Publix: new face, new challenge.
Consider the action:
Grand Union, which is based in New Jersey, retreats totally, closing almost 50 supermarkets and warehouse stores. Pantry Pride shutters 56 stores and acquires five closed GRand Unions. Piggly Wiggly opens thre stores in the southern Florida market after being absent from the Florida scene for a half-century. Winn-Dixie acquires 11 closed Grand Unions and ends the year with a new high in store acreage in some 430 Florida units.
In northern Florida, Kash N' Karry, which is owned by Lucky Stores of California, snaps up 15 closed Grand Union units and brings itself to a new high of 73 stores. Albertson's adds to its stable of combination stores, also reaching a new high, with 60 units open or under construction. A&P adds two Family Mart superstores, reaching a new peak of 11 units. Pueblo International launches the first of several planned 85,000-square-foot warehouse markets. Aggressive independents pick up four of the closed chain supermarkets.
Throughout all this activity, one fact is dominant. Be it a new store, a remodel or a conversion, these stores are all more costly. Most are larger, carry more items and have added to their array of service departments.
In the second half of 1984 the stakes rise even higher. Safeway invades Florida for the first time with an 84,000-square-foot Pak N' Save in Tampa and says that it is seeking additional sites.
Super Value, the Minneapolis-based wholesaler, purchases Pantry Pride's 415,000-square-foot distribution center in Miami. Pantry Pride, now rid of its money-losing stores, launches eight warehouse-style Sun Supermarkets and electrifies the competition by announcing plans to open several of the vaunted Cub super warehouse stores under a franchise agreement with Super Valu.
Into this mealstrom of change comes a new chief executive who promises to be one of the most important players of all--Mark Hollis, the new president of Publix. The soft-spoken (but then, everybody at Publix seems to be soft-spoken) succesor to Joe Blanton has the most at stake. He takes over Publix at a time when the Lakeland-based chain has reached new highs in sales, profits, numbers of stores, size and scope of distribution facilities, and number of employees. Volume last year was $3.2 billion, up 14% from the previous year.
Says Hollis, "These are, indeed, interesting times for food retailers in Florida. As a leading Sun Belt state, Florida continues to attract new competitors in the food business."
Will the powerful new companies with their huge new formats pose a threat to Publix? Hollis says no. "As long as people appreciate service and value, there's a market for Publix. If it ever comes to such an economic pass than ambiance no longer counts, we're in trouble, no doubt about it. But we don't see that happening."
He cites the Golden Rule, "the princople upon which George Jenkins founded the company 54 years ago," as the reason he thinks Publix flourishes and will continue to do so. "Our purpose is to operate the finest food stores in America, where customers find it a pleasure to shop and employees find it a pleasure to work. If we do that, we'll be just fine."
In the super-competitive grocery business such sentiments border on pure cornball, but Publix has always championed its employees as its strength. More than 12,000 of the 14,000 full-time and 21,000 part-time employees own stock. ("It's not true that we're a privately held company," says Hollis. "Publix is wholly owned by the employees and executives and is privately traded.")
Pay scales are good, and benefits are better. Profit sharing and retirement beneftis accrue even to part-timers who work 1,000 hours in a year. Profit sharing bonuses, based on the performance of individual stores, go to all full-timers, not just managers. Publix, as a result, has never even come to being organized by unions.
New Looks, New Formats
If underlying principles will remain unchanged, outward manifestations will not. Publix shoppers have been shopping a new breed of store since June 1983. Dubbed the 38M for its square footage, it's the biggest basic format of Publix stores ever and will be the anchor store for the rest of the decade.
In Publix fashion, the general layout for the 38M is always the same: service center up front, meats at the rear, produce and bakery on the left toward the end of the shopping tour. But in the 38M the interior departments will be varied to meet the needs of individual trading areas.
Scratch bakeries, already a feature in 189 of Publix's 278 stores, will be included in all of the 25 new or converted units scheduled for 1985. The planned 25 units represent a new high for opoenings in a single year.
"Friendliness and service are vital," says Hollis, "but that doesn't mean stodginess. The stores will be clean and sharp. And they will stay at the cutting edge of technology, as well."
