I've been writing about the grocery retail industry all day and I'm afraid I've had several more snacks than usual due to the fact that I'm always thinking about all kinds of goodies available at the grocery store. Nevertheless, we shall soldier on until dinner time. In this post, we look at two companies competing in the same industry for the same market share experiencing very different performance on two common financial metrics. It's Safeway versus Supervalu in the Battle of the Grocers. If you haven't already checked out Lora Cecere's post Unilever and Colgate: Two Bookends, I would encourage you to. In it, she takes a similar approach to understanding the CPG space.
Here we turn our attention to the grocery industry focusing on five of the largest global players profiled in the table below.
In a typical Supply Chain Insights research report, we systematically work through the four categories we believe matter most when understanding supply chain performance: growth, performance, cycle and complexity. Here, we'll take an abridged version looking briefly at two metrics that especially contrast the performance of Safeway and Supervalu.
Here, perhaps, it is important to insert a little disclaimer. We believe that our understanding of supply chain excellence is evolving. As a relatively young discipline, we have evolving, not best practices. Furthermore, the leaders today are not necessarily destined to be the leaders next year. In fact, sometimes leaders stumble and other companies are able to learn from their mistakes without having to repeat the mistakes themselves. Thus, our analysis is not meant to be finger-pointing, but rather a unique look at financial performance that is rarely exposed.
The table above illustrates average financial performance for the grocery retailers since 2000. The trend is clear: the cash-to-cash cycle is declining, as is operating margin, and revenue per employee is increasing. Although these trends are not truly universal, the majority of companies above demonstrate these patterns. Safeway is the only company to exhibit a growing operating margin; similarly, Supervalu is the only company to report decreasing revenue per employee over the decade. Interestingly, Supervalu also reports the highest average year-over-year growth at 8%. This relationship is examined further in the following section centered upon the growth metric.
This level of detail illuminates a clearer story that escaped us previously. Supervalu does have the highest average growth, but demonstrates a high level of fluctuation going from negative growth to double-digit growth and then back to single-digit. Safeway, meanwhile, demonstrates a stable 4% rate, but a decreasing trend from 9% at the beginning of the decade to -3% at the end. I'm not sure either of these patterns is truly enviable. Decreasing growth sure isn't good, but I don't envision many supply chain managers aspiring to wide fluctuations.
Days of Inventory
Inventory is another meaningful metric that might help bring more clarity to the grocery situation. The results are shown below.
Overall, the grocery industry seems to be making slow but steady steps in the right direction, reducing inventory in sustainable quantities without large oscillations. Interestingly, Supervalu demonstrates the lowest average over the period, but a climbing trend. Safeway on the other hand has cut 10 days on average out of their inventory. Who would you rather be? Would you like to see increasing inventory at a low starting level or decreasing values from a high point? I'm going to wager a guess most would hope for an improving supply chain (decreasing inventory) regardless of where they started.
I know there's much more to the grocery retail story and especially the relationship between Safeway and Supervalu than I've been able to illuminate here. However, I still find the financial conversation enlightening. What lessons do you see in the comparison of Supervalu and Safeway? I'd love to hear from you. You can reach me on Twitter (@indexgirl) or email me directly (firstname.lastname@example.org).