In a recent interview with IRI, Albertsons CEO Vivek Sankaran noted that one of the challenges for the $60 billion retailer (and many others up and down the supply chain) was getting supplies. While Albertsons was creating relationships with some of the largest restaurant distributors (to reallocate foods supplies), its teams were building local relationships with a range of other distributors, including large and small players.
“It’s a fragmented market. The combination, to me, was always about getting safety right; moving fast on personal safety for our associates,” Sankaran told IRI. “We knew if they were safe that they could make the customers feel safe, and it was also about supply. And we were nimble on supply.”
Prior to joining Albertsons, Sankaran spent years at PepsiCo, most recently as CEO of PepsiCo Foods North America. The biggest difference between working for a manufacturer versus a retailer is that the former is one step removed from the customer. Sankaran noted that the day-to-day interface is through research or a retailer. In contrast, the amount of interaction in the retail environment is fascinating, he said.
“I tell people, when a customer tells you something, don’t judge it as right or wrong. It’s just real,” Sankaran told IRI. “Their word is real. Accept it, react to it. If she likes it, she’s coming back. If she doesn’t like it, she’s gone.”
He called that interaction both “fabulous and scary,” but it keeps retailers on their toes and it happens thousands of times a day in each Albertsonsstore.
For some retailers, the pandemic has been a roller coaster. Sankaran pointed out that there is a heightened level of demand, but he said he empathizes with CPG executives who wonder if they should add capacity.
“Companies are held to a very high standard on ROIC (return on invested capital),” he noted. “For them to add capacity, they really have to get their mind around whether this demand is going to stick or last just a few months.”
Sankaran reminds all of Albertsons’ CPG partners that they were innovating in the past for a reason; and that reason was the customer and that has not changed.
“I hope that we will continue to bring the innovations to retail that were such an essential part of their growth and our growth and the vibrancy in retail that we had pre-COVID-19.”
One thing that the pandemic did change, of course, was mobility. Prior to the outbreak, the focus was on serving the on-the-go consumer; you know, folks who had no time to cook or clean or it seems, even catch their breath as they ran from meetings to kids activities to home and back again. Now, of course, more people eat at home and clean their homes as they stay at home.
“I think people are recognizing that it’s fun,” he told IRI. “You know, ‘I’m connecting with my family again in ways that I didn’t before.’”
As a result, Sankaran predicts that there will be less on-the-go, which translates into more bigger basket shopping trips and more complete baskets in one store. At the same time, he expects the rate of e-commerce acceleration will stay slightly higher than pre-COVID-19—after all, it’s what the customer wants and it’s all about delivering on those wants. According to Sankaran, foodservice grew 70% between 2009 and 2009 to $771 billion. During that time, away-from-home food overtook in-home food dollars.
Obviously, away-from-home will continue to lead, but with a recession, work-from-home policies and a pandemic still in place, Sankaran predicted that in-home food dollars won’t evaporate immediately when the pandemic gets under control. And if consumers are spending more time at home, they’re sure to notice that their homes could use a good cleaning. Of course, the pandemic roiled supply chains and consumers couldn’t always find their preferred cleaning products (think Clorox Wipes). Sankaran said customer-facing is a huge opportunity. Whether it’s getting more granular with existing loyalty engines, getting more granular about demand signals in store and into e-commerce and predicting order e-commerce order patterns.
“And when I say technology, I’m including data in it. Don’t think robots, think harnessing the power of data, too,” said Sankaran.
Still, there’s plenty of room for those robots in automating distribution centers and stores, and any other place where physical activity can be done more efficiently with robotics. There’s plenty of room for loyalty, too. As IRI pointed out, too many retailers think most purchases are separate from prior purchases; as a result, retailers don’t make decisions based on long-term benefits.
“It’s surprising that telephone companies that we may have transactions once every three years think of lifetime value,” observed Sankaran. “Yet in grocery where shoppers transact three times a week with us, we don’t think of it. That’s the opportunity for our whole sector and for Albertsons.”
And for the entire household and personal products industry, too.