The Basket Runneth Over
Aug 1, 2007 12:00 PM, By Jennifer Popovec
Similarly, Safeway opened just seven new stores in 2006 compared with 11 in 2005 and 22 in 2004. However, the Pleasanton, Calif.-based company completed 276 remodels in 2006 and expects to remodel another 275 stores this year. All of Safeway's newly remodeled stores have been converted into the “Lifestyle” format, which boasts an expanded perishables offering including meats, bakery, deli and produce. The new stores feature earth-toned décor, custom flooring, unique display features and special lighting to highlight products and departments.
As of June 30, Safeway had remodeled 48 percent of its 838 stores, according to chairman, president and CEO Steven Burd. He says the company is on track to spend $1.7 billion on remodels this year alone.
“Our new store program continues to be pretty moderate, and we still think that's the right course of action given that we've got another 50 percent to [remodel],” Burd said during Safeway's second quarter earnings conference call in mid-July.
Safeway, in fact, has had such success with its prepared foods sales that in June it opened a freestanding restaurant called Citrine New World Bistro in Redwood City, Calif. The 5,000-square-foot, 125-seat eatery features food with five regional flavor profiles and will bolster the company's store-label brands such as O Organics chicken, Rancher's Reserve beef, and Primo Taglio meats and cheeses.
One big exception to the renovation and upscaling trend is privately owned and operated Publix Super Markets Inc. The Lakeland, Fla.-based chain is expanding more aggressively than its larger competitors, with 30 units under construction this year to go along with another 30 that are under renovation, according to a company spokesperson.
Experts speculate that Publix's remodeling efforts are more about keeping stores fresh than completely revamping the brand like Safeway has done with its “Lifestyle” concept. “Publix owns its customers' heart and soul,” says Mary Lou Fiala, president & COO of Regency Centers Corp. “That's why their remodels aren't as extensive.”
Rebuild it and they will come
Most grocery chains find new development far less compelling today than they did a few years ago. While the slowdown in the housing market is somewhat limiting the need for new projects, that's not the only factor. It's the price of land, high construction costs, zoning issues and competition that have really taken the shine off ground up development.
