The Winn-Ing Way

A new corporate vision, "revolutionary" store remodels and a fresh approach to store brand development are positioning Winn-Dixie on a path to success.

When given a choice between a grocery-shopping experience that is "difficult and monotonous" and one that is is "easy and fun," most people would opt for the latter alternative without hesitation. Jacksonville, Fla.-based Winn-Dixie Stores Inc. certainly understands that mindset, and is determined to make its guests' lives easier and fun — at least while they are shopping in the company's stores.

That guest-centric attitude is a critical part of Winn-Dixie's new vision, explained Larry Appel, senior vice president of operations, during the retailer's fiscal 2011 fourth-quarter earnings call on Aug. 30. Winn-Dixie has spent the past few years establishing a fresh and local experience in its stores, he said, and is now working hard to provide guests with a "truly exceptional shopping experience" that will further improve the retailer's brand image.

That brand image took a beating prior to and right after Winn-Dixie's 2006 emergence from bankruptcy. But the retailer's leadership team has worked hard in the years since then to turn things around.

"We invested a lot of time thinking about and understanding what the consumer needs and wants," Appel said. "And we believe it is centered around making their lives easier and the overall shopping experience fun."

Freshness, hospitality count

To help deliver on that vision, Winn-Dixie is stocking its stores with easy-to-purchase and easy-to-prepare meal solutions at a good value, Appel noted, and devising personalized shopping experiences for guests by matching products to the neighborhood and leveraging its rewards card to create personalized merchandising and marketing programs.

"It also means that we will be obsessed with fresh, offering only the best of freshest foods and quality products," he said, "and that our stores will be as fresh, clean and appealing as the products we sell."

The new vision requires the involvement of each and every one of Winn-Dixie's employees as well. The retailer not only created a new Service Excellence department that puts a hospitality specialist in each of its 21 districts, Appel said, but also broadly communicated to all 46,000 team members the need to maintain "immaculate stores" and provide "warm and personable hospitality" to store guests.

"We use the term the 'Winn-ing Way' to communicate the shift to them," Appel added.

The new guest-centric vision will not alter Winn-Dixie's remodel plans, however — the retailer continues to invest heavily in both traditional remodels and "transformational" stores to improve the shopping experience (see the sidebar, below).

And even though private label penetration was "off a couple clicks" during the second half of 2011 — following several years of strong growth — store brands also are a very important part of the retailer's new vision, noted Peter Lynch, Winn-Dixie's president and CEO, during the earnings call.

"I think our penetration is in the upper quartile of players out there," he said, "and [store brands are] very much part of our plans going forward."

Streamlined approach

Although Lynch attributed the slowdown on the private label side to a number of attractive opportunities to promote national brands, WinnDixie could hardly be called a slacker here. In fact, several years back, the retailer relaunched its entire store brand lineup — some 3,000 products at the time. In doing so, it streamlined what had been approximately 60 different brands into three main brands representing the premium, national-brand-equivalent (NBE) and value tiers, as well as several niche brands.

And since then, the retailer has added strategically to that mix. In fiscal 2011 alone, Winn-Dixie added more than 300 store brand items, boosting the SKU count to more than 3,750, notes Wesley Bean, vice president, Own Brands strategy and innovation.

"Making product selection easier for our guests is one reason Winn-Dixie established the multi-tiered Own Brands program, which collapsed nearly five dozen private label brands into a three-tiered program," Bean says. "This system offers a good-better-best model."

At the "good" level is the Valu Time brand (a recent replacement for the Thrifty Maid brand), which Bean says graces products that offer good quality and a great price. The WinnDixie brand, meanwhile, takes care of the "better" territory, offering products that compare to the national brands and often beat them in taste tests. Finally, the Winn & Lovett brand, named after one of the company's earlier monikers, is reserved for the "best" level — premium, high-quality items of distinction. Available only at Winn-Dixie stores, these products capture the company's "rich heritage and history," he adds.

Augmenting this three-tier model are a handful of niche brands such as Kuddles (baby care items), Fisherman's Wharf (seafood products), Prestige (ice cream) and Chek (soda), as well as a wide selection of Winn-Dixie Organic and Natural branded food and non-food products.

"Our goal … is to be the leading health and wellness brand that families trust to provide solutions that are certified organic, natural or are environmentally friendly," Bean notes. "We strive to provide a better-for-you offering under a name that is known for quality and value."

