Albertsons Cos. CEO Vivek Sankaran maintains a strong conviction that COVID-19 has triggered not only a significant near-term sales lift but long-term disruption in consumer habits and the business climate that will continue to benefit the U.S. supermarket business for months to come.
“The question is, would the comps be better pre-COVID vs. post-COVID? I would argue that we’d be disappointed if it wasn't better,” Sankaran said in remarks this week at the Goldman Sachs Global Retail Conference, according to a Sentieo transcript.
Sankaran said he bases this conclusion on the effects of changing consumer rituals in the home that came with the initial shutdowns of workplaces and so-called nonessential food competitors such as restaurants, but also on the likelihood that despite an easing of those restrictions, office work will return only gradually and many competitors in the restaurant space may not come back at all.
“We've been in this now for six months. Just reflect on it for a moment. For six months, we’ve all developed new rituals on our dinners, lunches, breakfast, etc., right? And in food, rituals matter, and I suspect some of these rituals, not all of these, but some of these rituals will stick. If you eat one more meal at home vs. eating outside, that's 13% or 14% of shift into the home.
“The second thing to think about is work from home,” he continued. “I think you’re hearing more and more that people are going to spend a little more time working from home than they did before. These don’t have to be drastic changes. These have to be 10% more time, 20% more time. And when you work from home, your breakfast and lunches come home. Both are two big meals that were always eaten more often on-the-go.”
Finally, he argued, “the supply side on the restaurant business is starting to dry up,” relaying a recent experience encountering personal frustrations finding a restaurant serving Indian food near Albertsons’ Boise, Idaho, headquarters that hadn’t gone out of business.
“I think if this thing continues for six more months, I think all of these three things will become even more entrenched. So I’m cautiously optimistic that we would have a higher baseline of the business,”
How Albertsons is executing in these conditions is helping the company gain outsized share even among a fast-growing industry, Sankaran said, elaborating on a point made in a recent earnings conference that the retailer had gained market share faster in places where it wasn’t a share leader. The surge in business that came to these stores provided what he said was “an opportunity to step up into a different gear,” and leverage advantages in assortment and availability while ongoing efforts behind e-commerce capabilities and loyalty programs did their work.
“It’s just a matter of people who are entrepreneurial … making hay while the sun shines, I guess,” he said. “And if you can think of it that way, even though [COVID] is a terrible situation, they did something good out of it.”
Sankaran, who arrived at Albertsons 18 months ago from Frito-Lay, has prescribed improvements in assortment and execution in stores; expansion of loyalty and e-commerce programs; increased productivity, and talent development that has helped the company gather momentum that it rode to a successful public stock offering this year and same-store sales growth of an eye-popping 26.5% over its 16-week quarter ending June 20.
Improvements in the assortment of fresh foods—and Albertsons’ abilities to customize that selection through service departments such as floral, meat and deli—is helping to set the company apart from competitors that might be focused on more commodity offerings and limited assortment, Sankaran maintained.
“It is not just having the availability of fresh, but it’s the commitment to providing additional customization around that fresh. And that, to me, is what’s different about it,” he said. “It’s hard to be great at fresh if you don’t put the labor behind it in a store, right? You can’t keep the product cold as you want to, and so on and so forth.
“So that, to me, is the system that works at fresh,” he continued. “And I think it has proven itself as a massive advantage in this environment, especially when people eat more at home.”