Welcome to Leading Edge, a semi-monthly Q&A forum where some of the grocery industry’s top executives share their views on several current and important issues. This week’s interviewee is Dan Glei, executive VP of merchandising & marketing for Abingdon, VA-based KVAT Food Stores whose approximately 140 supermarkets in five Southeastern states trade as Food City. Glei, who joined Food City in 2014 after an eight-year stint at Ahold USA, discusses relevant topics such as supply chain challenges, the current and potential impact of inflation and the importance of  utilizing customer data analytics.

  1. Supply chain dysfunction: Has it improved over the past two months? What remain the key chokepoints? What needs to happen before you will be confident that the process and flow will return to more normal levels?

We recently addressed our internal supply chain constraints driven by our organic growth over the past three years. We became members of Associated Wholesale Grocers (AWG) and they are supplying stores in our Chattanooga division and stores west of Knoxville from their Nashville division. We remain committed to self-distribution and the addition of AWG as a distribution resource allows us to continue the growth we have planned. This transparent relationship allows a seamless integration with our stores and supplier partners.

The supply chain performance from our suppliers over the past couple of months has not changed much, it’s like what we have seen over the past year.  Allocations are not growing fast enough to meet total demand across many suppliers’ items.

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We have the same constraints like all retailers – in baby formula, peanut butter, pet food and pouch juices – driven by ingredients, packaging, and major recalls.

I am beginning to believe the service levels we all enjoyed historically may not return in the foreseeable future due to instability of inputs such as labor, ingredients, transportation, and mother nature.

 

  1. How would you gauge the impact that inflation is currently having on consumer buying habits? What can we expect if food price inflation continues to remain at levels at 10 percent or above?

We are seeing a shift toward value, most visible in own brand growth as well as a growing response to all promotions.  This move toward value will grow as inflation continues to impact consumers’ purchasing power. In turn, this demand shift will bring challenges to a fragile supply chain in the form additional allocations on value-focused items and perhaps slowing velocity on more premium items.

 

  1. As chief merchant, what must suppliers offer you that would help them sell more units?

We are seeing that cost increases are not the best way to grow sales and units. In many instances unit growth is slowing because of cost increases and reduced promotional spending by CPGs. Category units are shifting to value offerings and private brands. Suppliers need to bring ideas, initiatives and plans that grow customers, trips and transactions for their categories and brands. Also, they need to bring the resources required to move the plans our merchant and marketing team is prepared to engage to make those ideas happen.

 

  1. What have been the greatest advantages of your company’s utilization of quantitative customer data analysis?

It keeps us majoring in the majors – focused on the customers who drive our business by store.  Using the data that is compiled by Symphony Retail AI keeps us nimble in responding to demand shifts in the price/quality spectrum and customer engagement throughout the store. We can easily measure and our effectiveness of mass and personalized marketing campaigns.

 

  1. With the worst of the pandemic seemingly behind us, what key learnings have you been able to carry forward and implement in your stores or with your associates?

We learned we can do much more than we previously thought was possible. Our teams are much more flexible and cross-trained in stores and across many functional areas than we were historically. An example is a the ‘reserve’ team of 50+ associates that is trained to supplement the distribution center to address peak shipping or times when we had team members out with COVID. Communication is better than ever before with widespread use of video calls, which were used only occasionally prior to COVID. E-commerce has explosively grown and we have increased our footprint in our stores by adding providers like DoorDash full service in addition to Go-Cart (Pick-UP)  and Instacart.

Our customers reward us most for having a great experience in-store. That is, our team taking great care of them, being clean and well stocked  (not as easy as in the past),  bringing value and being local – having a direct impact in the communities where we live and work.