Jewel-Osco Pilots Supervalu’s New ‘Big Relief’ Pricing Strategy

In the wake of reporting a fourth quarter loss due to hefty charges alongside adjusted earnings that beat Wall Street estimates and sent its shares soaring 11 percent, Supervalu’s flagship Chicago-based Jewel-Osco division late last week unveiled a major price-cutting initiative on many items by up to 20 percent.

Dubbed the "Big Relief Price Cut," the program, which will include more lasting price reductions than traditional short-term sales and promotions, will cut prices on thousands of items throughout categories where pricing is most important to customers, including stock-up and staple items such as peanut butter, pasta, deodorant and detergent.

“Consumers today are facing mounting pressure from economic uncertainty and the desire to provide their families with good-quality food,” said Jewel-Osco president Keith Nielsen. “Our Big Relief Price Cut is another example of how we are delivering greater value and meeting the needs of our customers.”

The 185-store Jewel-Osco, the Chicago region’s dominant market leader, has seen its leading share of the roughly $12-billion local market reduced in recent years by the aggressive expansion of Wal-Mart Stores Inc.

During a conference call with investors to review its fourth-quarter financial results last week, Supervalu chairman/CEO Jeff Noddle said pricing is one of four key areas the Minneapolis-based retailer will heavily concentrate on to win over customers. A byproduct of Supervalu’s recently solidified centralized marketing and merchandising team, the new pricing program in Chicago was “designed to sharpen our price position in one of our largest markets,” explained Noddle. “We chose Chicago because it is a top-tier market for us; our store fleet has seen significant capital investment over these last several years and is in very good shape.”

Citing the hyper-competitive landscape that’s shifted in the past several years as both Wal-Mart and Meijer have expanded their market share, Noddle said Supervalu timed the selection of the program’s launch this month as a result of having “enough elements of our new business model in place to implement a comprehensive set of actions that will strengthen our competitive offering and build market share.”

Noddle noted that the program would deliver “noticeable changes on everyday pricing on high-velocity value items, where price is top of mind with customers. These known value items play a large part in influencing customer perceptions of our pricing and our overall value equation.”

Supervalu is duly supporting the rollout of the Chicago initiative with “a very impactful marketing campaign to make sure consumers across the entire market are aware of these actions,” said Noddle, noting that the effort “is a major step forward in being able to more effectively and strategically address pricing and capture a larger share of the consumer’s grocery spend. As we look to the future, our pricing programs will fully utilize our data-mining efforts to deliver value that is the most relevant to our customers. This data gives us a much stronger understanding of how an item’s movement will respond to changes in price, thus allowing us to very methodically position prices across the store while strengthening that overall price perception.”

What’s more, the new initiative will enable Supervalu to target its spending “towards those items that matter most to our customers, and making our price investments work harder for our customers and our business,” observed Noddle.

“Enhanced pricing programs are just one example of what our center-led teams will be utilizing in the future in how data will be at the heart of our marketing and merchandising decisions,” he said.
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