May 09, 2014
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National grocery industry magazine Grocery Headquarters has named Bi-Lo Holdings as Retailer of the Year.

Noting the company’s recent “boldness and positive steps” to grow, improve and take on competition, the magazine article recounted the chain’s history, summarized company strategies in comments from President and CEO Randall Onstead and included favorable impressions from industry observers.

The article, from the magazine’s May, 2014 issue, follows.

Stepping up down South

by John Karolefski

Grocery Headquarters magazine featured Bi-Lo Holdings President and CEO on the cover of its May, 2014 issues as it recognized the company as its 2014 Retailer of the Year.
Bi-Lo Holdings’ boldness and positive steps have earned the chain the honor of Grocery Headquarters’ 2014 National Retailer of the Year.
Faced with stiff and savvy competition from a variety of sources, officials at Bi-Lo Holdings still have a simple strategy to help the chain rise again in the Deep South: Be the neighborhood grocer that people shop the most.
That may be easier said than done. While the company’s two banners—BI-LO and Winn-Dixie—operate proudly throughout eight states across the South, they are faced with a number of vaunted competitors, including three major chains experienced at winning consumers’ loyalty and their dollars: Publix Super Markets with its vaulted customer service expertise; Walmart with its lowest-price drawing card; and Kroger with its dunnhummby-engineered personalization strategy.
BI-LO officials seem determined, however. How are they so certain they can win consumers over to their banners? “By offering customers the freshest foods at the best deals, and really connecting to their neighborhoods,” says Randall Onstead, the well-respected grocery veteran who serves as president and CEO of the company formed only a few years ago.
The eyes of the supermarket industry are certainly on Bi-Lo Holdings, with its no-nonsense go-to-market strategy, watching to see if it can make an impact on one of the fastest growing and most diverse segments of the country. While it may surprise some, Bi-Lo’s fundamental approach to food retailing is already making an impact.
“For fiscal year 2013,” Onstead says, “we finished with positive same store sales and growth in EBITDA,” the widely touted measure of company performance and indicator of value.
This early success and the sheer boldness of taking on well-run grocery giants convinced Grocery Headquartersto name Bi-Lo Holdings as its 2014 Retailer of the Year.
“Our biggest advantage is that we have great people,” says Onstead. “Leveraging the talent and expertise of all of our associates allows us to run better stores for our customers. Understanding and listening to our core shoppers and building a shopping experience around what we learn are how we will improve. We believe our stores are uniquely qualified to deliver on these important strategies.”
Bi-Lo Holdings operates 714 stores—495 Winn-Dixie and 219 BI-LO—serving many key metropolitan areas in Florida, Georgia, Alabama, Louisiana, Mississippi, South Carolina, North Carolina and Tennessee. The average store size is 40,000 to 50,000 square feet and there are some 60,000 employees.
The Jacksonville, Fla.-based company was formed in early 2012 when BI-LO acquired Winn-Dixie Stores. More recently, it acquired 155 supermarkets from the Delhaize Group under three banners; Sweetbay, Harveys and Reid’s. It also acquired 23 Piggly Wiggly stores from the Piggly Wiggly Carolina Co.
“With no overlap in our markets, the combined company will have a perfect geographic fit that will create a stronger platform from which to provide our customers great products at a great value, while continuing to offer exceptional service,” says Onstead.
There is a long history in this combined company. Winn-Dixie, founded in 1925, made a name for itself in the Deep South by emphasizing its meat selection, a broad private label assortment and a bond with middle- and working-class shoppers in the region. However, the chain has had a few rough patches in its history, including a bankruptcy filing in 2005 and the closing of more than 300 of its 1,000-plus stores.
“It was an ugly time for the chain, mainly because of mismanagement and intense competition from Publix and Walmart, which just entered that area at that time,” says one retail observer. “But I think the bankruptcy was the root to its success and the eventual merger. I think management figured out that they had to modernize the stores in order to move forward and they did.”
BI-LO history is a bit less dramatic, though with some pitfalls along the way. The chain was founded in 1961 by Frank Outlaw and was run under the name Wrenn & Outlaw for a couple of years. Realizing that the name did not ring quite right with consumers, Outlaw held a contest for a new name, with BI-LO winning out. Ahold purchased the chain in 1977, combining it with the recently purchased Bruno’s in 2001.
