Safeway Plans $100-Million Ad Campaign
Safeway Inc., the nation’s third-largest grocer, is launching a $100-million national advertising campaign to try to update its image and attract wealthier shoppers.
The new ads, which will begin appearing April 18 on television, radio and billboards, use the slogan “Ingredients for Life” to portray the company’s 1,802 stores as convenient places to shop for high-end meat, produce and prepared family dinners.
Analysts say Safeway and other conventional supermarkets have been suffering from something of an identity crisis in recent years, overshadowed by discounters and savvy retailers such as Trader Joe’s Co. and Whole Foods Markets Inc.
Sales at Safeway, whose holdings include the Vons and Pavilions chains, rose less than 1% last year. That was about the same as at Albertsons Inc. but fell short of the 4% rise at Kroger Co., which owns Ralphs. By contrast, sales at Whole Foods, the largest natural-food chain, rose 23% in 2004.
Safeway, based in Pleasanton, Calif., is trying to differentiate its stores from those of its rivals, said HSBC Group analyst Mark Husson. The big chains “are all a bit [the] same.”
Safeway hired former PepsiCo Inc. food service chief Brian Cornell last April to try to “brand” its supermarkets, as he had done with consumer products such as Tropicana orange juice for more than 20 years. Initially, he found that shoppers couldn’t find much of a difference among the major chains.
“Consumers told us they were looking for sweeter produce, more tender beef, fresh bakery products and restaurant-quality meals,” Cornell said. “We spent a lot of time working on the renovation of those categories.”
Safeway began the first step in the re-branding two years ago by test-marketing its Ranchers Reserve beef, which claims to be more tender than other cuts. Since then Safeway has added a line of Signature gourmet soups and sandwiches, proprietary produce varieties and more organic foods to its stores.
The company also has begun remodeling its stores, adding wood floors and more subdued lighting to better reflect its image as a high-quality purveyor of perishables. Safeway’s remodeled stores posted a 10% jump in sales last year, Husson said.
After remodeling 140 stores last year to this new prototype, Safeway expects to do an additional 450 this year, Cornell said.
“I think we all recognize that the landscape has changed,” he said. “People have been looking to fulfill their shopping needs in a number of different outlets.”
Safeway has yet to win back all the customers it lost during a lengthy strike in Southern and Central California that ended last year.
“Safeway can copy Whole Foods to create a high-end experience, and it just could rub off a little,” said David Dietze, president of Point View Financial of Summit, N.J., which manages $92 million in assets, including Safeway stock. “To that extent it could be a good investment.”
Safeway shares rose 39 cents to $18.65 on the New York Stock Exchange.
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Bloomberg News was used in compiling this report.
