Taking Stock

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Despite Acquisition Disappointments, Burd Was Innovator, Game Changer

Steve Burd, Safeway’s soon-to-be retiring CEO, has plenty of industry critics. Over the years he’s taken his hits as an uncreative merchandiser, an executive with limited people skills and a leader whose acquisition skills were generally below par (Genuardi’s, Domenick’s, Randall’s). Some of that criticism may be warranted, but to me Steve Burd is clearly a first ballot Hall of Fame member as an industry game-changer. No supermarket executive over the past 20 years has influenced and altered the way the industry analyzes itself more than Burd.

Obviously a charter member of the 30 pound brain club, Burd’s skills as a micro-manager, his financial and HR acumen, his tireless work ethic and tenacious approach to managing a business as large as Safeway’s place him in a special distinguished category in the food retailing business.

Remember, when Burd joined the Pleasanton, CA chain as president in 1992 (under then CEO Peter Magowan whose family has been connected to Safeway since the early 1930s), the company was bloated and directionless. The store base was old and small and, in most head-to-head battles with existing or emerging competitors (including alternate channel retailers), Safeway came out on the short end.

A year later when Magowan bowed out and the board named Burd chief executive, his approach to change was vastly different than the usual “huff and puff” style of the day. From his previous career as a management consultant (Bob Tobin, former Ahold USA and Stop & Shop CEO, has told me several stories about Burd’s diligence and eagerness to learn the grocery business after Burd was assigned by KKR – which acquired control of Stop & Shop in 1988 – to work at the company’s headquarters in Quincy, MA), he learned that the devil was really in the details and from a different purview could understand the significant waste and lack of efficiency that plagued the business and relegated to its “one percent of sales” earnings image.

From the unique perch, Burd analyzed every aspect of the business – logistics and distribution, in-store labor costs, better deployment of resources, (especially technology) and a review of its relationship with its many labor unions.

Steve Burd was relentless in his quest to eliminate waste and create an administrative template that had never been seen in any aspect of retailing, especially the supermarket segment. I can recall many financial meetings over the past 15 years when Burd’s execution before the analysts was akin to Michael Jordan’s performance on the basketball floor. Burd was that good.

However, once you take most of the cost out of the system, you’ve got to show the customer something else. And after the first wave of store enhancements, Safeway’s stores began to look more vanilla. With the help of then marketing chief Brian Cornell (now CEO of PepsiCo Americas), Safeway reinvented itself though its Lifestyle store formats. The company enjoyed a solid 10 year run with Lifestyle, but in the past few years the economy, the emergence of new and diverse competition and Safeway’s slowness to become more price aggressive have produced flat sales and a backsliding stock price.

Safeway could certainly use a more Kroger-like creative approach, one which features more merchandising creativity and which gives the divisions more clout and input into what affects their business in a given market(s).

Still, Burd excelled in areas that were intuitive to his strengths. The Blackhawk gift card network, Safeway’s deep dive into building its private label business, its proactive approach to health care and even its usage of digital technology (highlighted by its new “just for U” platform) are all indications that Burd remains the premier thinker in the business.

For years, we’ve heard analysts claim that Burd would never retire – he was going to be Safeway’s CEO for life – but I never believed it. He is still good at his job and for a man of 63, is incredibly fit and looks 15 years younger than his age.

And his comments as they relate to his future, especially with his deeply-rooted interest in health care, aptly summarized his situation: “While I still have the high level of energy and enthusiasm I brought to the company 20 years ago, I need more personal time and, given my extensive work in health care, I want to pursue that interest further.”

We wish Steve all the best in his next endeavor. I’m certain we’ll be hearing a lot more from a man who not only transformed his company over the past 20 years, but also changed how the industry is now run. That’s my definition of an innovator and a pioneer.