Safeway to spend a bundle on new image

$100 million ad campaign to promote makeover of stores, upgrade of products

Wednesday, April 6, 2005


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Safeway revealed an elaborate $100 million advertising campaign Tuesday, touting a new image under the slogan "Ingredients for Life."

The yearlong campaign will begin airing radio and television ads on April 18 that will showcase the supermarket chain's revamped look, which includes softer lighting in its stores, expanded organic food sections, and a greater selection of high-quality beef and produce.

The "Ingredients for Life" slogan is meant to convey that Safeway no longer just offers ingredients for meals but for everyday living as well.

"The strategy here was really to differentiate ourselves from everyone else," said company Chief Executive Officer Steve Burd, in a phone interview from New York City.

Burd said the ad campaign is the company's largest ever. Safeway has been restructuring stores for the last two years, with wooden flooring in the floral section as well as a wider range of prepared meals. The changes had not been widely publicized until now.

So far, 142 of Safeway's 1,800 stores have reinvented themselves under the new branding concept, 24 of them in the Bay Area.

The Pleasanton company plans to revamp 450 stores by the end of the year. Burd said eventually all stores across the country will have the same look and feel, a strategy that he says he expects will make the supermarket experience more enjoyable for the customer.

Safeway's campaign comes on the heels of its recovery from last year's strike by grocery workers in Southern California, which lasted eight weeks and affected earnings severely.

The firm has finally begun to see some positive numbers, reporting preliminary sales in the first quarter ending March 26 of $8.6 billion, an increase from $7.7 billion -- or 12 percent -- the previous year in the same period.

"Safeway's strong sales performance in the quarter marks a key inflection point in the company's reinvention and underscores our confidence in the effectiveness of our overall strategy," Burd said.

Still, Safeway must contend with the obstacle many supermarket chains nationwide come up against: Wal-Mart. The discount giant has been stripping market share from grocery chains for years now, and few have been able to fight back with any success.

"Whatever's been on the table the last three years hasn't worked," said Jason Whitmer, an analyst for FTN Midwest Securities, who owns no shares of Safeway.

With its new campaign, Safeway is not necessarily positioning itself against Wal-Mart for head-to-head battle but rather sealing itself off from its competitor, Whitmer said.

"Safeway wants to be a Whole Foods for the mass market," he said.

Unlike Whole Foods, however, which caters to high-end customers with its organic products, Safeway is going after the middle market. Burd said he intends to keep prices down, even though quality will go up.

George Anderson, editor in chief of RetailWire.com, a news and analysis Web site for retail industry professionals, said the true test for Safeway will be whether its advertisements live up to actual customer experience.

If shoppers do not feel the difference between buying their groceries at Safeway and at Wal-Mart, they might as well shop at Wal-Mart.

"The problem that supermarket operators have had is that when they sell their same box of cereal and Wal-Mart sells it for cheaper, the consumer says, 'If I'm not getting anything extra, then why not go to a supercenter?' " Anderson said.

"The emphasis in the grocery industry is to try to be the un-Wal-Mart. Most have come to the conclusion that they cannot compete with Wal-Mart in the price area, so they are trying to offer a shopping experience."

Whitmer said Safeway's efforts to rebrand itself will have positive results -- at least initially.

"There's almost always a net positive impact," he said. "But the real question is: How long will that impact last? That's a question that's too early to be solved."

E-mail Pia Sarkar at psarkar@sfchronicle.com.

This article appeared on page C - 1 of the San Francisco Chronicle

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