THE FRIDAY 5: Cyberattack Cripples UNFI Operations; Sam’s Club, Kroger Lean Into Tech

1. GroceryTech Takes Dallas

Progressive Grocer’s third annual GroceryTech conference took place in Dallas this week, with a packed slate of speakers, activities and opportunities to connect with industry leaders. Readers were most interested in learnings from the event, which were shared throughout the week by PG editors.

Kicking things off on Tuesday was Todd Garner, SVP and chief product officer at Sam’s Club. As a “people-led and tech-powered” club retailer, Garner noted that Sam’s Club’s goal is to maximize the time spent between a member and an associate, but also to complement associates with technology to help them do their jobs better.

“[I]n a world of 10,000 things that can be done, what is the most important thing that should be done? We can further lean into that with technology, and it can help us be more efficient, it can help us find better deals, it can help us find a more personalized experience. And so we feel the real magic is actually in marrying those two together, but you’ve got to keep both front and center,” Garner noted.

Newly minted Heritage Grocers Group CEO Suzy Monford also took to the stage to share how her team is leading the charge in customer-first innovation through the power of AI. Heritage Grocers is working with Instacart on a few initiatives, including an integrated app with shoppable recipes and retail media capabilities, as well as Caper Carts, and Monford revealed that the grocer is also now partnering with tech company RELEX Solutions on assortment optimization pricing and promotion optimization.

During day two of GroceryTech, Kroger VP of Associate and Operations Product Experience Mindy Rector discussed how technology can help engage and retain employees, explaining that the retailer ensures that its associates have tools that are intuitive and easy to use so they can do their jobs more efficiently.  

“I think about when you purchase a new phone, and you get that phone home and open the box, there aren't instructions in the box, typically,” Rector explained. “And so how do we put the right tools in the hands of our associates that are just that easy, that are intuitive to use, easy to understand, require a little to no training? That really is a big portion of our goal on providing them with tools.”

Finally, Glenn Figenholtz and Chad Petersen from Lowes Foods delved into ways the grocer’s shoppers are the proverbial hub and tech tools are the spokes. “We try to bring digital to life in a way that best supplements and amplifies what we do,” Petersen said. 

Using technology to convey value has proven pivotal for Lowes Foods over the past few years. “We bring it to life through ‘brown bag’ offers that are delivering the right price. We also have our little ‘Easter eggs’ that we tie in. If you pick up one of our private label products, for example, the UPC code on the back is actually shaped like a barn, which ties back to the outside of the store that you see,” Figenholtz said.

2. UNFI Delivers Solid Q3 Amid Cyberattack 

News of a June 5 cyberattack at UNFI rocked the grocery retail world this week, with the wholesaler revealing that it was forced to take some systems offline, which affected customer orders. While UNFI has not yet revealed whether the attackers stole any data from the company's network, it did issue the following statement: 

“We have identified unauthorized activity in our systems and have proactively taken some systems offline while we investigate. As soon as we discovered the activity, an investigation was initiated with the help of leading forensics experts, and we have notified law enforcement. We are assessing the unauthorized activity and working to restore our systems to safely bring them back online. As we work through this issue, our customers, suppliers, and associates are our highest priority. We are working closely with them to minimize disruption as much as possible.”

Meanwhile, UNFI shared solid Q3 results this week, with net sales increasing 7.5% to $8.1 billion in Q3 compared with the same period in the prior year, primarily driven by a 4% bump in wholesale unit volumes, including the benefit of new business with existing and new customers, as well as inflation. This performance was led by natural product growth.

Gross profit was $1.1 billion, a $62 million increase, or 6.1%. The gross profit rate in the Q3 was 13.4% of net sales compared with last year’s 13.6% of net sales. The decrease was primarily driven by lower product margin rates and business mix, partly offset through supplier programs and lower shrink.

3. Suit Filed Against Grocery Outlet for Deceptive Pricing

A class action lawsuit was filed on June 2 against Grocery Outlet alleging deceptive sales strategy. OCJ Law P.C., along with co-counsel, filed the lawsuit on behalf of Oregonians, claiming that Grocery Outlet marketed and sold products, including near-to-term items, to the state’s consumers through a "coordinated scheme of fake savings and made-up reference prices" — vaguely attributed to "Elsewhere" — violating Oregon's Unlawful Trade Practices Act.

The complaint provides photo evidence from recent transactions that demonstrate Grocery Outlet's practice of displaying fabricated price comparisons that don't clearly identify the competitor whose price is supposedly being referenced. In some instances, the prices either don't correspond with other products sold regionally or are intentionally inflated to give the illusion of better in-store deals. 

This lawsuit alleges that shoppers of the “bargain market” ended up paying roughly the same amount — or even slightly more — than if they had shopped at another store. 

The grocer did not respond to PG’s request for comment.

4. Kroger, Albertsons Strike Actions Considered in 2 States

News came in this week that local unions representing 45,000 grocery store workers at Ralphs, Albertsons, Vons and Pavilions locations across Southern California have voted overwhelmingly to authorize their bargaining team to call for an unfair labor practice strike in response to alleged labor violations during contract negotiations. The Kroger Co. and Albertsons Cos. are the parent companies of Ralphs, Vons, and Pavilions grocery stores.

“Our message is clear: We are fed up with these corporations’ union-busting tactics designed to intimidate us and prevent us from getting the fair contract that we’ve earned and deserve,” noted  the bargaining committee for UFCW Locals 324 and 770 in a statement. “For four months, we’ve negotiated with Kroger and Albertsons, offering solutions to the staff shortage crisis that hurts store operations, working conditions and customer service. The companies have dismissed our proposals and claimed that our concerns were ‘anecdotal,’ downplaying the real challenges we and our customers face daily.”

The ULP strike authorization votes took place in the first two weeks of June. Negotiations are slated to resume on June 25, 26 and 27.

In Indiana, 8,000 Kroger retail workers are threatening to strike against the grocer. A contract was rejected in late May, which included wage increases that the workers deemed too low, with thousands seeing a $0.25 raise in the first year, and between $0.50 and $0.75 over the entire four-year contract. The group also shared that the tentative agreement failed to address understaffing issues.

5. Costco Expands Shopping Hours for Executive Members

Costco is introducing a new benefit for its executive members, allowing them to shop an hour earlier than standard members, according to an email to employees confirmed by USA TODAY. Upper-level members will be able to shop at 9 a.m. starting June 30.

"Our Executive Members are our most loyal members, and we want to reward them for their commitment to Costco," the email said. Costco also revealed that executive members will receive a monthly $10 credit for orders of $150 placed through the company's "Same-Day" service or Instacart.

These perks for its upper-level shoppers are part of Costco’s aim to increase the overall value of its membership, including extending gas station opening hours and lowering prices on some key items such as eggs, butter and olive oil.