Keith Knopf is president and CEO of West Sacramento, Calif.-based Raley's—one of Winsight Grocery Business' 2021 Remarkable Independents honorees. (Watch for the January/February issue of WGB, coming soon, to meet all of this year's honorees.) Knopf, who joined Raley's from Kohl's in 2015 and became president and CEO of the family-owned, 126-store grocer in 2018, spoke with WGB about Raley's focused approach in the past year, his top lessons from 2020 and the headwinds he sees in the year ahead.
Christine LaFave Grace: Looking at Raley’s moves in the past year, two words that come to mind are bold and deliberate. The company launched the Raley’s O-N-E Market concept in June. A dedicated e-commerce fulfillment center opened the same month. There continues to be an emphasis on team-member development through a three-track leadership development program. How would you define Raley’s approach? To you, what has set Raley’s apart in the past year?
Keith Knopf: It helps when you have a purpose that inspires and drives your organization, and our purpose is to change the way the world eats one plate at a time. We think about what we do through different filters rather than just surviving or profitability. We are inspired by not just the bottom line but our desire to do good and be an important part of the community and take care of our team in ways that may not be top of mind for other retailers. That doesn’t make it right or wrong; it’s just who we are, and that really comes from being a family-owned independent company for 85 years. It’s just core to who we are.
Looking back on the past year, what are some of the things you’re most proud of? What do you point to and say, “We really excelled here,” or “This was really reflective of who we are”?
First, I’m deeply grateful for the leadership and our team members across our stores and all of our support functions. Working under difficult circumstances, they demonstrated incredible determination, agility and a word I don’t think we use often enough: grit. We did what we had to do to make sure we had the safest working and shopping environment possible. We prioritized that with our focus, our time and our money. Two, we really leaned into our community support efforts. We tripled down on our giving. We grew our contribution to the Sacramento Food Bank six-fold. Very, very proud of that.
Supply chain, from the very onset, with production issues and allocation required us to be incredibly agile. It helps that we already had a purpose around curating our assortments. So we just accelerated into changing the sets in our stores, adding in more small-vendor-produced healthier items and we had already repositioned our private label—it was healthier, sustainably packaged, competitively priced. And we were able to leverage our supply chain, and our private label grew 49%.
And we gave back to our team members. We gave back nearly 50% of our net operating income back to our team members. That’s a magnitude greater than most retailers.
Raley's prides itself on the internal development opportunities it offers. What has leadership development looked like amid the pandemic?
We took a quick 90-day break just to reformulate those programs so that they were able to be accomplished in a new way, because typically those programs involve bringing people together. We did that April, May and June of last year, and then we accelerated back into our development programs.
At any point in time, we have 100 people or more who are in one of three different levels of development: our leadership track program, which is kind of an introduction to leadership; our assistant store team leader development, which is getting assistant store team leaders more prepared for store leadership, that next step up, which is a big jump; and then our district leader development program, where our high-performing, high-potential store leaders are being prepared to run district-level volume, which could be 20 stores or so.
All of those programs we reignited back in June. We moved people through those in a virtual way and have graduated more than 100 people during this time.
How has e-commerce evolved for Raley's in the past year?
We already had a very robust e-commerce and digital customer experience ethos in place. We were able to leverage that when our buy online, pick up in-store grew by a factor of 7x. We do in a day now what we used to do in a week, and we learned how to do that more efficiently, we learned how to do it more profitably, we learned how to help people onboard, to enroll. I think that’s a tailwind for us going forward in our ability to meet people and serve people on their terms.
To the point of doing things differently—what did that look like? How did Raley's make e-commerce operate more profitably?
During the pandemic last spring, April, May, June, July—in those four months, we opened three new stores. In addition, we opened an e-commerce fulfillment center. We converted an existing store to a dark warehouse, and we support about two dozen stores out of that location for delivery.
That allowed us to be far more efficient in two ways: one is, picking those orders in that location was far more efficient. Second, it allowed us to open up more slots or windows in the retail stores so that we could just get more e-commerce in the pipeline. We kept [e-commerce] open, and we fought through it. We have gained far more than our share of market growth.
What are the biggest headwinds you see for the rest of 2021?
I’d say macroeconomics. How resilient is the economy? If price sensitivity becomes even a greater factor, we stand ready to make strategic price investments, but we’re mindful of that. Another headwind I think could be further disruptions to the supply chain, but I do believe that it’s starting to be sorted out. The issues of whether or not we’re on again, off again in terms of degree of lockdown—that kind of uncertainty is hard, in some states more than others. California’s been stricken pretty hard. There’s a lot of ambiguity, but I think we’ve demonstrated that we are agile and we can sort it out.
Finally, what lessons did you learn in 2020 that you'll apply going forward?
When the large CPG companies were pulling back on their line extensions and focusing on their core, we all thought in the industry that this would sort itself out faster. One of the things I’ve learned that I would have done differently then and would do differently in the future is to act faster with augmenting the assortment. And [the issues] were not just about producing food, they were also about the packaging requirements. It’s not like we ran out of water, we just ran out of plastic bottles.
The other thing I learned is to further anticipate future crises and to have a ready stockpile of safety and sanitation materials in hand. Cleaning supplies and such, that stuff has a long life, and we’ll never be caught short again.