Len Lewis
Safeway/Steve Burd
April 2013

When Steve Burd retires as CEO of Safeway Stores in May after 20 years, he will have transformed a middle-of-the-road supermarket with spotty customer service into a nationally respected retailer innovator in marketing, merchandising, expense control, healthcare and private label.

But will Safeway retain the same commitment to innovation that's been the hallmark of his leadership for two decades?

Well, consider the facts.

Burd's success is deeply rooted in Safeway's culture. And his successor is unlikely to pull back on profitable, high profile programs like store brands which now account for an estimated 25% of the chain's annual $43 billion in sales.

When Steve Burd joined Safeway as president in 1992, it was under intense pressure from low margins, high costs and lackluster consumer demand.

His first challenge at the 77-year-old chain was to develop a culture of thrift by instituting major cost reductions.

Industry observers say that there are few people in the grocery business then or now with as much financial discipline. In fact, some believe Safeway might not have survived without it.

However, he didn't cut costs in-store. Just the opposite.

Burd arrived at a time when many Safeway stores were in pretty bad shape since little or no investment had been made for some time. That's when he launched a renovation program designed to reinvent the chain.

Brad Edmondson
The Decade in Spending
April 2013

If anyone tells you they know which products your customers will buy a year from now, my advice is: don’t rush to sign a purchase order. Consumer spending is powerfully affected by sudden changes in economics, technology, attitudes, law, and the weather No one can accurately predict things more than a few days in advance. I follow demographic trends because unlike those other factors, demographics move slowly and are predictable. Demographics might not be destiny, but they do reveal enduring patterns in consumer spending. If you don’t believe it, let’s take a look at how spending changed over the last ten years.

According to the federal Consumer Expenditure Survey, the average American household spent 1 percent less in 2011 than it did in 2001, after adjusting for inflation. I probably don’t need to tell you why spending did not grow in the last decade. Average wages and salaries barely kept up with inflation, unemployment was extremely high, and some prices rose dramatically. The price of gasoline nearly tripled, for example. You probably knew that. But did you know that overall spending on transportation declined 14 percent? It happened because consumers reacted to the rising price of gas by holding on to their cars longer. Spending on vehicle purchases declined 41 percent between 2001 and 2011. Economists call this price elasticity. When we have to spend more on essential things like gasoline, we choose to cut back on nonessentials like a new car.

You can see elasticity in food spending, too. Food is the third-largest major spending category, after housing and transportation. Spending on food at home decreased 4 percent over the last decade, after inflation, but spending on food away from home was down 8 percent. Non-essentials like restaurants always suffer more during recessions.

Sometimes technology pushes spending trends. Household spending on printed reading material decreased 36 percent over the past decade. Now, people are still reading – they are just doing it online, which is why spending on audio and video services increased 17 percent. New laws affect spending, too. Consumer outlays for tobacco products declined 10 percent over the decade. This sounds like a modest gain for public health, but it’s actually a major victory. Consider that the price of tobacco products nearly quadrupled over the same time period. As taxes on cigarettes got higher, more smokers cut back or quit.

Some changes in food spending are driven by changes in attitudes. In the last decade, spending on meat absolutely crashed. Consumers spent 28 percent less on beef and pork, 16 percent less on seafood, and 20 percent less on chicken. It wasn’t price, either, because while the price of most meats rose, the price of chicken did not change. What changed was what people wanted for dinner. Spending on dairy products decreased only a little bit, spending on eggs was up 12 percent, and processed vegetables were up 20 percent. Consumers still want their protein, but more of them are getting it from beans or dairy.