Grocery Outlet CEO & President Abruptly Resigns

[Alpha8472]

The CEO has resigned not long after a disappointing earnings call. In August, the CEO blamed the disappointing results in same store sales due to aggressive pricing from competitors.

https://www.supermarketnews.com/executi ... ly-resigns

[storewanderer]

This CEO was saying they could get the chain up to hundreds more stores...

I am concerned about Grocery Outlet. I am buying so much less there than I was the last couple of years. They just aren't getting the interesting mix of items they once got.

At this point the shelves are filling up with this new GO private label product. While the price points are pretty attractive compared to NorCal Safeway, they are barely competitive with Kroger product at Smiths up in NV or Wal Mart/WinCo pricing (one operator has adjusted prices down on these items to try to undercut these places a little, other operators aren't).

To that point I am also unhappy with the new private label initiative. Let's go to the cheese category. They kept getting bags of Land O Lakes Shredded Cheese, sometimes Cabot, at a 1.99 price point, these were usually expiring about 30-45 days from when I'd buy them but this was a great deal. Now they have most of the cheese area filled with this new GO brand cheese and while it has longer expirations it is also at this 1.99 price point. When they were previously selling me branded cheese at 1.99 and now want to sell me generic cheese at 1.99 instead, my perception of the "value" is not quite the same anymore... and I think this is playing out across the store.

The other thing with this new GO private label is it is all over the place on quality. Many of the items are just typical private label commodity type items like every other grocer sells. However I did find a couple of interesting "premium quality" ones. They have bagged pasta (0.99-1.19 depending on store) which is imported from Italy and that is a great deal but you wouldn't know it unless you studied the label closely. They also have GO pasta sauce at a 3.49 price point which is also imported from Italy.

[ClownLoach]

They are wildly over expanding. The private label initiative is the complete opposite of the store concept, and compares to the lowest of the low quality. I go there for big brands cheap, not cheap brand crap. Even country of origin like the Italy pasta you mentioned doesn't mean it isn't junk or worse fraudulent labeling. They are in deep. The next CEO is going to have to right the ship with a chainsaw. It's going to be ugly. If they want to turn into a discount house brand box, Aldi will eat them alive. The private label thing is going to need to be reversed, but I have to wonder if they're experiencing the same issue as the 99 and Big Lots: there just isn't enough closeout merchandise left to fuel so many closeout stores thanks to better forecasting, supply chains, AI assisted ordering, etc. All of those factors should be screaming "close stores, don't open more!"

At least they're mostly the right size box for Aldi to acquire them in bankruptcy and convert them. I wonder if the "buy in" payment from the fake Store Manager - "Owner" program will be refunded. Basically you're hired as SM only after you write them a check to "buy in" to the company. You're not really an owner operator.

[storewanderer]

They are wildly over expanding. The private label initiative is the complete opposite of the store concept, and compares to the lowest of the low quality. I go there for big brands cheap, not cheap brand crap. Even country of origin like the Italy pasta you mentioned doesn't mean it isn't junk or worse fraudulent labeling. They are in deep. The next CEO is going to have to right the ship with a chainsaw. It's going to be ugly. If they want to turn into a discount house brand box, Aldi will eat them alive. The private label thing is going to need to be reversed, but I have to wonder if they're experiencing the same issue as the 99 and Big Lots: there just isn't enough closeout merchandise left to fuel so many closeout stores thanks to better forecasting, supply chains, AI assisted ordering, etc.

Like you said, I think they overexpanded. So it is harder to come by inventory. So they do this stupid thing where they form a private label. They have so few stores they will have high cost per unit. Plus managing a private label program is completely different than running an "opportunistic buying" program. So more overhead to set up the structure to manage the private label program. They'd have been better off calling up Topco, C&S, UNFI, and asking for Food Club, Best Yet, or Essential Everyday staple food and paper product items by the truckload, distribute high turn stuff out on pallets to the stores on an AS NEEDED BASIS when they could not find closeouts in given categories, and blown those wholesaler private labels out at bargain prices and they could have come close to Aldi-level pricing. As for things like water and paper products they could have approached various suppliers and gotten those dirt cheap in packer labels and not wasted money putting their private labels on the items.

