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Behind Winn-Dixie price cuts, a CEO strategy borrowed from Australia

 
In an effort to keep up with Publix and Walmart, Winn-Dixie is cutting prices on more than 400 of its most popular items. It’s the second wide price cut by Winn-Dixie in the past year. [Photo by Eric Vician]
In an effort to keep up with Publix and Walmart, Winn-Dixie is cutting prices on more than 400 of its most popular items. It’s the second wide price cut by Winn-Dixie in the past year. [Photo by Eric Vician]
Published Jan. 7, 2016

An Australian newspaper called him "the wily Scotsman" last year after supermarket turnaround expert Ian McLeod opted to come to the United States to try to fix the flagging performance at Southeastern Grocers, the parent of Winn-Dixie.

Australia should know. McLeod greatly improved an ailing retail grocery giant there called Coles by prompting a supermarket price war with big slashes in prices for staples like milk and bread. And, as the Sydney Morning Herald tells us, McLeod employed "hardball" and "strong arm" tactics with suppliers.

Now we are starting to see a replay of at least some of those McLeod strategies here in Florida at Winn-Dixie and at Southeastern Grocers' other grocery chain in the Southeast, Bi-Lo.

In reports today by Tampa Bay Times retail reporter Justine Griffin, and in related coverage in newspapers in Orlando and Charlotte, N.C., Winn-Dixie and Bi-Lo just launched a coordinated effort to slash prices on hundreds of grocery items. Both Winn-Dixie and Bi-Lo call their price-cut campaigns "Down Down" and hope to reinvigorate chains badly trailing Publix and Walmart in market share in Florida and, in Bi-Lo's case, Walmart, Harris Teeter and Food Lion in the Carolinas. Publix is behind Bi-Lo in those markets but growing fast.

Can Winn-Dixie rebound? The chain was in Chapter 11 bankruptcy six years ago and still suffers from a lingering reputation as an untidy chain that's trying to improve operationally and searching for a niche that resonates with consumers.

As its latest owner, Southeastern Grocers recruited McLeod one year ago, replacing former CEO Randall Onstead. We don't know what McLeod is getting paid. In Australia, reports cite his $50 million compensation (presumably in Australian dollars). Shortly after arriving in Florida, McLeod purchased an 8,570-square-foot beachfront home in Ponte Vedra Beach for $6.4 million.

For the short term, supermarket analyst Phil Lempert's comment to the Charlotte Observer may offer the simplest answer: "The good news is the shoppers are going to win, because they're going to get better shopping experiences and better prices."

But longer term, the "Down Down" campaigns that cut Winn-Dixie prices will work only if the grocery chain can attract more customers. That's a challenge that goes beyond just cutting milk and bread prices. It demands a commitment to open new and refurbished stores in locations where population growth is high. And that, of course, requires money. Lots of it.

Let's see if the wily McLeod can repeat his Aussie success in the United States.

Contact Robert Trigaux at rtrigaux@tampabay.com. Follow @venturetampabay.