By 2009, with competition increasing throughout the South, BI-LO was in trouble too, filing for bankruptcy that year. The chain emerged from bankruptcy in late 2011. “So now we’ve got two companies, both in trouble and both looking for a savior,” says the retail observer. “Putting them together creates an economies of scale that helps both and allows for some stability. Now, the question is whether the leadership can pull this off and whether they are willing to take some risks.”
Onstead thinks it puts the company in a very good place. The acquisitions are helping Bi-Lo Holdings fuel its long-term strategy of providing the freshest foods and the best deals to a broader base of customers, he adds.
It has been said that the most difficult part of bringing two chains under one corporate umbrella is merging the cultures and management. All parties want an easy integration, but often that is not the case. It seems as if Bi-Lo Holdings has managed to pull it off.
“As with any merger or acquisition, it was a huge effort that at times was seamless and at other times was a little more challenging,” says Onstead. “When you’re combining two different operating systems, policies and procedures, you are bound to face a few obstacles.
“I can say that combining the two banners in the first six months was similar to running a baseball spring training camp,” he adds. “It was a time that allowed us to evaluate all of the talent within both companies. From there, we put together a very talented starting line-up. Then in the six months after teams were assembled, we began playing real ball games. We could not have been as successful as we were without the dedication and effort of our management teams and associates.”
The result of that effort—neighborhood stores offering value—has been needed in the last few years as shoppers continue to look for ways to make their money go further. The retailer provides its customers several ways to save with value programs and special offers.
For example, shoppers can find weekly saving solutions through Buy One, Get One Free items, 10 for $10 promotions and attractive prices on a variety of meal packages for the family. Shoppers can use e-coupons, which load manufacturer savings onto their reward card, and redeem them automatically with a swipe of the card at the register. Additionally, reward card holders can take part in the Fuelperks! rewards program that lets customers earn gas savings every time they shop. Finally, a multi-tiered private label strategy aims to satisfy the needs of customers seeking value, standard or premium products.
The man behind the merger
Onstead has been in the grocery business nearly his entire life. “My father started a chain in Texas in 1966 called Randalls Food Markets where I started working in 1978. The supermarket chain operated stores called Tom Thumb and Simon David in the Dallas/Fort Worth Metroplex and Randalls in Houston and Austin, Texas.”
Over the years Onstead worked his way up and eventually served as chairman, president and CEO from 1996 to 1999. He helped with the transaction that resulted in Safeway purchasing Randalls Food Markets. From November 2003 to October 2004, he was president of Dominick’s Finer Foods, a division of Safeway. He joined BI-LO’s board of directors in 2008, then served as interim CEO of the chain in 2008 and chairman beginning in 2009. In March 2012, he became president and CEO of Bi-Lo Holdings.
Such a varied and prestigious background explains why Onstead enjoys widespread acclaim as a strong chief executive. “I have become the person I am today because of my experiences with each venture,” he says. “Randalls/Tom Thumb, Dominick’s and Bi-Lo Holdings have all been very satisfying, but each is quite different.”
He describes Randalls as a family business that ultimately transitioned to a financially sponsored company, which gave Onstead the experience of leading a company through that type of transition. Safeway-owned Dominick’s gave him a chance to work in a large public company with a centralized support structure. BI-LO was a regional stand-alone owned by a private equity firm, much like Randalls/Tom Thumb was when it was held by KKR. Finally, Winn-Dixie was a public company when it was purchased last year.
“Bi-Lo Holdings has been a combination of all three scenarios: companies that started as family businesses, that have been owned by private equity and that have been public. I believe what helps make this business satisfying and rewarding for me is having a team that appreciates and understands those different dynamics,” he says.
Looking forward, BI-LO company officials aim to grow Bi-Lo Holdings in three ways across both banners:
•Organic Growth: Executing strategies in existing stores to earn customers’ repeat business and give them reasons to shop time and time again. “We have lots of opportunity for continued growth within our stores,” Onstead says.
•Smart Capital Investments: Build and remodel stores that cater to the community, and focus on departments and service enhancements that make sense for each neighborhood and customer.
“We are fortunate to operate in a part of the country where there are unique differences in many neighborhoods, how people shop and what foods people prefer to eat,” he says. “Our capital plans should complement these differences.”
