Save-A-Lot

An American Discount Grocery Store

Table of Contents

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Executive Summary

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Business description
Save-A-Lot
The American Discount Grocery Store

It was about four years ago that we heard about Save-A-Lot grocery store for the first time in our

life. At the time my husband with complete different education and work background was

looking for entering an industry to open his own business due to unsuccessful journey of filling

more than 250 job application without a single interview. Rational-actor paradigm in economics

defines that people usually respond to incentives and incentives occasionally are the sources of

making wrong decisions. We are a living example of this paradigm. The presence of the financial

incentive encouraged us to step in a business without any efforts to obtaining the proper business

plan prior to investing our life long saving in advance to stepping into life-altering chain of

decision making. It took about two years from the first time that my husband met SAL marketing

manager till we opened our store in Monroe, NC with dedication of opening the second store

within the first year.

Although it took two years of investigation, series of interviews and self pay training for

SAL to accept my husband as one of their Licensee owners, It took us only six months after

grand-opening to realize grocery retailing is a dynamic and highly competitive industry with

very low profit margin and vast dependability to the skilled human resource, and it’s becoming

more so. Grocery retailing like many other food businesses are strongly tied to the economy.

Despite the fact that the U.S. economy seemingly emerging from the downturn during the past

few years, rising competition and changing consumer preferences have threatened many

operators including Save-A-Lot.

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To give you a better understanding of an American brand which is about to celebrate its 40th

anniversary, I referenced to Wikipedia with following information:

"Save-A-Lot is an American discount supermarket chain headquartered in Earth City, Missouri,

near St. Louis. The company comprises more than 1300 stores across 36 states in the United

States with over $4 billion in annual sales.

Save-A-Lot was founded in 1977 by Bill Moran as an alternative to larger supermarkets.

He opened the first Save-A-Lot store in Cahokia, Illinois, and remained with the company until

his retirement in 2006. Moran oversaw the expansion of his company from the one Cahokia store

to more than 1,000 locations across the country. He was succeeded as President and CEO by Bill

Shaner, previously COO of Save-A-Lot. Shaner began his career at Save-A-Lot in 1999 after

spending 15 years in the operations division at parent company Supervalu. In May 2011, Bill

Shaner was replaced as President and CEO of Save-a-Lot by Walmart veteran Santiago Roces,

who most recently served as senior vice president and general manager of Walmart's small

format division.

In September 2012, Supervalu announced it would close 22 Save-A-Lot stores in seven states.

Several executive changes were made by Supervalu on March 4, 2013, including replacing Save-

A-Lot CEO Roces with Ritchie Casteel. This came in the midst of plans by Supervalu to sell a

number of its other grocery chains to Cerberus Capital Management.

In October 2016, SuperValu sold Save-A-Lot to Onex Corporation.

A majority of Save-A-Lot stores are owned and operated by independent licensees. Save-A-Lot

supplies much of these stores with its exclusive branded products, but the licensed owners have

the freedom to sell other non-Save-A-Lot products at their stores. Some licensees have added

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services beyond the traditional Save-A-Lot model that includes bakeries, delis, liquor, tobacco,

money transfers, and fuel services. The distribution of licensed stores is spread across the

contiguous United States. Most of these stores are located in small rural communities

in Kentucky, Tennessee, Michigan, Indiana, Ohio, Western Pennsylvania, and Western New

York.

After announcing it would double the size of the company in 2009, Save-A-Lot began offering a

licensee incentive program to spur growth in its licensed division. Pending financial approvals of

each individual applicant, Save-A-Lot offered to provide a minimum of $200,000 in capital

assistance per new store. The program began in late 2009 and was in effect through early 2017."

The above history is a self-explanatory definition of a business in trouble with more than five

different CEOs within 6 years and incentive money plus no loyalty fee were two great motivators

to expand the business by motivating the existing owners and bringing new owners with their

capital to a troubled company which is operating based on 70% licensee stores including my

husband.

The form of the Incentive was based on 5 different payments with the big portion of it at the

opening and the remaining within 6, 12, 18 and 24 months after grand opening in form of

merchandising product. For new stores the merchandising is through the ordering by the district

manager who is selected by the corporation.

