Carrs/Safeway: life after a merger; initially, times were tough, but now growth is encouraging.(ALASKA BUSINESS MONTHLY'S 2007 C

It's been nearly eight years since the Carrs Gottstein grocery chain in Alaska was bought out by Safeway. Executives, like Safeway's CEO Steven Burd, admitted last year that the company had weathered three difficult years. But, he said, by retooling strategy, and conducting consumer research, the company in 2006 began experiencing a renaissance and seeing the fruits of its labor.

That could be seen as a literal statement considering one of the biggest boosts to Safeway stores nationwide, and especially Carrs/Safeway in Alaska, has been the introduction of a proprietary brand of organic foods. From frozen fruits and veggies to tortilla chips and yogurt, the O Organics line has bursted onto the scene in Carrs/Safeway stores, said Glenn Peterson, district manager for the grocery.

'TAKING OFF LIKE GANGBUSTERS'

"Our organic line is taking off like gangbusters," Peterson said.

The line came about a year ago and boasts nearly 200 products. In late February, the company introduced O Baby line of organic baby and infant foods. Peterson said the customer response to the line has been "phenomenal."

"It's just truly outpacing most other sectors in the grocery channel," he said.

Peterson said the response to the organic line wasn't necessarily surprising; he said he figures many Alaskans were receptive to organic and natural food lines, but in previous years found the products costly or lacking in variety. But as stores, like Carrs/Safeway introduce more products in those areas, the price becomes more affordable.

"Now, with us having our dedicated production facilities, we've managed to get the price down," Peterson said.

Helping with the push of the O line, Peterson said, is the store's decision to place the products alongside conventional products on the shelves, rather than in a designated section of the store.

"Sales improved when people can see it there, side-by-side," he said.

Still, most Carrs/Safeway stores also have a designated natural food section. Peterson said the holdover of the natural food boutique section is from the merger. Carrs had the designated section of natural foods, while Safeway mostly integrated their natural and organic foods. Peterson said the use of both methods after the merger works to reach more customers.

"Customers see both a natural food section and O brand on the shelves next to conventional products and it's the best way to expand movement," he said. "Part of this is also an education. Some customers may not understand what organic means now and that it is becoming truly affordable."

NEW DIGS

Along with new products on the shelves, the company also has been implementing new looks overall in the refurbishing of its so-called "Lifestyle stores," meant to create a warm ambience during shopping. Since the merger, Peterson said the company has invested upward of $120 million in the 35 Alaska stores. He said it's expected another $100 million will be invested to complete the remodel of all Alaska stores in the next few years.

Peterson notes that any skepticism that surrounded the merger seems to have dissipated. He attributes much of that to the latitude granted by Safeway, acknowledging some of the uniqueness and challenges specific to Alaska. Peterson, who worked with Carrs for nearly 30 years previous to the merger, said having a distribution facility in Anchorage greatly benefits getting products to the Alaska stores in a timely manner.

"(Safeway) realizes we're a little further out, our freights are going to be a little different," Peterson said. "And they've been receptive."

Company executives also latched on to the community involvement of the Carrs stores after the merger. The Carrs Great Alaska Shootout at the University of Alaska Anchorage each November seamlessly morphed into the Carrs/Safeway Great Alaska Shootout. And Peterson said the local stores maintained their ties to local organizations and fundraisers for Providence Alaska Medical Center and Bean's Cafe. Peterson said the company donated more than $1 million in in-kind donations, mostly food to various organizations, like Bean's Cafe in Anchorage.

COMPETING FOR LARGEST EMPLOYER

With continued growth, the company continues to vie for the title of state's largest private employer next to Providence, increase share price in the last year, a look to more remodeling and refurbishing and the successful proprietary grocery line. Peterson said the company continues to keep an eye on the competition. Fred Meyer, Costco and Wal-Mart are listed in Safeway's annual report as the Alaska store's biggest competitors. Peterson specifically noted that the company is keenly watching as Wal-Mart talks of expanding some of its Alaska stores into Super Wal-Marts with more groceries.

"You always have to look over your shoulder," he said.

He said watching and analyzing the competition also keeps his managers focused on what areas Carrs/Safeway can be most competitive. While Peterson said the stores can compete overall with price and selection, he said he believes service is the often the determining factor for customer satisfaction. He said while price is often thought to be the major determining factor for customers deciding where to shop, he's found many customer surveys from around the country rank price behind other considerations.

"Location, service and quality are usually the top three," he said. "If we can continue to do that and give a quality shopping experience, we know we'll be successful."

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