Retailers

Q&A With Southeastern Grocers CEO Anthony Hucker

WGB Staff photo

While a lengthy turnaround is nearing its homestretch—and its leaders contemplate the next step—Southeastern Grocers is once again finding itself at a pivotal moment. In an exclusive trade interview with WGB, Anthony Hucker, president and CEO of the Jacksonville, Fla.-based parent of Winn-Dixie, gives a forthright accounting of the chain’s improving health, the difficult decision to move forward without its Carolinas-based Bi-Lo chain, and how it relied on new digital capabilities and “muscle memory” to navigate the challenges of COVID-19 while acknowledging that that has brought “unprecedented uncertainty” to the industry and to SEG as it begins what Hucker calls its “growth phase.” To that end, Hucker shares news of a new-market expansion for the promising Hispanic-focused Fresco Y Mas banner and reveals plans for several new openings for units acquired from bankrupted rivals Lucky’s Market and Earth Fare.

anthony hucker
Anthony Hucker

The following interview took place via email Oct. 2 and has been lightly edited for style.

Jon Springer: So, you’re nearing the homestretch of a long and complex transformation plan, and suddenly a global pandemic arrives. How has COVID influenced what could be accomplished under your plans? I know many retailers have mentioned the operational difficulties it brought but also a kind of accelerant making the investments they made until COVID hit pay off sooner, and the opportunity to gather still more investment fodder. What’s the view been like from your perch at SEG, in the short and long terms?

Anthony Hucker: I’m proud to tell you that our transformation has continued in earnest. While the pandemic has certainly affected our customers and our communities, our transformation continues right on track, which is a powerful testament to the resilience of our associates and durability of our long-term strategy.

In some cases, COVID-19 has accelerated plans already in motion. For example, we have continued to expand our e-commerce partnerships and digital offerings, as many customers now prefer to shop differently with us due to health concerns. This is a lever we’ll keep pulling; more than 80% of the customers acquired during COVID-19 continue to shop with us and nearly half of these customers are engaging digitally.

With respect to the long-term outlook, I think all the players in grocery retail face one common challenge:uncertainty.

The market dynamics that factor into our sector have always conspired to create complexity; however, we collectively now face unprecedented uncertainty from the pandemic—uncertainty for stimulus, health and safety legislation at the federal and state levels and macro-economic effects of the virus. As it’s been widely reported, the virus has put additional pressure upon the supply chain and added costs into the business via investments in health and safety.

The good news is that we have quickly adapted how we’re running our stores at SEG, we’ve demonstrated that our supply chain can bend without breaking—and we’re continuing to deliver for our customers. Most importantly, we’re keeping our people safe.

We’ve seen some outstanding financials (comps and profits) for supermarkets that have reported results in this period. Has SEG has gotten a “fair share” of those benefits as well? More? Why or why not?

Our strategy for COVID-19 has been informed by two principles that have always guided us, regardless of circumstance. First, we put people at the forefront of every decision. We considered the impact and the benefit that every single decision would have on our associates, our customers and our communities. Second, we listened. We listened to their concerns, to their ideas and to how we could precisely meet their needs in this unprecedented moment.

Simply put, that strategy has proven an effective foundation in our response. And as a result, we have exceeded even the high bar for performance we set for ourselves during this period.

Fortunately, our transformation strategy was already well underway. Our strong culture, our growing e-commerce strategy, our market-leading fresh, our compelling range … we had these initiatives in place before the crisis, and they have certainly delivered.

I also can’t minimize the importance of our muscle memory—the process, protocol and discipline—built through decades of natural disaster response. Our team never blinked, even in the earliest days of the pandemic. We’re fortunate to have steady, confident hands steering our supply chain and operations.

Aside from keeping the right products on shelf, we’ve benefitted from making our customers—and our associates—feel safe when shopping with us. We were early leaders in our footprint for implementing aggressive safety protocols and creating specific times for our first responders and high-risk customers to shop.

As to the transformation, last time we talked about a year ago you expressed confidence in having addressed the basics right and was prepping to, in your words, “getting ourselves fit for purpose, which is in service of getting ourselves set for growth.” Where are you along that journey? What’s still ahead?

You have a great memory! I’m happy to tell you that we are precisely where we planned to be at this moment. We are effectively at the midway point in our third year, and we find ourselves just on the verge of shifting into our growth stage of the strategy.

At this point, we have significantly improved the financial health of the business and have advanced in key business metrics that we established in 2017—most notably in comp sales, debt reduction and store renewals.

Looking ahead, there are a number of initiatives underway that will continue to generate both traction and progress. First, we’ll be focused upon our store experience that is both locally relevant and customized to our customers and communities. We will progressively offer targeted promotions and rewards through our mobile apps and website to encourage sales growth strategically and sustainably. 

Second, we’re seeing encouraging results from our multi-banner strategy, and we believe that all have significant opportunity for growth. In fact, I’m happy to share with you that we’ll be expanding into a new market with our Fresco y Mas banner in Lehigh Acres (Fort Myers, Fla., market) on Oct. 21.

We will continue to renew our stores on a progressive pace, as that is essential to evolving our store experience. Our goal is to have 95% of our store fleet renewed by 2024.

Are you where you want to be—or aspire to be—in terms of a digital offering to shoppers and digital capabilities as a retailer? We are absorbing a number of announcements that would be appear to be advancing the latter front, but can you share your perspective here on where SEG is as both as a digital seller and digitally capable retailer?