Publix already is at that cutting edge. It was the second major chain to go 100% scanning and the only one to have automated teller machines in each of its stores. Publix is also unique in the industry brecause it owns the electronic switching network that transfers funds between its store and financial institutions.
On the other hand, Publix's plans for the future do not include its smallish, price-appeal Food World supermarkets. "They were predicated on a semi-discount approach," Hollis explains, "and we're getting out of them, converting or enlarging all 16 of them into Publix units. We want to stick with our basic appeal of giving total value--not being just a discounter"
Oddly enough, the woes of Grand union played a role in polishing Publix's reputation for low prices. Says Hollis, "Grand Union's price matching program, in which they advertised that they would match the prices of the area's low-price leader, proved very beneficial for us, because they identified Publix as the leader."
In the end, the price-matching appeal failed to generate enough new volume to offset the lower margins entailed, and was a major factor in Grand Union's decision to abandon the market. Industry observers agree, however, that Publix was handed a low-price image on a platter, when actually the chain's pricing is merely competitive, at best.
One proof of Publix's ability to avoid the deep-cut price route is that after 31 years it still gives S&H trading stamps. "Stamps have been good to us and we see no reason to discontinue them," Hollis says. "We're the only major factor to give them. That's a plus. And we use them in three ways, not one."
Publix shoppers can redeem stamps for merchandise or exchange them for cash at an S&H redemption center. But they are also used as a price lure as well. A quarter-book of stamps entitles a shopper to a gallon of milk at $1.49, bagels at 5 cents apiece and similar spectacular prices.
Publix, according to Hollis, has developed an overall price strategy which has been in use in the Miami area for about a year. "It's confidential, of course, but it seems to be working quite well. We're not telling customers we're the cheapest in town, but we do tell them that at Publix they will get the best overall value--good prices, service, friendliness, accuracy and so on."
Sunday openings will continue. The last major chain to adopt them, Publix was able to boast for years that it could "give the competition a whole day's start and still beat them at the end of the week." Staying closed on Sunday, however, proved to be a luxury.
"The object was to give our employees the traditional day of rest," Hollis says, "but we relearned a very important lesson from our going to Sunday openings. You better do what the customer wants. And it turns out that a sufficient number of younger customers want to shop on Sunday. It does promote families shopping together. These shoppers also buy more of the higher margin merchandise, such as health and beauty aids and, apparently, are not as concerned with cherry picking. Our Sunday business is good and continues to grow."
Here Come the Cubs
Pantry Pride's new Sun Supermarket superstores, a threat in their own right, are dwarfed by the impending addition of the Cub format which typically gathers in $35 million to $50 million or more in sales from one location. Hollis, who has visited both types of stores, professes lack of fear. "It reminds me of grammar school when a bigger guy could scare the pants off of you, if you let him. These new formats do the same, scare everybody and shake up the market so that good operators abandon their basic principles.
"We believe in our approach and we're not going to let these newcomers take away our share of the market. We'll meet them ... toe to toe, nose to nose. And we're not going to fall into the trap of playing their game."
One reason for this confidence is that Publix has a new combination store on the drawing boards. As yet unnamed (although the Publix name will be part of it), the 55,000-square-foot prototype will stock about 40% non-foods, including pharmacy, hardware, expanded cosmetics, toys and limited soft goods. The first of the new stores is scheduled to open in the second half of 1985.
Meanwhile, Publix will depend on its supermarkets and superstores to maintain its slim lead over Winn-Dixie and the emerging new competition. "I believe that in one respect we're in a better position than Winn-Dixie," says Hollis, "Our stores are bigger. They have half again as many stores as we do."
Ruminating on the future, Hollis declares, "We are blessed in that George Jenkins remains very active and keenly involved in Publix as CEO. But his style--the entrepreneurial style based on the knowledge that you built the business brick by brick--can't be mine. We don't manage by committee here. So I've got to get out into the stores and the warehouses--visiting, observing, asking questions--to keep in touch.
"Florida will continue to grow and I believe most emphatically that Publix will too. But some of our growth may come from north of the border.
"There are rumors that we have signed up store locations in Georgia. That is not true. But I have publicly stated that when we have sufficient distribution facilities in north Florida, we will cross the border. My dream is to give the people of Georgia the opportunity to shop where shopping is a pleasure--in Publix stores."