Save-A-Lot opens 1,000th store: Chain ups expansion in uptapped markets

DSN Retailing Today, April 22, 2002 by Mike Duff

WATERBURY, CONN. -- Save-A-Lot may not be the best-known supermarket name in the United States, but with the opening of its 1,000th store, this division of Supervalu may become better recognized both for its size and the way it does business.

A supermarket that emphasizes price and a limited assortment of everyday items-the company refers to it as an edited assortment-Save-A-Lot represents a kind of food retailing operation that is becoming increasingly prevalent among stand-alone operations, and within the context of food operations at discount stores, supercenters and warehouse clubs. Based on its success, Save-A-Lot may even have a lesson or two to teach the broadliners.

Save-A-Lot cut the ribbon on its 1,000th store in Waterbury, Conn., on April 4. "It took us 25 years to get to our 1,000th store," Bill Moran, company founder, president and ceo, told DSN Retailing Today at the opening. "We hope it will take us five years to get our next 1,000."

Current plans are a little more conservative, but are still aggressive, with 100 new units planned annually. This 100-store growth outlook doesn't consider Supervalu's acquisition of Deal$, a chain that is being paired with Save-A-Lot. The addition of the 45-unit dollar store operator should boost Save-A-Lot's divisional growth by about 30 to 40 locations annually.

Save-A-Lot has grown to become the 13th largest retail grocery chain in the United States and the fifth largest operating under a single banner. Save-A-Lot's addition in Waterbury is a first for the market and part of a strategy of continuing expansion into untapped territories.

For example, in September 2001, Save-A-Lot opened its first store in Chicago and initially entered Baltimore and Wisconsin. While it will fill in as it opens new stores, developing new markets continues to be important to the chain, said Dan Kimack, manager of corporate communications. In addition to Waterbury--the company has a total of four stores in Connecticut-Save-A-Lot will enter Phoenix and Colorado this year.

Although Save-A-Lot now generates more than $4 billion in annual sales, it started as a small idea. In the mid-1970s, independent grocers faced an onslaught from expanding chain supermarket operations that had more money to invest and better economies of scale than they did. Moran, working for a wholesaler, began thinking about the situation and how to help independents win a game that was stacked against them. "The original idea was to compete with the big chains," he said.

Independent retailers, to this day, operate the majority of Save-A-Lots on a licensed basis.

To gain an edge, Moran developed a limited-assortment supermarket that, with a low-cost structure, would meet the week-to-week needs of core customers. The original stores had fewer than 700 SKUs; the number today is about 1,250, still less than one-fifth of the number carried even in modest supermarket operations. Store sizes run from 12,000 square feet to 14,000 square feet.

Still, Save-A-Lot is set to meet the basic grocery needs of its shoppers. Unlike some limited-assortment food retailers, Save-A-Lot offers fresh produce and meat, but in a way that is consistent with its edited assortment philosophy. Thus, fresh produce consists of 22 SKUs at the Waterbury store merchandised in a 24-foot refrigerated fixture.

The editing process may be demonstrated--like gravity, as Newton discovered--by apples. Save-A-Lot offers two varieties of apples, red and golden delicious, under a single sign that reads: loose apples 69 cents per pound. The chain isn't adverse to a little extravagance, though. In addition to iceberg lettuce, it offered two packaged salad SKUs.

Save-A-Lot offers both national and private-label products. Quality is critical, said Moran. "We've always been focused on the best quality available."

Kimack noted that the company's model and growth have been leveraged to continually provide better quality and lower costs. "We sell 53 million cans of our corn a year," he said. "With those kinds of numbers and with 1,000 stores, we can dictate quality specs to our manufacturers."

On the cost side, the company innovates constantly, working with its vendors to find new ways to drive pennies out of the system. Much of the product available at Save-A-Lot is sold out of cartons. Recently, the company developed a new carton for standing bottles. It has a perforated area on the top and one side that can pop out in a fashion similar to opening a tissue box. Notably, preparing the carton for display doesn't require a box cutter. This new carton makes putting product on the shelf quicker and precludes box cutter-related shrink, thus cutting costs.

Keeping costs down helps to set Save-A-Lot's pricing structure, which offers shoppers discounts of up to 40% below prices available at competing food retailers.

With its low-cost, low-price model, Save-A-Lot fits the needs of low-income consumers who are being targeted by more retailers who consider the group underserved and, thus, a growth opportunity.