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Winn Dixie's CEO pushes for market share rebound

Peter Lynch lifted a small tub of sale-priced hummus from a remote corner of the deli case.

"This is selling like crazy," the chief executive officer of Winn-Dixie Stores Inc. gently prodded the store's deli manager. "Wouldn't we sell more of it if you moved it over there?"

CEO-led inspections like this one last week at a freshly remodeled St. Petersburg store have long been a routine ritual in chain retailing. But not at Winn-Dixie.

Leading the struggling chain out of bankruptcy four years ago, Lynch became the first Winn-Dixie chief executive to set foot inside any of the Tampa Bay stores since the early 1990s. And in the toughest fix-it job he has taken on in a 36-year supermarket career, the burly and charismatic Lynch has swapped tips with workers in every one of his chain's 522 stores from New Orleans to Key West.

"In the year I've been here, he's been in my department three times," said Toni Natale, the deli manager.

Lynch spends two days a week visiting stores — five of his own and several rivals in one day last week — and on weekends he's his family's primary cook and food shopper.

"In this business everything happens with the people in the stores," he said. "That's where you learn what's actually happening."

The dramatically remodeled Winn-Dixie at Rutland Plaza in St. Petersburg carries the imprint of Lynch's hands-on style. After all, during a store visit months ago, he personally dictated it in broad strokes to a team of local managers, engineers and market research people tailing him and filling their notebooks.

Now, after three years of bouncing along the bottom, Winn-Dixie hopes hundreds of projects like this, which on average generate 10 percent more business, will help win back customers lost to rivals.

Given how far Winn-Dixie fell, it won't be easy.

The son of a Boston department store executive, Lynch, 58, started as a teenage grocery store bagger after multiple broken ribs soured his taste for playing football. The 1970s bear market killed notions of parlaying a finance degree from Nichols College into a stock broker job.

Star Markets, which helped him pay for school, offered a management trainee job, and 20 years later he was president of the chain. From there he led Jewel Foods in Chicago, Acme Markets in Philadelphia and was chief operating officer of Albertsons Inc., until an ill-fated merger collapsed.

Recruited as the third outsider to try fixing Winn-Dixie, Lynch didn't realize just how far what had been the largest supermarket chain in the Southeast had fallen until he settled in at the Jacksonville headquarters in 2004.

Stuck with tired old stores, unmotivated workers and a reputation for cheap food, Winn-Dixie closed half its 75 stores in the Tampa Bay area and lost half its market share in the past six years.

To stay competitive, a supermarket usually needs remodeling every seven to 10 years. In the bay area, most Winn-Dixies had not been touched beyond a paint job in 15 years. Some went 25 years.

Despite its minimal cash after emerging from bankruptcy, Lynch scraped together $300 million to remodel half the chain so far. That includes 35 of the 42 Winn-Dixie stores in the Tampa Bay area at an average cost of $2.2 million each.

The bright and clean updated stores boast a tantalizing array of perishables, a third more produce items, a sushi bar, olive bar, custom sandwich counter and artisanal breads. The new layout also includes some unusual touches: 10 types of chicken wings in a grab-as-many-as-you-want deli and a produce section that starts outside like a farmers market with bins of apples, pears and green peppers displayed in an open-air vestibule.

The entry doors that used to face the back end of a row of cash registers now open right into colorful floral and produce displays and the flames of a rotisserie oven.

"We're stimulating the senses and appetite for a first aisle filled with perishables and prepared foods people want to eat that night," Lynch said.

In other new stores, he challenges industry convention by moving all the frozen food and ice cream to the very last aisle rather than the middle of a shopping trip so it has less time to melt.

While Winn-Dixie's "Beef People" monicker of old lives on, Lynch markets the meat department as "your neighborhood butcher." He trained the meat cutters to make cooking and recipe suggestions "to get them out of the back room and interacting with customers."

It's not just rank and file under new pressure to elevate their game. Customer service training became a management priority. The chain, which replaced almost half its store managers, expanded recruiting from its home states to nationwide. Lynch's own total performance-based compensation dropped 19 percent last year to $3.7 million.

"We were a poor operator that I would rate now as good and aiming to be great," he said.

• • •

While Lynch chose "Getting Better All The Time" as Winn-Dixie's aspirational slogan, industry wags add the word "sloooowly."

Despite all the remodeling work, the chain continued to lose ground in the most recent financial quarter. Sales in stores open more than a year have been stagnant to down as recession-weary shoppers tightened their food buying budget. Worse, the chain was forced to close 30 unprofitable stores this fall, twice the normal annual weeding.

And at $280 a square foot, Winn-Dixie's sales productivity lags well below the industry average of $400 on an annual basis.

Realizing Winn-Dixie stores needed a bigger shakeup, Lynch dreamed up a flashy new prototype that costs twice as much — $4 million — to open. The first three opened over the summer in Covington, La.; Mobile, Ala.; and Margate, near Fort Lauderdale.

Designed to appeal to affluent shoppers, the stores are on pace to hit sales of $470 a square foot.

Lynch ordered 17 more for 2011. He promises to build at least one of them as the first new, from-the ground-up Winn-Dixie on Florida's west coast since 1991.

About two-thirds of the winning tactics from the test stores will spread throughout the chain, which needs three more years to remodel the rest of the stores.

It's a big change for Winn-Dixie, once a low-price operator that has been earning a reputation for higher prices lately. Lynch sees Winn-Dixie's future competing with the higher price/product/service offering at Publix rather than trying to beat low-ball pricing at Walmart, Aldi, Save-A-Lot and Target.

“The affluent customer is back," Lynch said. "There will always be some customers out for the absolute lowest price. But we are convinced most shoppers today are willing to pay for a well-run store, customer service and quality foods."

Because Winn-Dixie knows how to cater to lower-end neighborhoods, Lynch figures he won't chase off many of his most loyal customers.

Is it enough or is it too late?

"They are still fighting, and their comparable store sales, while still negative, are headed in the right direction," said Scott Mushkin, a securities analyst with Jefferies & Co. "They are making a big bet that the new store design will change the direction of the company."

Several Rutland Plaza shoppers were jazzed about the look, punched-up selection and food at their new Winn-Dixie. They stopped Lynch in the aisle to personally thank him.

"This is just marvelous, nothing like that old Winn-Dixie," enthused Trinette Williams, an off-duty health department restaurant inspector who does most of her shopping at Publix. "It's like night and day. I'll be back."

Mark Albright can be reached at [email protected] or (727) 893-8252.

Chain market share

Winn-Dixie tumbled to fourth place after losing half its Tampa Bay market share in five years, but it may be poised to rebound.


Publix44 percent36 percent

Walmart16 percent13 percent

Sweetbay14 percent15 percent

Winn-Dixie7 percent13 percent

Sam's Club4 percentn/a

Super Target3 percent3 percent

Save-A-Lot2 percent3 percent

Costco2 percentn/a

Albertsons1 percent10 percent

BJ's 1 percent0 percent

Aldi1 percent0 percent

Sources: Shelby Report, Trade Dimensions

Winn Dixie's CEO pushes for market share rebound 11/05/10 [Last modified: Monday, November 8, 2010 11:51am]
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