Grocery Outlet probably could have learned a few things and found a few suppliers for a consistent supply of generic packer label water/paper and some other random foods who lost a big customer when 99 Only closed but it doesn't seem like they quite made the connection. Instead they pushed on this private label thing which adds costs vs. just going with the packer label.

You should see how much of this private label stuff they have. It has flown in big time the past couple weeks. I don't see any in frozen, canned, pet or drug yet but it is everywhere else (dairy, paper, baking, water, etc.). Some stores have more of it than others. That also confuses me. I am wondering if they even ordered enough for 500 stores...? I have a couple stores that really don't have much of it at all which is interesting.

I am paying attention to the packing/manufacturing codes on the private label stuff they are bringing in. It is good quality. I'd put it up against standard Kroger private labels any day (a lot of it is the same suppliers). This is not a junk/Value Corner/Smart Way level private label.

[ClownLoach]

They are wildly over expanding. The private label initiative is the complete opposite of the store concept, and compares to the lowest of the low quality. I go there for big brands cheap, not cheap brand crap. Even country of origin like the Italy pasta you mentioned doesn't mean it isn't junk or worse fraudulent labeling. They are in deep. The next CEO is going to have to right the ship with a chainsaw. It's going to be ugly. If they want to turn into a discount house brand box, Aldi will eat them alive. The private label thing is going to need to be reversed, but I have to wonder if they're experiencing the same issue as the 99 and Big Lots: there just isn't enough closeout merchandise left to fuel so many closeout stores thanks to better forecasting, supply chains, AI assisted ordering, etc.

Like you said, I think they overexpanded. So it is harder to come by inventory. So they do this stupid thing where they form a private label. They have so few stores they will have high cost per unit. Plus managing a private label program is completely different than running an "opportunistic buying" program. So more overhead to set up the structure to manage the private label program. They'd have been better off calling up Topco, C&S, UNFI, and asking for Food Club, Best Yet, or Essential Everyday staple food and paper product items by the truckload, distribute high turn stuff out on pallets to the stores on an AS NEEDED BASIS when they could not find closeouts in given categories, and blown those wholesaler private labels out at bargain prices and they could have come close to Aldi-level pricing. As for things like water and paper products they could have approached various suppliers and gotten those dirt cheap in packer labels and not wasted money putting their private labels on the items.

Grocery Outlet probably could have learned a few things and found a few suppliers for a consistent supply of generic packer label water/paper and some other random foods who lost a big customer when 99 Only closed but it doesn't seem like they quite made the connection. Instead they pushed on this private label thing which adds costs vs. just going with the packer label.

You should see how much of this private label stuff they have. It has flown in big time the past couple weeks. I don't see any in frozen, canned, pet or drug yet but it is everywhere else (dairy, paper, baking, water, etc.). Some stores have more of it than others. That also confuses me. I am wondering if they even ordered enough for 500 stores...? I have a couple stores that really don't have much of it at all which is interesting.

I am paying attention to the packing/manufacturing codes on the private label stuff they are bringing in. It is good quality. I'd put it up against standard Kroger private labels any day (a lot of it is the same suppliers). This is not a junk/Value Corner/Smart Way level private label.

I'll respectfully disagree on the private label.

There are a few private label items that are commodity buys as you describe such as bottle water and paper towels. But almost everything else these days is spec driven by experts who formulate the exact taste profiles, exact preparation techniques etc.

And Grocery Outlet does not have adequate experience to perform this type of work and deliver a product comparable to higher quality private labels like Private Selection, Presidents Choice, Kirkland, Members Mark, Aldi various names, Good and Gather, etc. So even if it's a good factory and good source the odds are still against it being a unique quality taste. This is why for example as you said Land O Lake or Cabot cheese is a great deal, but who cares about GO brand at the same price. Cabot is the Tillamook of the East Coast and might actually be better. But I don't care if the same plant makes Cabot and GO, because they're not going to follow the same process or ingredients that make the Cabot cheese taste the way it does.

And even lower tier brands like Great Value still have done massive focus tests and adjusted their flavor and manufacture processes and profiles over the years to deliver better quality than the old "no name" type product. Grocery Outlet lacks the capability to make anything of unique higher quality, so they're still going to be buying commodity quality from these factories then sticking their label on it.

