PG PROFILE: Winn-Dixie

Marion Bakos has her choice of supermarkets to pick from, with Publix and Winn-Dixie equidistant from her Lady Lake, Fla., retirement village home. But when she juices up her electric golf cart she usually heads over to the Winn-Dixie. "I prefer shopping at Winn-Dixie because it is cheaper," says the transplanted New Jerseyan. "They have all the products that I want, in the sizes that I use. Publix sometimes has odd or different brands that I never heard of. I like a lot of the Winn-Dixie-brand products," she says, quickly adding about the store that bills itself as "The Beef People," "I like their meats better too."

Bakos isn't the only one whistlin' Winn-Dixie. "Winn-Dixie is going through an amazing turnaround that was not possible two years ago," says Burt Flickinger 3rd, managing director at Reach Marketing, a consulting firm in Wilton, Conn.

Back then many in retail circles considered the chain's days numbered. Wal-Mart, Publix, Kroger, Ahold, and other competitors were nibbling away at its market share, as evidenced by a streak of quarterly declines in same-store sales. Stores were mismanaged; there were too many layers of corporate management and numerous divisions. Sushi bars and other service department perks made new stores appear far too upscale for the chain's core middle-class customers.

Winn-Dixie has responded with a new management team made up of veterans from companies such as Price Chopper, Fleming, Rite Aid, Burger King, and PricewaterhouseCoopers. "Our management team is comprised of what I think is a very healthy mixture of experienced Winn-Dixie veterans and professionals from within and outside the supermarket industry, approximately 50/50," Allen R. Rowland, president and c.e.o., tells Progressive Grocer.

The team has streamlined the number of divisions, centralized buying, shuttered underperforming stores, sold or closed some manufacturing facilities, and improved customer service. The Fort Worth division, which operated 76 stores in Texas and Oklahoma, was closed. "In addition to Texas and Oklahoma, we exited 114 stores in areas where we did not feel like we had an opportunity," says Rowland. "On an ongoing basis, we will continue to evaluate our stores in every area in which we operate and make decisions that are in the best interest of the company and our shareholders."

But Winn-Dixie continues to grow through new stores and acquisitions, such as the Jitney Jungle/Delchamps and Gooding's stores it snapped up in 2000, and it continues to look for acquisitions—if the price and strategic fit are right. "The primary area we are concentrating on is our existing operating area. However, we would be open to the right opportunities that serve the best interest of our shareholders," Rowland says.

Winn-Dixie is also open to new formats. That was proved when the money-losing Atlanta Division was converted to the new price-impact Save Rite format. A new "Real Deal" marketing campaign touting "real good food, from real good people, at a real good price," was rolled out chain-wide last September. To reinforce Real Deal, Southerners in several markets were introduced to frequent shopper cards for the first time with a new Customer Reward Card program that has by all accounts been a success. Self-scanners have been introduced, and Winn-Dixie has entered the information age in a big way by joining electronic buying alliances. The results have been nothing short of amazing.

In late July, the company was even able to pay down $100 million of its bank notes early with excess cash flow from operations. This was on top of the $150 million that was paid down early in January.

"Winn-Dixie has done a pretty miraculous thing cutting their expense structure," says Meredith Adler, a securities analyst with Lehman Bros. in New York City. For the first time in a long time, same-store sales have stopped their precipitous slide. "Winn-Dixie has been running negative comps for years. But their most recent comp was flat. Same-store sales were down 4.5 percent in the second quarter and then flat in the third. That really amazed the market," Adler says. "Plus, there was healthy improvement in the operating margin, so they didn't do it by giving the store away. Something right is happening."

"In an area where Wal-Mart has its greatest concentration of supercenters, Winn-Dixie has defied the trends, and that is a tremendous accomplishment," says Flickinger.

"While questions remain as to how well they can succeed in a frighteningly intensified competitive environment, for now they will probably beat the pants off the more established chains," says Gary Giblen, director of research at C.L. King Associates in New York. "Winn-Dixie has a couple of things that are working for them, at least in the short term, like the Save Rite stores and the frequent shopper card. They are the first ones to have them in Florida, and that is important."

