Albertsons CEO Shares Grocer’s Plans for the Future
While Albertsons Cos. CEO Vivek Sankaran expressed his disappointment over the grocer’s failed merger with the Kroger Co. during its Q3 earnings call on Jan. 8, he was also enthusiastic about the company’s future. Sankaran used the call to discuss the company’s wins over the past two years, as well as to give an early view of its strategic priorities moving forward.
Albertsons stayed busy during its merger proceedings with Kroger, which began in October 2022 and ended last month when a federal judge blocked the deal from moving forward. After that, Albertsons terminated the merger agreement and sued Kroger for willful breach of contract.
Sankaran stressed that the grocer continued to invest in its four top priorities during that time, including driving customer growth and engagement through digital connection, enhancing the customer value proposition, modernizing capabilities through technology, and driving transformational productivity. Albertsons has also been busy working toward enhancing the customer value proposition and driving transformational productivity.
Engaging Customers
In an effort to engage customers, Sankaran said Albertsons has invested in the growth of four digital platforms that help increase both sales and customer lifetime value, including e-commerce, loyalty, pharmacy and health, and mobile app integration into stores.
“Our investments in e-commerce have driven sales penetration to over 7% of grocery revenue, with a top-performing market over 9%,” Sankaran explained. “This growth, which is higher in our first-party versus our third-party business, has been driven by the development of new capabilities in our fully integrated mobile app, and improvements in quality, speed and convenience of Drive-Up and Go and in-home delivery.”
Continued Sankaran: “While we have grown this business significantly and faster than the market, it is still underpenetrated compared to industry benchmarks and is one of our biggest growth, customer acquisition, and customer retention opportunities.”
Capturing those opportunities will include the rollout of a store-based certification program that will help ensure the delivery of a consistent, elevated level of customer service, along with a series of targeted marketing initiatives to help grow sales and penetration.
Leveraging Loyalty
“Our loyalty program is integrated into our mobile app and is a key engagement tool for our business,” Sankaran said. “It is the entry point for digital and personalized marketing, and a primary contributor of data to our retail media collective.”
In April 2024, Albertsons launched an updated loyalty program that made it easier for customers to earn points and redeem coupons, fuel and grocery rewards, and also to redeem points for dollars off their grocery bill. According to Sankaran, the grocer has seen more frequent engagement, higher attention and increased customer spend.
The company expects to continue to see increased adoption, and plans to leverage strategic partnerships to provide more loyalty and rewards options.
Pharmacy and Health
Albertsons’ investments in pharmacy have driven sales penetration to more than 11% of total annual revenue, driven by core script growth, immunizations and best-in-class service, Sankaran explained. It has also been driven by the integration of pharmacy offerings into the company’s mobile app through Sincerely Health, its proprietary digital health-and-wellness platform.
“Although the pharmacy business is financially devoted, cross shoppers between grocery and pharmacy are exceptionally valuable customers, spending three times more and engaging across all service offerings,” Sankaran said.
Going forward, Albertsons believes Sincerely Health will continue to grow as a top loyalty driver and a catalyst for introducing immunization and pharmacist-administered treatment. The company also expects to capitalize on script and immunization growth from the continued closure of traditional pharmacy stores.
In-Store Mobile App Integration
“When our customers are in our stores, we want them to engage with us digitally,” Sankaran said. “To enable this, we launched an in-store, geolocated mobile feature that delivers real-time coupons, helps shoppers locate products and plan meals, and assists customers with their shopping lists.”
Sankaran expects to see continued increases in customer utilization of the new feature and said the company is planning to launch additional capabilities to drive even deeper engagement over time.
Coming Together
With all of these digital platforms coming together, Albertsons is generating digital inventory and data that is fed into Albertsons Media Collective, which was brought in-house during fiscal year 2022.
“Since then, we have invested significantly in building industry-leading technologies to deliver an easy-to-use, dynamic and transparent measurement platform, which is improving endemic and non-endemic brand reach,” Sankaran explained. “We've also improved our ability to define shopper audiences, run targeted media campaigns, enhance product offerings and achieve parity in campaign measurement.”
According to Sankaran, Albertsons Media Collective is currently growing faster than the market, and the grocer will continue to invest in the platform while building new partnerships. Most importantly, Sankaran stressed that the Collective continues to be one of the largest opportunities Albertsons has to fuel reinvestment into its business.
Enhancing the Customer Value Proposition
Sankaran explained that Albertsons will continue to enhance its customer value proposition by working with its brand partners to strategically invest in price in certain categories and markets, while also increasing its own brand penetration.
Investing in technology capabilities is also a priority when it comes to customer value, Sankaran said. “Over the last few years, we have invested strategically to make technology the key enabler of all major future growth and productivity initiatives,” he said.
Those investments have included migration to the cloud; the launch of end-to-end e-commerce capabilities; the digitization of pharmacy and health; state-of-the-art tools for pricing and promotion; the enablement of self-checkout; productivity tools to manage replenishment, shrink and labor; new supply chain systems; and its retail media platform.
“These investments have created long-term capabilities that will continue to allow us to accelerate the transformation of our operating model going forward,” Sankaran said. “They also position us well to take advantage of the evolution of AI and machine learning to elevate our core business processes.”
Driving Transformational Productivity
Finally, Sankaran explained that Albertsons has continued to develop a productivity engine that is designed to systematically improve the efficiency of its business while also improving costs. Over the next three years, the company plans to deliver $1.5 billion in savings to invest in its customer value proposition and growth initiatives, while also offsetting inflationary headwinds.
To achieve this, Albertsons is leveraging its consolidated scale to buy goods for resale, rebalancing its on-shore and off-shore activities, and automating its supply chain through the rollout of a new warehouse management system.
“By the end of 2025, we expect 30% of our distribution volume to be automated and our [warehouse management system] to be fully implemented companywide,” Sankaran said. “These supply chain initiatives improve in-stock conditions, differentiate our fresh quality, lower our cost to serve, and improve our end-to-end data analytic capabilities.”
As for in-store operations, Albertsons is leveraging a more robust technology platform to drive enhanced efficiency, improved customer experience and deeper associate engagement. The grocer has implemented AI technologies to reduce inventory shrinkage and improve the customer and associate experience, and is also expanding technology utilization in its produce departments to drive increased sales and to reduce shrink.
As of Nov. 30, Albertsons Cos. operated 2,273 retail food and drug stores with 1,732 pharmacies, 405 associated fuel centers, 22 dedicated distribution centers and 19 manufacturing facilities. The Boise, Idaho-based company operates stores across 34 states and the District of Columbia under more than 20 well-known banners. Albertsons is No. 9 on The PG 100, Progressive Grocer’s 2024 list of the top food and consumables retailers in North America.