The lack of the innovation within the company caused for the financial system to operate with a

DOS- based program!!! The same program is responsible to evaluate the sales of the week the

turn-over of each product and enable to collect usable data to track the inventory.

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The incentive was not created to expand and improve the business but elongated an existing

struggle within the industry with waste of thousands dollar of the perishable merchandise either

in trash or in the most optimistic operation in local food banks.

As it was mentioned before grocery retailing is a dynamic and highly competitive industry and

with the economy seemingly emerging from the downturn, industry leaders are looking for a

better understanding of shoppers’ mind-sets. Indeed, grocery retailers in order to survive the high

competition will have to respond to important trends that are currently reshaping the competition

during past several years. The affect of the German discount stores such as Aldi and Lidl, the

health conscious of the millenniums generation, the information technology era and renovation

of online shopping, the shift of American culture away from cooking and last but certainly not

the least the entrance of the online shopping giant, Amazon in the grocery industry are the major

forces upon the current businesses.

With that being said, our 12,000sqft store at the corner of downtown area in Monroe, NC is like

a tiny drop of water at the bottom of the ocean that is trying to reach to the surface to enjoy the

warm sunshine.

After acquisition of Save-A-Lot by Onex, they announced Kenneth McGrath former Lidl

executive in April 21, 2017as the CEO of the company. McGrath is an experienced leader in the

discount grocery sector, who spent 13 years with Lidl in executive roles including CEO of Lidl

USA from 2013 to 2015 and CEO of Lidl’s Ireland division from 2009 to 2013.

During his tenure as CEO of Lidl Ireland, McGrath oversaw a period of exceptional customer

and revenue growth while also maintaining a cost leadership position within the retailer’s global

operations. McGrath was then named to spearhead Lidl’s market entry into the United States

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before leaving to become CEO of the Caribbean and Central America region at wireless

telecommunications firm Digicel, where he had responsibility for 26 markets comprising $2

billion in annual sales.

The annual SAL symposium which traditionally was held in St. Louise during early may, an

opportunity for the store owners to present in the CEO's annual report was cancelled and

McGrath after meeting with Bill Moran the founder of the company traveled with the member of

the Onex board to various regions to meet with store owners in the group of 10-15 peoples. He

announced that had his eyes on the company for few years and were hoping for the position.

During past few months he has been making numerous fundamental changes in effort to

repositioning the brand. His actions are compatible with every recent improvement techniques

that I have been introduced to within my MBA program. He is certainly walking toward the right

path, however repositioning a 40 year old brand requires a lot of knowledge, effort and most

importantly time.

From the factors that are threatening the grocery industry, online shopping and health conscious

customers do not impact the discount supermarkets with mainly low income, value seeking,

mostly government funded customers. The Giant retailers such as Walmart and German discount

store Aldi are imposing the biggest threat for Save-A-Lot to compete. Aldi which also has

entered the US market 40 years ago has been developing much stronger brand than Save-A-Lot.

At the corporate level, the new leadership has already launched the first wave price cut by

reducing about 69 different products. They are also aggressively in negotiating process to work

with new suppliers to reduce the price of milk, egg, paper and cheese. They are also in process of

introducing beer and wine to all of their stores planogram to increase the basket value of each

customer.

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Despite every effort that we have done during past twenty months, we are not anywhere close to

our projected sale of $75,000. In fact during past twenty months, the over inventory, unskilled

employees and improper marketing had cost not only our life time saving but also injection of

more than $150,000 and dedicated 80 hours per 7 days working week. About two months ago,

we were advised to close the doors due to the store financial situation. However, our

commitment to our employees and customers as well as believing in the direction of the new

CEO are what motivate us to open the door every day since then. On the other hand, closing the

doors prior to 5 years from the grand opening, requires the return of the incentive money, that we

actually never received on the top of all of our lifetime saving.

I was very grateful when my group agreed to choose my business for our project business plan. I

am honored to be able to take advantage of my team mate diligence as well as my professor

knowledge and expertise to use this project for a struggling desperate in need business. For this

business plan, Renee will be in charge of the marketing, Susan will manage the financial section,

Amy will coordinate the development and production and I will be in charge of the business

description.