Giant weighs shift in strategy A reinvented market to be rolled out in '99

outsourcing examined

March 14, 1998|By Lorraine Mirabella | Lorraine Mirabella,SUN STAFF

With consumers' food-buying choices expanding from traditional supermarkets to superstores, Giant Food Inc. is shifting its strategic course in an effort to boost profitability and stay competitive into the next century.

That will mean reinventing grocery stores, contracting out more work, focusing on older, but under-served markets and slowing its current expansion in Pennsylvania, Delaware and New Jersey, Giant Chairman Pete L. Manos said yesterday.

"Times are changing," Manos said. "Today, the competition is getting hot and heavy, with the big mass merchandisers coming in and people like Wal-Mart and Kmart. We are entering a new era of supermarkets."

In a speech to financial analysts at a Merrill Lynch retailing conference in New York this week, Manos detailed the key strategies in the company's three-year plan.

Giant, the area's largest supermarket chain, has been working to regain market share lost during a five-week Teamsters strike more than a year ago. Earnings fell 35 percent for the third quarter that ended Nov. 1. Giant expects to release its year-end results at the end of this month.

Manos said Giant's first priority will be to contain costs by reviewing whether outside contractors can perform in-house functions more cheaply. Giant now builds its own stores and makes or processes baked goods, dairy items, ice cream, soft drinks and ice.

A consulting firm is reviewing operations, with an emphasis on "costs we can easily identify that will provide us the fastest reduction that will not cause the Giant culture to change," Manos said yesterday.

The company also expects to roll out a new store prototype by early 1999. The new stores will likely be similar in size or slightly larger than the 68,000-square-foot stores the company builds now. The stores likely will get a new decor and rearranged floor space that includes expanded sections for takeout meals, Manos said.

In a departure from past strategies, Giant plans to expand into under-served urban areas and to grow by acquiring regional chains -- although Manos would not comment on whether the company was talking with other firms.

Giant, which will build a new store on Edmondson Avenue in West Baltimore, is seeking additional city sites, Manos said.

In another strategy shift, Giant plans to slow its planned expansion into Pennsylvania, Delaware and New Jersey, where it runs 13 Super G stores, most of which have been unprofitable.

The initiatives came as welcome news to retail analyst Kenneth Gassman, with Davenport & Co. in Richmond, Va.

"It sounds to me like Pete [Manos] is going to make some pretty sweeping changes at Giant Food, and those changes have been much needed," Gassman said. "Giant Food was really stuck in the 1960s or '70s."

The chain never has faced as much competition as it does today, especially with stores such as Wal-Mart, Target and Rite Aid expanding their food sections, Gassman said. Other supermarket chains have either been weak competitors or have gone through multiple owners.

Union officials representing Giant's bakery workers, drivers and warehouse workers also applauded the company's efforts to stay competitive, but said they anticipate no adverse changes for their members.

"The bakers' union has a positive working relationship with Giant, and we're confident we will maintain that positive relationship in the future," said Jim Callahan, president of the Bakers Local 118, the Washington, D.C., chapter.

Rick Dade, president of Teamsters Local 730, which represents about 1,100 warehouse workers, said he believed the Giant warehouses were competitive with outside suppliers.

"I totally support Giant's efforts to try to make their business run better," said Phil Feaster, president of Teamsters Local 639, which won lifetime job guarantees for its members, mostly drivers, after the strike. "But we don't intend to stand idly by and see them outsource any of our work."

Pub Date: 3/14/98

Baltimore Sun Articles
Please note the green-lined linked article text has been applied commercially without any involvement from our newsroom editors, reporters or any other editorial staff.