Taking Stock

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After Record Year With 44 New Stores, Weis Tells Plans To Continue Momentum

The past 12 months proved to be the busiest period in Weis Markets’ 105-year history. The Sunbury, PA merchant acquired 44 stores and, after remodeling, reopened all of them within 96 days. The acquisition of five Mars Supermarkets, 38 Food Lion units and one Nell’s Market were part of a total of 146 projects the company’s store development team completed last year.

And according to Weis chairman and CEO Jonathan Weis the momentum is continuing during the first three months of 2017. Weis, along with COO Kurt Schertle and senior VP-merchandising & marketing Richard Gunn addressed nearly 700 vendors at the regional chain’s annual vendor strategic alignment summit meeting held earlier this month in Hershey, PA.

“I’m happy to re-emphasize what I said at our last strategic alignment meeting in 2016: Weis Markets remains a buyer, not a seller. We’ve proven that point over the past 12 months,” Jonathan Weis asserted.

He added that the company, co-founded by his grandfather in 1912, will continue to invest in its growth this year with a $100 million cap-ex budget that will include 14 remodels, two gas stations and a major distribution center expansion.

“As a result of our acquisitions, we have completed several years’ worth of growth in one. This allows us to compete in new markets and it makes us a bigger customer and a more valuable account for your business,” Weis proclaimed when addressing a packed house of suppliers, distributors and food brokers.

Along with Jonathan Weis, chief operating officer Kurt Schertle is one of the drivers of Weis’ recent success. In his remarks, he provided the vendors with an overview of the market landscape and how Weis plans to continue to upgrade many of its systems and operations to remain ahead of the competitive curve.

The 45-year old industry veteran noted recent key industry changes have included the Ahold-Delhaize merger (which is heading toward a more decentralized organization); the effects of Albertsons Safeway acquisition and regional consolidation and the shifting priorities away from retail at Supervalu. He also noted the growing impact of online competition and mobile ordering where studies have suggested that as much as 40 percent of all center store and non-food items will be purchased via the Internet by 2025.

Schertle told the vendors it was important that Weis step up its online presence, remain competitive with price-driven merchants such as Aldi, Wal-Mart and the soon-to-be new market entry, discounter Lidl (Weis is currently offering 180 “Valu Time” products comparable in price to its discount competitors). He also noted Weis’ priority to remain on trend both with category growth and store improvements. At the store level those upgrades include additional beer and wine cafes (50 currently exist), which was aided by a change in Pennsylvania law that allows food retailers to sell wine in its stores.

The former Supervalu executive, who began his career at the old Metro Food Markets/Food Basics banner in Baltimore, was particularly proud of the efforts of the company’s associates in completing the conversion of its 44 newly acquired stores last summer and fall. “Associates from every part of the company played a key role in these conversions – IT, store support and supply chain. Our store development team also played an important role,” Schertle declared, adding that more than 2,500 additional associates were hired and trained to accommodate the growth initiative.

Looking forward to the remainder of this year, Schertle said the company will focus on the overall customer experience while also adding productivity “enhancements” in all its stores. He also reviewed gains made in Weis’ pharmacy operations where sales grew an impressive 8.3 percent at its 138 in-store pharmacies. “Pharmacy is an overall sales builder through health and wellness promotions,” Schertle affirmed.

He was pleased with Weis’ gains in sales and earnings last year. With 44 new stores added to the fold, obviously revenue would increase significantly, but Schertle pointed to the retailer’s comp store sales for the year which were up 2.9 percent (significantly better than most of its industry peers) while net income also grew 46.6 percent. In a very difficult economic climate where deflation created a big hurdle to match comps from previous years, Weis achieved its third consecutive year of increased comp store sales. When assessing overall company sales (which were $3.1 billion last year), Schertle felt that once the new stores have been fully absorbed into Weis’ revenue stream coupled with the company’s ongoing solid same store sales performance, Weis’ total annual revenue will be in the $3.6 billion range by the end of the year.

In addressing the vendors at the summit, Richard Gunn focused on several key priorities for Weis Markets going forward. Those areas, where both consumers and members of the trade will see improvements, included advertising/marketing, enhanced value image and store upgrades and refinements.

Gunn noted Weis has broadened its message delivery network to include print, mail, radio, TV and digital, all of which has created more impact with the company’s customers. From information improvements such as providing customers with a more detailed receipt to more visible ones such as promoting its lowest price guarantee program (on specific advertised items), “driving home our value image is also one of our key 2017 initiatives,” Gunn affirmed. The former Food City executive, who joined Weis two years ago, updated the audience on its “click & collect” program which now includes 36 stores with 13 more units to be added this year. Gunn said his company expected to add mobile ordering by summer, which he described as a huge opportunity.

The Virginia native briefed the vendors about its ongoing reset program which now includes one ISE (In-Store Execution) vendor for every two stores; two resets per week; reset work performed at night which will create a speed-to-shelf turnaround in less than a week.

Gunn amplified Schertle’s “on-trend” focus, revealing that by prioritizing areas such as gluten-free, sushi and K cups, both Weis and its participating vendors have really benefited.  He praised the contributions from Weis’ fresh departments – meat, produce, deli and food services – where sales grew in all areas (including meat and produce where deflation was significant). Also gaining revenue was Weis’ bakery departments, aided by a new bulk sales program.

During the past few years, Weis has spent significant capital on improving and enlarging its distribution center in Milton, PA. In 2016, the company’s weekly deliveries increased 25 percent and it expanded its overall fresh capacity, too. This year another 105,000 square feet of refrigerated pace and 110,000 square feet of frozen capacity will be added giving the primarily self-distributed retailer 1.3 million square feet of warehouse space. It has also hired 160 new associates to meet Weis’ growth.

Late last year, Weis began utilizing the services of C&S Wholesale Grocers, the nation’s largest independent retail distributor. C&S, which sold Weis two stores (Hanover, PA and East Berlin, PA), will now supply Weis with some HBC and general merchandise items, allowing Weis to utilize that space in its own warehouse to carry faster moving products.

Gunn also appealed to the vendors to become more actively involved with Weis’ “Fight Hunger” program, a cause “that is very important to me.” He said that this year’s expanded program will benefit food banks in seven states and that corporate donations will be given to complement monies that are raised. Gunn had one more message to the vendors in the form of “the big ask”: “We want to set up a meeting with your senior supply chain executives and our distribution team, including myself, our senior VP Wayne Bailey, Terry Wallace, our senior procurement manager, and Gary Kinneer, our director of managed transportation. Our goal is a comprehensive review of our buying model. Can we make improvements that will help us lower our costs? Are there additional backhaul opportunities? Mixing center opportunities?”

This was the biggest of all of Weis’ annual vendor summits which began modestly with a small gathering in Hagerstown, MD in 2009. It was also the best attended, reflecting Weis’ continuing growth.

And throughout its exciting recent run some things remain unchanged: its ability to execute at a high level, the fairness in the manner it treats its associates and its vendors and the grace and humility in which it comports itself on a daily basis.

There’s little question that without a very high level of execution by CEO Jonathan Weis, COO Kurt Schertle and their team, the Sunbury, PA regional chain could not have reached the stellar performance levels it has achieved in an extremely competitive environment. Opening 44 stores in 96 days is a microcosm of the company’s flexibility and skill. And when you talk to Weis’ associates and to its vendors, the common theme is “fairness and respect.” That’s how we’d all like to be treated, but Weis is clearly walkin’ that talk. Much easier said than done. And after three consecutive strong years of performance, it would be easy to feel a bit full of yourself. That’s never been the case at Weis where the culture continues to be one of focus, selflessness and remaining humble.