May 2008
by Jeff Metzger

The facts don’t lie, and perhaps the most impressive fact of all is that Giant/Carlisle continues to rank among the elite of all grocery chains in the U.S.

After attending the retailer’s annual vendor meeting on April 30 held at the Giant Center in Hershey, PA, the song remains the same – and it’s a sweet melody.

Let’s look at some of the hard facts: 51 consecutive quarters of positive comparable sales; 36 straight years of increased sales and earnings; dollar and unit share growth of more than 200 basis points; strong identical customer account growth; and another year of positive order size gains. The latter two achievements are especially notable because virtually every supermarket retailer has lost traction in those areas to merchants in other channels.

The three hour meeting was broken up into six presentations representing segments of the company’s business.

Opening the event was Ahold’s COO for U.S. operations, Larry Benjamin, who praised Giant for its fine effort over the years. He then talked to the group of more than 300 vendors about Ahold’s improving corporate performance. To wit: he compared the Dutch retailer’s status in 2003 (the year of Ahold’s accounting scandal) versus how it fared in 2007.

Total sales in 2003 were 56 billion euros (today the company is half the size, ringing up overall sales of 28 billion euros); Ahold lost 747 million euros in 2003 (profit in 2007 was 1.13 billion euros); identical sales in 2003 were negative 2.7 percent (in 2007 ID revenue was positive 7.9 percent); and in 2003, Ahold’s debt was 7.5 billion euros (today the firm is an investment grade company with 2.1 billion euros of debt). Quite a turnaround.

One more fact from that four year period: Giant/Carlisle’s annual sales increased from $3 billion to $4.3 billion.

CEO Carl Schlicker addressed the group next and noted that, in today’s challenging economy (80,000 jobs lost in March; unemployment rising from 4.8 percent to 5.1 percent; inflation driven by commodity prices, weak dollar, influence of ethanol; and gas prices influencing consumer spending and transportation costs), execution of a value driven strategy is very important and Giant is well positioned for that task.

The supermarket industry veteran, who took over the CEO chair from Tony Schiano about 15 months ago, also provided the audience with an overview of Giant’s business. At year end 2007, the company operated 145 stores that amassed sales of $4.3 billion with EBITDA of $193.8 million, a 13.7 percent gain. Identical store sales rose an impressive 3.7 percent. In 2008, Giant has plans for four new stores: Hatfield, PA and Willow Grove, PA (both of which have already opened); Lancaster, PA (a former Redner’s unit, scheduled to open on May 7); and North Reading, PA.

Two other stores, in Hagerstown, MD and Selinsgrove, PA, will be relocated and will open as 76,000 square foot units. The retailer will also expand four other units – Cumberland, MD; Red Lion, PA; Charles Town, WV; and Jennersville, PA – to its most profitable 76,000 square foot prototype.

There will also be 12 other remodels and seven new gas stations.

“We enjoyed excellent performance in 2007 and are off to a good start in 2008,” Schlicker noted. “As our business continues to evolve, we will stay committed to constantly improving our facilities and stores, investing in our associates, knowing our customer better than the competition, and ‘getting it done’ better than the competition. It all comes down to execution.”

Jeff Martin, Giant’s executive VP-sales and merchandising, who was promoted to that position when Schlicker was named CEO last year, covered a broad range of topics in his 30 minute presentation. Among the key points Martin touched on were the company’s continued strong support of “local” (80 stores now feature Nature’s Promise Marketplace sections), its increasing focus on food safety, and the expansion of its “perishable excellence” program.

The 30 year veteran of the Carlisle-based retailer noted that, while Giant continues to grow, the “mass” channel - even beyond Wal-Mart - continues to gain market share. Including Wal-Mart, that channel remains very strong, with 92 current Giant stores impacted by a Wal-Mart SuperCenter, a figure Martin projects will grow to 107 Giant stores by the end of 2009.

So, what’s on tap for 2008? According to Martin, the company will focus on several key areas, including: more direct-to-consumer offers and promotions; further expansion of its local marketing efforts (“local” is the new “big”); and growing its convenience customer offerings and services.

Additionally, Giant is preparing to deal with a challenging economy and heightening its corporate social responsibility.

Ron Domenick, senior VP-non-perishables, provided an overview of the utilization of its TradePoint software. Nearing its second anniversary, more than 2,000 vendors/broker partners and their product lines have been set up in TradePoint and more than 61,000 Giant/Tops offers have been processed through the program. Domenick also told the group of Giant’s plans to increase its scan-based trading programs and said it is also looking to increase vendor participation in its “Giant 1st” new item program. “Giant 1st” accelerates the trial of new items during the initial 12-week time frame before national advertising. This year, the chain will roll out “Giant 1st” programs in its HBC department, joining grocery and frozen.

As fuel prices increase and sustainability becomes a greater issue, Domenick is anxious for more regional vendors to interact with the Carlisle based chain. In fact, on May 1, Giant held a trade fair at the Harrisburg Farm Show Complex to develop and expand relationships with local farmers, producers and manufacturers.

Another recent change at Giant includes its new demonstration program called “Sample ‘n Save.” Changes from the previous demo program include management by a new demonstration firm, Vertigration, and the fact that demos now will be driven by Giant’s category managers rather than the individual vendors.

Recently promoted Jodie Daubert, now senior VP-perishables, passionately told the vendors, it’s all about “fresh.” She outlined a four-point platform to create a comprehensive “fresh” strategy – understand shoppers’ needs; develop strategy; validate strategy; and best practices. Among the objectives Daubert is seeking to achieve are: increased focus on convenience and time savings; offering value with fresh savings; providing variety and choice; emphasis on healthier eating and nutrition, ingredient content, easy-to-understand labeling and signage; and delivery of a consistent fresh experience every shopping trip.

Erik Keptner, senior VP-marketing and advertising, who may have been the smartest man in the room, updated the audience on Giant’s aggressive consumer-centric retailing (CCR) program, an effort that was begun in 2005 to improve key business processes by integrating customer metrics.

Over the past year, Keptner noted, CCR has moved from insights to actions. Today, because of successful CCR learnings, Giant has been able to increase its promotional efficiencies, create effective assortments, improve its customer profile insights, and analyze brand loyalty and strengths. According to Keptner, CCR’s implementations in the future will include: introducing trip missions and store clusters into decision analysis; integrating business decision workflows along key decision modules; incorporating CCR metrics into mid- and year-end financial reviews; launching vendor/brand scorecards to understand performance and growth opportunities; and integrating CCR further into Giant’s business to include operations, sales and marketing and category management.

Closing out the meeting was Denny Hopkins, Giant’s VP-advertising and marketing, who will be retiring later this year after 42 years with the company. Hopkins recently received the company’s prestigious Nick Riso Award for an outstanding record of contribution to Giant Food Stores. Hopkins thanked the vendors for their contributions to Giant’s multi-faceted charitable efforts. The company donated $12.2 million last year, benefiting local schools (A+ School Rewards program), local food banks, Children’s Miracle Network, the MS Society and the Jake Gittlen Cancer Research Institute (Giant For Jake).

As Giant celebrates its 85th anniversary in 2008, judging by its growth and ingenuity it seems a million years removed from its genesis as the Carlisle Meat Market. However, upon further review, what makes the company great is that it never really has lost touch with its roots and the culture that David Javitch created in 1923.