Retailers

Albertsons Gains 11 Million Households in 2020, Posts Record Sales Year

Digital initiatives were a ‘key catalyst for growth,’ says CEO Vivek Sankaran
Albertsons Cos.
Photograph: Shutterstock

Delivering its ongoing message of “transformation,” Albertsons Cos. President and CEO Vivek Sankaran discussed the company’s robust growth, accelerated digital presence and enhanced technological capabilities as key factors contributing to record sales and historic success at its recent fourth-quarter 2020 earnings call.

“We accelerated digital transformation across our company. Almost every critical capability in our company is now enhanced with or enabled by technology,” said Sankaran, according to a Sentieo transcript of the earnings call.

Sankaran also pointed to Albertsons “deep relationships” with its customers; a fresh-focused Own Brands portfolio that is as deep as it is wide; an enhanced loyalty program; and a suite of omnichannel capabilities that allow customers to shop with Albertsons in any way they want, as other important factors to its success.

Calling the company’s digital initiatives “a key catalyst for growth,” Sankaran noted that in the fourth quarter, Albertsons’ digital sales growth accelerated to 282%, with growth of 258% for the full year. Meanwhile, membership for its Just for U loyalty program continued to accelerate sequentially and has been up over 20% year over year each quarter. It is now at 25.4 million members with a 93.1% retention rate. These members have been a key driver of share gains as they spend 2.6 times more than nonregistered customers, the company said.

“We’ve also increased the number of actively engaged customers, almost 10%, who spend nearly five times more than a nonactive customer,” said Sankaran, who adds that Albertsons’ retention rate is 34% greater when a household is actively engaged in its loyalty program.

Perhaps more importantly still, Albertsons Cos. continues to build its shopper base. “We closed 2020 with almost 11 million more identified households shopping our stores than in 2019, allowing us to understand which categories they are purchasing with us for the first time, how often they’re coming back to repurchase, how they’re progressing up the loyalty ladder and their incremental spend levels as they migrate from in-store to omnichannel engagement with us,” said Sankaran.

Albertsons, which ended fiscal 2020 with three times the number of omnichannel households compared to fiscal 2019, also saw that as customers moved into omnichannel, they increased their spend in its stores with a net growth of 20% per household and a total spend rate double that of an exclusively in-store shopper. Even the most loyal households early last year purchased two times the number of categories in Albertsons stores than the prior year, noted the Albertsons CEO.

At the start of the fiscal 2020, Sankaran shared four strategic pillars of Albertsons’ transformation plan, including in-store excellence; accelerating digital and omnichannel capabilities; driving productivity; and strengthening talent and culture. During the earnings call, Sankaran provided the following update on the company’s progression in transformation:

In-Store Excellence

As to in-store experience, Sankaran said the Boise, Idaho-based grocer delivered excellence through differentiated one-stop shops supported by the quality, variety and depth of its fresh and Own Brands offerings. Other standouts in fresh excellence, said the CEO, were seafood, meat and floral, as customers continue to spend more time at home. Albertsons sees this trend continuing.

Albertsons continues to expect Own Brands penetration to reach 30% in the next few years. “We are continuing to innovate and expand our portfolio of brands, moving quickly to meet evolving consumer preferences,” said Sankaran. “As a result, we launched over 1,200 items in fiscal 2020, well above our stated goal of 800-plus new items for the full year.”

On the fresh front, Albertsons is also working to expand the rollout of its ready meals program in its United division to other divisions, where it make ready-to-eat, ready-to-heat and ready-to-cook meals in its stores.

Delivery, Drive Up & Go

Albertsons not only grew its physical footprint—opening nine new stores and completing 409 upgrades and remodel projects during fiscal 2020—it also accelerated its digital and omnichannel capabilities. 

Digital continues to be a key growth driver for us as we achieved over 200% digital sales growth in each quarter this year, demonstrating the strength of our digital offerings to capture consumer demand for more convenient shopping experiences,” said Sankaran.

Albertsons Drive Up & Go grew over 1,000% in the fourth quarter and 865% during fiscal year 2020, the company said. Having launched 343 new Drive Up & Go locations in fourth-quarter 2020, the program is now available in 1,420 Albertsons stores. The company, which further sees incremental Drive Up & Go sales as well as an acceleration in consumer preferences towards digital, has invested over $300 million to accelerate its offerings and launch new capabilities, the company said.

On the delivery and pickup customer service front, Albertsons said it has improved its on-time tilling and delivery to 95%, enabling consistent on-time delivery and Drive Up & Go pickups. Albertsons has also trialed an automated electric delivery robot powered by Tortoise and piloted a number of walk-up-and-go options, including walk-up counters, pickup lockers and stand-alone kiosks. 

“Our mix of e-commerce has improved dramatically,” said the CEO in response to a question on the earnings call. “But we’re still behind some others, right? And that’s why we are going to continue to invest in this business because we know that it’s resonating." 

To improve its profitability, Albertsons said it has shifted delivery at many of its locations’ third-party logistics providers to improve speed and lower costs. “We improved our picking software, optimizing and standardizing the picking process to drive cost reduction through increased picks per hour and improved auto prioritization,” said Sankaran.

Albertsons, which is opening its third microfulfillment center (MFC) this week, has learned from its two current MFC installations, that as in-stock commissions have improved, “labor cost per order can be dramatically reduced without compromising the breadth of assortment and the customization a customer can get from the store,” said Sankaran. Albertsons is opening its third MFC this week and has plans for an additional six before the end of our fiscal year.

Profound Productivity

Albertsons’ third pillar of transformation is driving productivity to support reinvestment in the business and help offset inflation, Sankaran said. “We achieved approximately $500 million in gross productivity savings in fiscal 2020, as a result of our actions with large contributions from indirect spend, labor productivity and shrink reduction.

“Given our progress to date and incremental opportunities we see ahead, we now expect to exceed our goal of $1 billion in gross savings by the end of fiscal year 2022 and have increased our cumulative target to $1.5 billion,” continued Sankaran. “The additional $500 million in savings is principally driven by new projects related to the transformation of our supply chain and the additional cost-reduction programs and further optimization of our promotional spend.”

Talent and Culture

Albertsons’ fourth priority on the journey to transformation is strengthening its talent and culture. The company most recently hired a new chief data officer to lead efforts in translating data into an enhanced customer experience.

 

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