Guest-focused products

Winn-Dixie's assortment of store brands and products bearing their labels might be impressive, but the retailer's Own Brands team has no plans to rest on its laurels here. In fact, the Own Brands department, under the direction of Bean and Matt Gutermuth — group vice president of center store, pricing and own brands — has begun a process to transform its in-house philosophy from that of a traditional corporate brands team to a more streamlined group that operates much like an internal consumer packaged goods (CPG) company.

"Making the transition to operating like a CPG company involves thinking of products as brands and not equivalents of national brands," Bean explains. "It comes down to combining innovation and creation versus a price-point differentiation."

Bean notes that the new direction incorporates three distinct areas: providing solutions for Winn-Dixie's guests, redefining processes in place and developing new products. And when it comes to providing solutions for guests, the retailer is operating under the philosophy that there is no such thing as a "typical" Winn-Dixie customer.

"That is why we are tailoring our 483 stores to the neighborhoods they serve," Bean says. "To be successful, we first need to understand our guests' needs and wants and [answer] those needs."

To mesh with Winn-Dixie's new vision, answering those needs likely will require quite a bit of private label product development on the meal solutions side to make guests' lives easier.

"Our guests are proving that we are on to something," Bean says. "They have responded enthusiastically to the prepared foods and ready-to-serve entrées — as well as the meal solutions — that we are offering in our remodeled stores. That's why we are looking to replicate these stores across our footprint."

Own Brands team members hope to spend more time in the Winn-Dixie QA kitchens, working with the company's culinary experts to produce high-value, restaurant-quality products, Bean adds.

"New product development has spread to our new transformational remodeled stores," he notes. "There has been a great deal of research and development from the fresh side especially, and we are providing solutions for our guests' needs. … We recognize that we are battling restaurants, as well as other grocers, for share of stomach."

Existing store brand products also are a focus, as Winn-Dixie aims to build brand equity here. The retailer's Consumer Insights group has conducted extensive research to understand its guests' view of its brands and uncover opportunities for improvement, Bean notes. The goal is to make brands such as Fisherman's Wharf, Kuddles and Prestige strong brands that "emotionally connect" with guests instead of serving just as "logos on a package."

Stronger partnerships

Going forward, Winn-Dixie also will be working to deepen its relationships with its supplier partners to create products that help the retailer keep its corporate promises to its guests, Bean says. These relationships have become even more critical since Winn-Dixie's exit from the manufacturing side of things to focus more closely on its core business of operating grocery stores. The company sold its last remaining processing plant — a bottled water facility located in Fitzgerald, Ga. — in April.

"There will be a heightened level of accountability for Winn-Dixie and our vendors to achieve these promises," Bean says. "There will be stronger partnerships with our vendors, with more strategic goals."

Speaking of partnerships, Winn-Dixie has worked with its bottled water suppliers on a number of occasions to do even more than meet guests' needs. Last summer, it raised money for the Wounded Warrior Project (WWP), a non-profit organization that helps veterans injured in the wars in Iraq and Afghanistan, by offering 24-packs of commemorative bottled water and donating 10 cents to the organization for each pack sold. WWP helps injured veterans regain what they lost in service to the country, according to Mary Kellmanson, Winn-Dixie group vice president of marketing.

The retailer also introduced specially wrapped 24-packs of bottled water prior to last winter's holiday season to benefit the U.S. Marine Corps Reserve's Toys for Tots program. Here, the retailer also donated 10 cents from each pack sold, helping "to make the holidays a little brighter" for many children in the Winn-Dixie communities, Kellmanson noted in a press release.

New metrics

Yet another change within Winn-Dixie's Own Brands program is the company's philosophy as to how it sizes up success here. Traditionally, retailers have measured success via private label penetration. (Store brands currently represent 22 percent of Winn-Dixie's dollar sales and almost 26 percent of unit sales.) But the company believes other factors really should come into play, Bean says.

"We believe that our own brands should be measured more closely by the profit and sales impact provided to the overall business and the leverage it creates with our national brand partners to ensure we offer a value to our guests," he explains.

No matter what metrics it uses to measure success, Winn-Dixie appears to be heading toward a "Winn-ing Way" — in both its Own Brands program and in operations overall.

"I'm very excited about the progress we've made as a company," Lynch noted during the earnings call, "and the fact that we are at a very significant stage of our brand evolution." PGSB

' We believe that our own brands should be measured more closely by the profit and sales impact provided to the overall business and the leverage it creates with our national brand partners to ensure we offer a value to our guests. '

— Wesley Bean, vice president, Own Brands strategy and innovation