Bob Miller, CEO of Albertsons LLC, took pleasure Friday in telling people how industry analysts underestimated his company. But he also admitted that he wasn't sure Albertsons would survive in 2006.
In his first public address in Boise since last year's reunification of the two Albertsons chains, Miller told a Boise State University audience of students and business leaders that his goal has always been to do a better job selling customers products they want.
When Albertsons Inc., the public company that grew from Joe Albertson's first grocery store, broke up in 2006, its best divisions - including all the stores in Idaho - were sold to Supervalu, based in Minneapolis. Its weakest divisions were bought by a consortium led by a New York private equity firm. That firm created a new Boise company, Albertsons LLC, and hired Miller to run it. Each chain retained the Albertsons name.
Some analysts gave Miller's chain few prospects of success. "The analysts all thought that they were very smart, that this was just the beginning of the end for our company," Miller said.
Albertsons LLC did in fact give up on many stores. It closed or sold most of the more than 600 stores it had in 2006. By the time an ailing Supervalu put what remained of its Albertsons Inc. holdings up for sale in 2012, Albertsons LLC had just 190 stores left, mostly in the South.
But its ownership consortium was so happy with Albertsons LLC's results that it bought the Supervalu stores and put them under Miller's control as well.
Some analysts feared large-scale closures of the Supervalu stores would follow. So far, that has proved untrue. Instead, sales have risen, by the company's account. And the consortium, which is led by Cerberus Capital Management, said last month that it would buy the larger Safeway chain later this year and make Miller executive chairman of the combined company.
Miller's appearance Friday offered a rare opportunity for Idahoans to hear him in person. He was at Boise State to receive an award.
Other highlights of his remarks:
Miller said he wasn't sure that he could turn things around when Albertsons LLC was created. "Just between all of us in the room, I wasn't 100 percent sure when we started in '06 that Albertsons name would even exist in 2012," he said. "And I think there were a lot of people who thought the same way."
NO WHOLESALE SELL-OFF
In 2006, Miller said, analysts predicted that Albertsons LLC would immediately sell all of its 661 stores, mostly for their real estate value. Albertsons closed 125 right away and sold several regional groups later, but it surprised analysts in 2007 by buying 10 Raley's stores in New Mexico, he said.
"That strengthened our presence in New Mexico, and it also showed the grocery world that we weren't solely about selling the car for parts," he said. "It was the first time we looked at acquisitions that could make sense for improving our company's profitability."
SAFEWAY TO LIVE ON
Miller hasn't decided how many Safeways will be rebranded as Albertsons. "They are stronger in some areas," he said. "We're stronger in other areas. We're going to take our time and analyze that, but both names will definitely survive. We're too big not to."
BRIGHTER LIGHTS, CLEANER STORES
In some stores, the turnaround started simply, with washcloths.
"Prior to 2006, as part of a cost-reduction plan, many of the stores had dimmed their lights, some with as many as 40 percent of the lights turned off," he said. "Well, guess what? We turned the lights back on, and what we found were stores that needed some TLC. Checkout stands needed to be scrubbed. Walls needed to be painted. Cases and shelves needed scrubbing. ... That first project - just cleaning up and doing some cosmetic repairs to the stores - helped our team take ownership of their stores."
Miller split Albertsons into regional divisions, each with control of merchandise and marketing.
"We really push decisions down to our divisions," he said. "We visit our divisions on a regular basis. We share ideas with them, and, the most important part, we have quarterly bonuses that drive our plan. ... I think we have a really great structure that gives people authority and responsibility at the local level that makes our company successful. In other words, I don't have to look too much."
Miller wants more local food-sourcing agreements like one struck recently between Treasure Valley Albertsons and Boise-based Agri Beef to sell Double R Ranch Northwest Beef.
"I would hope that our division presidents and their team are digging in and always try to do that, and I think they are," Miller said. "I think that can make us different from some national operators like Wal-Mart and even Kroger in some ways."