Historically, we haven’t been an early adopter in terms of digital offerings. We’ve opted instead to focus our innovation within our store experience, our fresh offerings and our Own Brand offerings. However, that balance is progressively shifting in response to our customer preferences and an acceleration of this dynamic from COVID-19.

Moving forward, our approach will be firmly rooted in data and crafting a connected personalization with our customers in a distinct 1:1 manner. This approach will have a foundation in a smartly localized range, strong service model and a commitment to the communities in which we operate.

And we’ll continue to advance in our e-commerce offerings, as we now have more pickup/delivery available in 87% of our stores. Those shoppers typically have a basket size twice that of traditional in-store customers.

Last, we’ll be looking for opportunities to evolve our partnerships; as you know we’ve recently announced a partnership with Uber. This was an exclusive to the Florida market, which is obviously a state critical to our success. We are leveraging our deep penetration in this quickly growing and lucrative market.

Exiting the Bi-Lo banner must have been a difficult choice to make. Why was it the right one for SEG at this time?

No question it was a difficult choice. Both from a leadership and cultural perspective, it was incredibly difficult, given the history and relationships built over decades.

However, growth and resilience in this industry are often dictated by tough decisions. Our strategy and our investments have been applied with equal expectation across all banners. On balance, those investments have generated significant return.

Bi-Lo has experienced incremental gains in performance as a result of our evolution and innovation within product offerings, loyalty programs and e-commerce options. Unfortunately, the performance within the Carolina markets didn’t keep pace to sustain our long-term growth goals. We are in a point in our transformation journey in which we have to keep the momentum we’ve built across the business, so although it was a difficult decision, this was the moment to make a strategic shift and support our core footprint and banners to their full potential.

Pending final Federal Trade Commission approval, which is proceeding as anticipated, the proceeds from this transaction will be used to further strengthen our balance sheet and continue to invest in the growth and development of our core banners.

Assuming Bi-Lo is largely off the table in 2021, SEG behind Winn-Dixie, Harveys and Fresco y Mas will be primarily a Florida-based company—and just when Kroger is due to debut its big Ocado virtual offering in that state without accompanying stores. Are we right to speculate on possibilities that SEG and Kroger could work together somehow? What’s next for the retail food business in Florida?

The food retail business in Florida is highly dynamic and I expect that to only increase. Our home state is experiencing rapid population growth and that trend will only enrich an already diverse set of major metropolitan areas and unique communities that represent a broad range of cultures, cuisines and regional tastes.  We see all of it as a tremendous opportunity and we’re eager to show our customers—both new and existing—how our banners can deliver exactly what they need from their neighborhood grocer. 

As the transformation has proceeded, what signposts can you point to that mark your progress? And finally, what would you like to be able to say about SEG is when it’s all over?

We are making steady progress and we are on our expected pace. We feel increasingly confident in the accuracy, efficacy and validity of our long-term strategy. However, none of this progress would be possible without our greatest asset: our people. We are a people-first organization and that is truly the foundation for the cultural transformation we’ve put in place the last three years. Our ability to recruit, retain and develop our people has improved—as demonstrated by a 30% increase in our associate trust scores since 2017. We are very proud of recently earning the distinction as a Great Place to Work.

Through the hard work of our associates and commitment to our strategy, we have made this organization “fit for growth,” by reducing our debt and consistently outperforming our plan. We now have [six] consecutive quarters of positive comps, which transcends the increased demand associated with the pandemic.

We are growing in our core footprint through new store acquisitions and a new store opening in our home market of Jacksonville to start 2020. As you know, we acquired four Lucky’s Market stores located in Fort Myers, Gainesville, Lake Mary and Melbourne and four Earth Fare stores located in Boynton Beach, Jacksonville, Lakewood Ranch and Viera.

Our new stores Jacksonville (Mandarin), Gainesville, Lakewood Ranch and Boynton Beach will be opening on Nov. 11. The remaining stores will be opening later in December, and our Viera store will open in Q1 2021.

We have evolved the ways in which we engage with our customers, most notably through our SEG rewards loyalty program and mobile apps. Our loyalty program promotions have already exceeded our annual goals for incremental sales in 2020. We have more than 7 million active loyalty program customers and 85% of our transactions are tied to the program. And because of our flexible—and customizable—rewards and promotions, we know that customers who download the app spend significantly more with us because they’re seeing the value. We’re on pace to have 3 million customers enrolled in the app(s) by end of year.

We have established real momentum on our store renewals, with more than half of all stores completed in the past three years. It’s been proven that these investments made into each community resonate with the customers and create sustained loyalty to our banners. And despite the complexities of the pandemic, by the end of 2020, we will have renewed a total of 33 stores this year and opened eight new stores for our communities.  

As for your question about what the future holds for SEG, I can tell you a few things.First, we have put ourselves in a position to have some flexibility in our path forward. That’s an accomplishment for which I’m very grateful to our associates.

And it’s reasonable to expect that some things will be evolving, such as our store experience, our range and how we connect with our customers. The fact is that in our nearly 100 years of serving the Southeast, we’ve never stopped evolving. And we never will.

Southeastern Grocers is the engine under the hood, but our banners and stores are what deliver a tailored, customized experience to our customers and communities. The needs of our customers and our communities are always shifting, but their essential expectations remain largely the same. I can tell you that quality, service and value will remain as hallmarks that our customers can count on for the next 100 years.

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