Says one food broker, speaking on condition of anonymity, "Winn-Dixie's frequent shopper card is working real well. It just seems to be drawing people in, and their business is picking up. I was just in a store and they had six registers open, and each line was about five deep."

Another success story can be found in Atlanta, where Winn-Dixie converted its conventional stores to the Save Rite Grocery Warehouse banner. With bare-bones fixtures and case-stacked groceries, Save Rite draws comparisons to Save-A-Lot, Supervalu's successful limited assortment format. But Save Rite also has extensive produce and meat, plus in-store bakeries and pharmacies. "Save Rite has been doing well, even in upscale areas like Marietta," says one local observer. "Publix and Kroger may have fancier stores and nicer service departments, but in these times, everybody is concerned about saving money."

"Save Rite Grocery Warehouse provides low prices on a more limited variety of product. The focus of these locations is to hold down costs in order to pass lower prices along to the customers," Rowland says, adding that Winn-Dixie will likely expand the concept. "We will continue to study stores in a number of market areas and make those decisions on an individual basis."

"Winn-Dixie has been able to more than double the dollars per door, sales per store, by converting from largely money-losing conventional Winn-Dixie stores to Save Rite," notes Flickinger. "Management's timing was impeccable, because it was the same time that Supervalu and Delhaize closed their Cub stores in Atlanta, leaving the market without a real price-impact food player. In the vacuum that was created by Cub and A&P/Big Star closing, Winn-Dixie seized on a major salient sales opportunity, and is now rebuilding its volume throughout Georgia."

Flickinger gives Winn-Dixie high marks for bringing new blood to the executive suite. "They've really brought in a dream team of proven professionals to turn the business around," he says, holding up marketing v.p. David Henry, recruited from Price Chopper, as an example. "Henry has created some of the best loyalty programs in the business, increasing Price Chopper's sales and share in declining population markets. Now he can work his magic with Winn-Dixie in markets with explosive population growth. We've heard that same-store sales in areas of Florida and Georgia where Winn-Dixie has launched its card are up over 5 percent."

A restructuring in the stores is also helping to boost sales. In an effort to compete with Kroger and Publix, Winn-Dixie built its stores too big and offered too much in the way of perishables and service departments for the company's core customers. "Winn-Dixie didn't build very efficient stores," says Adler. "There has been a big effort to sort out and fix all of those things. Stores have been retrofitted to shrink the perishables department. They had huge shrink because they were putting out way too much food. The seafood and meat departments were too big for what the customer was ever going to demand."

"Winn-Dixie used to have the in-store chefs and sushi bars, but they took all that stuff out," says the Southeastern food broker. "They got rid of most of the hot food, and now they mostly have fried chicken, other fried foods, and some vegetables," he says, adding that most service delis have been streamlined. More than 60 percent of the stores are new or have been remodeled in the past five years, with half of the stores seeing improvements within the last year. Store-within-a-store sections have been added for pet products, soft drinks and snack foods, household cleaners, and baby needs.

"They are adding more grocery and general merchandise to the stores," says Adler. "They went back to a bigger offering of dry grocery, which is something that is popular with their customers."

Pruning perishables

Winn-Dixie chief Rowland tells of a chain-wide retrenching that put stores more in line with customer needs and wants. "In fiscal year 2001 we retrofitted 600 stores. We found the perishables departments were much larger than the industry norms and much larger than we needed," he concedes. "As a result, our shrink and labor were very high. At the same time, the grocery and general merchandise departments were too small to achieve effective assortment and holding power on items in these departments. By right-sizing these departments we reduced shrink and improved efficiencies in both perishable and non-perishable departments."

"Winn-Dixie is making a huge effort to upgrade their customer service," Adler says. "They changed a lot of their store managers, but there is still a group of store managers who have to either come up to the learning curve or they aren't going to make it. Management is focused on that and understands they have to do a better job."