•Acquisition: “The infrastructure we’re building today will be capable of adding even more stores. We want to expand and we are committed to it,” he says.
Onstead is now focused on assimilating into the network the 130-plus additional Delhaize stores, which he says will contribute to the company’s overall results “in a meaningful way” in the second half of 2014.
Visiting the new Winn-Dixie
Mark Heckman, former vice president of marketing at Marsh Supermarkets and now a consultant based in Florida, has noticed the improved shopping experience at his local Winn-Dixie supermarkets since the merger with BI-LO.
He came away from his store visits “impressed” with the solid, consistent execution of basic marketing and merchandising programs.
“Their stores are consistently clear, well-stocked and well-staffed,” he says. “The perishable department has touted its relationship in produce with local growers and shippers, especially in Florida.”
Other in-store improvements include:
Center Store: Winn-Dixie has devoted a significant share of the center store to a “Breakfast” department, complete with hot and ready-to-serve cereals, juices and breads.
“As a thoughtful convenience to the shopper, the breakfast area is nestled close to the dairy for milk and eggs,” says Heckman.
Health and Beauty Care: The department is now outfitted with attractive curved shelving stocked with an expanded variety of salon brands and cosmetics. “This new presentation is clearly an upgrade from past Winn-Dixie HBC departments in both shopability and variety of offerings,” says Heckman.
Deli-Bakery and Seafood: Improved presentation and variety.
Heckman says the marketing and advertising strategy appears to be focused on the traditional mainstays of the supermarket industry, namely a strong weekly circular that compliments a Fuel Perks! program. Within the mix of BOGOs, 10 for $10 deals, Dependable Deals, What-a-Deals, Mix and Match and others, Winn-Dixie offers ways for consumers to earn bonus Fuelperk! points with their Baby Club and other continuities within the mix of their weekly program. Winn-Dixie’s six-page circular remains firmly entrenched as the medium to convey savings to the shopper.
In addition to the circular, Heckman says Winn-Dixie promotes a very functional, but basic mobile app that offers store location, profile building, list generation and the ability to add digital coupons to the Rewards Card.
What others are saying
Plenty of retail analysts and consultants are giving their seal of approval to the progress Bi-Lo Holdings has made over the last two years. They point to the seamless integration of BI-LO and Winn-Dixie, and believe that the leadership of CEO Randall Onstead will guide the company to continued success.
“From the onset of the merger, they have been very clear about what they are trying to accomplish and how they are going to get there,” says Neil Stern, senior partner at McMillian Doolittle. “That certainly is a hallmark of leadership. Their approach to the business is back to basics and being a no-nonsense grocer.”
Jim Hertel, managing partner at Willard Bishop Consulting, applauds the effort to cater to the local tastes on a market-by-market or region-by-region basis. Consultant Mark Heckman sees room in the South for a grocer offering basic marketing and merchandising programs. The key will be to continue improving in-store execution and customer service, while providing enough value in their promotions and fuel programs, he adds.
“Under the experienced leadership of Randall Onstead, coalescing the recently acquired banners of Sweetbay, Harveys and Reid’s with their existing fleet of BI-LO and Winn-Dixie stores is a critical current step forward,” says Heckman. “Like all acquisitions, it is no easy task.
However, they appear to be giving their store bannering strategy well deserved deliberative thought by inter-changing banner names when it fits the trading area demographics rather than taking the less expensive route of retaining their current banner names.”
Ron Lunde, a consultant and former supermarket executive, marvels at how discipline and all of the operational aspects at Winn-Dixie have been improved since the merger. He adds that Winn-Dixie’s relationship with the brands they work with has also been enhanced by the merger.
“Randall Onstead and his team have done one of the best jobs in the industry at merging both the culture and the operational technology required to run a chain. It’s not only people; it’s systems, too. They have done it on both levels,” Lunde says.
Stern has known Onstead for a long time, and calls him “a terrific communicator” who has put forth a very solid plan of what the company is going to do.
“Selecting Bi-Lo Holdings as Retailer of the Year is a great choice,” he says. “I think we can expect more as they solidify themselves as that traditional grocer. They are in a good position to grow and become a more formidable factor in the future.”
When asked to gaze into a crystal ball, Hertel did not hold back: “If you are a competitor, you may want to ignore them, and later wish you hadn’t. I think they will be a player when all is said and done.”

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