In a major structural change, Albertsons said it will shift center store merchandising and procurement responsibilities from its 12 operating divisions to corporate headquarters in Boise, ID.
The move was announced in a letter to vendors sent on May 7 from the Vivek Sankaran, CEO, and signed by Albertsons’ 12 division presidents and other senior members of its leadership team. The letter stated:
Albertsons Partner,
Thank you for your partnership and support as a valued supplier through these unprecedented times.
Despite all the disruption of 2020, Albertsons Companies has delivered for our customers, outperformed competitors, and gained market share, accelerating a transformation we began in 2019.
This year, we are going to invest in a total Albertsons Companies approach to category management that puts the customer first in our decisions and brings the best of our supplier partners to them. As part of this category-led process, we are changing our model for how we manage most of our center store categories and a few of our Fresh categories.
We are appointing some of our most exceptional merchants as National Category Directors to represent all of Albertsons Companies’ 12 divisions. These National Category Directors will be empowered to make company-wide category decisions around assortment, space, and vendor negotiations, in order to support our ambition to grow our collective business.
Please note that this is a departure from the past. It is not a one-time exercise, but a new way of doing business, which will drive growth for Albertsons and for our best partners. Additionally, this change will make it easier for you and your teams as you will have a single point of contact at Albertsons for many categories.
We look forward to partnering with more of you in the weeks to come and will be in touch as your relevant National Category Director[s] are named. In the meantime, please continue to partner with the merchants you are currently working with.
According to several sources, Albertsons has been toying with the idea of centralizing its core center store merchandising for almost a year. Sankaran, who spent nearly 11 years in leadership roles with PepsiCo before becoming Albertsons’ chief executive in 2019, reportedly is a firm believer that greater economic savings and internal efficiencies can be gained by leveraging Albertsons corporate buying power. Albertsons is the second largest pure-play grocer chain in the country (with annual sales approaching $65 billion) behind Kroger.
Approximately six months ago, the retailer formed a committee to explore the hybrid concept and even selected a few categories (including candy) to test drive it. Our sources told us that Albertsons hopes to save more than $100 million in the first year alone by driving down cost and creating a larger scale. It is also hoped that those savings will also help the company lower its retail pricing.
As indicated in Sankaran’s letter, details are still being worked out, but here’s what we know thus far. The division structure will remain intact with local divisions making all operational and administrative decisions. Each operating division will still fully control perishables merchandising (the “few fresh categories” that Sankaran referred to in his letter refer to packaged processed meat items such as bacon and hot dogs which the company calls pre-pack). The divisions will also retain a team of grocery sales managers (category managers) to handle regional and local items which represent about 15 percent of center store sales. Also remaining within the current decentralized division structure will be local control of pricing, promotion and advertising.
In terms of staffing the new alignment, current sales managers can apply for the new “national category manager” positions, and if named, can remain based in their local headquarters. Our sources added that the new plan will be officially rolled out in June and take several months to implement.
Among those who also signed the letter with Sankaran were Susan Morris, COO; Shane Dorcheus, executive VP-retail operations; and former Acme veteran Dennis Clark, who currently serves as Albertsons’ senior VP-merchandising. Clark was one of the leaders of the committee that explored the centralized center store merchandising option. Regionally, the letter was signed by Rob Backus, president of Shaw’s/Star Markets, and Jim Perkins, president of Albertsons’ newly formed Mid-Atlantic division which was created in September 2020 and includes the Acme and Safeway banners as well as the newly acquired Kings and Balducci’s stores.
Albertsons was the first large chain to shift back to a decentralized model in 2013 when the company acquired more than 900 stores from Supervalu.