Also on Winn-Dixie's plate is an upgrading of private label. The chain remains one of a handful of supermarket operators, along with Kroger and Safeway, to maintain its own manufacturing plants. Its new v.p. of manufacturing and operations, Evan Rainwater, held the same post at Safeway. "Evan Rainwater will play a key role in strengthening an important piece of our business with the potential to have a strong impact on our profitability," Rowland says.

At one time Winn-Dixie manufactured almost everything, even the paper bags used at the checkouts. In recent years it closed its central bakeries, laundry detergent, and paper bag plants. In April, the chain sold its 93,000-square-foot Deep South Products cheese plant in Gainesville, Ga. to Schreiber Foods. "Our primary reason for acquiring the plant was not just because of the location, but also because the work force is very dedicated," says Deborah Van Dyk, v.p., industry/regulatory affairs, at Green Bay, Wis.-based Schreiber Foods. The company will continue to supply Winn-Dixie.

Centralized buying

Other plants might be sold in the future. "We will continue to evaluate opportunities in manufacturing and procurement that will offer our customers the best value, our company the best opportunity for continued growth, and our shareholders the best return on investment," says Rowland.

Winn-Dixie has instituted centralized buying for products it doesn't make in-house. "By eliminating duplication of functions for us and for our suppliers we have reduced cost and positioned ourselves to work better with our suppliers for more effective joint promotional activity," says Rowland. "By combining our purchasing efforts we can better leverage our buying power for better value for our customers. We are very cognizant of the need to carry items that customers want in various areas and neighborhoods, and continue to work to meet those needs."

Meanwhile, the chain endeavors to stay current in the information age. Earlier this year it started using the Manugistics Global Logistics Management solution to help pare operating costs and improve distribution performance. The chain is purchasing more products on an F.O.B. (free on board) vendor basis, collecting the freight allowances from the vendors for those loads, and contracting for the movement of those loads with its own selected carriers. Winn-Dixie expects to reduce the cost of freight embedded in the purchase cost of goods, benefiting its customers.

"Winn-Dixie is on the leading edge," says Sean Gibson, v.p., retail, at Rockville, Md.-based Manugistics. "The majority of retailers are still not focusing on the inbound side, and that is where Winn-Dixie is one of the leaders. They are out there to take control of that."

Last October, Winn-Dixie became the first major retailer to join the Visagent Grocery Exchange, allowing it to sell its excess goods to non-competing chains in other regions of the country. For example, if Campbell's soup didn't sell in Florida because the winter was warmer than normal, Winn-Dixie could use Visagent to find a retailer in Minnesota where the winter was colder than normal and soup was in high demand.

"They are definitely a leader in terms of the value that they derived from the Surplus Goods Exchange," says Mark Rubin, c.e.o. of Jacksonville, Fla.-based Visagent. "Engaging in these collaborative types of initiatives is doing a lot to put Winn-Dixie in the upper tier of the industry."

Winn-Dixie is a member of the WorldWide Retail Exchange. Fellow members include Target, Ahold, Best Buy, Safeway, and H-E-B. "Winn-Dixie worked with us and Visagent to develop the Surplus Goods Exchange," says Steve Carr, director of strategic alliances at Alexandria, Va.-based WWRE. "Since then, they've been a very active member in the development and governance of the SGE."

Winn-Dixie is also seeking to improve its performance in the front end. That is a weak spot where the chain has drawn customer complaints about long lines. It's working to install several hundred self-scanning registers in its stores to speed up the checkout process. "Winn-Dixie was an early adopter of the self-checkouts, and they have been very aggressive with them. They do a good job with them," says Norman Tsang, marketing v.p. at Jacksonville, Fla.-based Productivity Solutions, Inc., which supplies the retailer's self-scanning checkouts.

In addition to weakness in the front end, observers say Winn-Dixie's stores need improvement in décor and more stock help, particularly during the busy weekend shopping period. However, many observers believe the chain has finally turned the corner, with a new management team that has the power and gumption to once again take it to the forefront of the industry..


Read more about Winn-Dixie by purchasing the Sept. 1 issue, which includes charts and sidebar material not included in this online edition. To order your copy, contact the VNU bookstore at (646) 654-4501.
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