. His online course: “Cheese: How to Buy, Store, Taste, Pair, Talk About and Serve”, is available at enjoycheese.net. Dan can be reached via email at dan@danstrongin.com.


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