All the names I mentioned even Great Value are a slice or two above commodity, even Kroger brand is. So if they want to go down this road unless they're going to out price everyone they are going to lose, and lose big. If I want cheap stuff and I don't care what the brand is I go to Aldi and it's going to be cheaper and better than this GO stuff. They've got some delicious cheeses, great brioche breads for burgers and hot dog buns, and so on for less than GO, and the store is cleaner and has great self checkout so I'm in and out immediately without someone trying to beg me to give my email address which then we will have to spell back and forth repeatedly. And of course I give it to them because I know the cashier loses hours or gets fired over email collection rate at GO.

This all keeps me out of their stores and will continue to do so as the real bargains disappear further into GO or whatever else private name junk.

[Romr123]

A great example of this are the high-end imported-from Italy frozen pizzas. Only the biggest companies (Target/WM/Kroger/Safebertsons/Trader Joes) have the resources and scale to efficiently do anything interesting with the flavors/toppings---so you get interesting inclusions like proscuitto and arugula or hot honey and pepperoni or kale and goat cheese or four mushroom

Smaller retailers (who may self-label like Meijer/Schnucks/Giant Eagle or use one of the wholesalers' premium labels like Full Circle) get the traditional ones (pepperoni, margherita) and don't get to do any customization (or any customization is far more expensive due to the smaller orders).

There likely isn't much quality difference, and pretty clearly there's one single supplier over in Italy, but it's noticeable.

Rinse and repeat category-to-category.

A smaller retailer like GO at best can get a generic selection of canned XYZ (canned tomatoes are another category that is pretty easily specified and customized), but unless it's a really compelling reason to customize they're going to get a pretty pedestrian selection of canned whole, crushed, sauce and paste which only sells by price.

I'm far more likely to buy canned tomatoes at GO (as a f'rinstance) if I can get an interesting name-brand closeout flavor/style (Eden Glen organic flame roasted whole tomatoes for 99 cents) rather than pedestrian private label whole peeled at 99 cents (where if I wait for a sale I can get pedestrian private label from Krobertson Brothers for the same price PLUS get the style I prefer).

[ClownLoach]

A great example of this are the high-end imported-from Italy frozen pizzas. Only the biggest companies (Target/WM/Kroger/Safebertsons/Trader Joes) have the resources and scale to efficiently do anything interesting with the flavors/toppings---so you get interesting inclusions like proscuitto and arugula or hot honey and pepperoni or kale and goat cheese or four mushroom

Smaller retailers (who may self-label like Meijer/Schnucks/Giant Eagle or use one of the wholesalers' premium labels like Full Circle) get the traditional ones (pepperoni, margherita) and don't get to do any customization (or any customization is far more expensive due to the smaller orders).

There likely isn't much quality difference, and pretty clearly there's one single supplier over in Italy, but it's noticeable.

Rinse and repeat category-to-category.

A smaller retailer like GO at best can get a generic selection of canned XYZ (canned tomatoes are another category that is pretty easily specified and customized), but unless it's a really compelling reason to customize they're going to get a pretty pedestrian selection of canned whole, crushed, sauce and paste which only sells by price.

I'm far more likely to buy canned tomatoes at GO (as a f'rinstance) if I can get an interesting name-brand closeout flavor/style (Eden Glen organic flame roasted whole tomatoes for 99 cents) rather than pedestrian private label whole peeled at 99 cents (where if I wait for a sale I can get pedestrian private label from Krobertson Brothers for the same price PLUS get the style I prefer).

You couldn't have stated the case better. I also forgot to mention the mass expansion Walmart has planned for that Bettergoods line that is all unique and interesting flavor profiles and such. The few items I've tried so far are fabulous and deliver both brand name quality and unique flavor you can't get anywhere else. Sourcing is similar high quality like the made in Italy frozen pizza. Grocery Outlet is not going to be able to compete with that competition from Walmart either selling the plain cheese pizza when Walmart has some sort of five cheese special with vodka sauce and herbs. Publix is a chain I've only been in a couple of times but I've heard they have giant labs and research facilities like Costco, Sam's, Walmart, Kroger and Target to optimize specifications for their private labels and as a result their customers are raving fans that happily shop their small expensive stores for those house brand goods. What kind of similar facilities does GO operate?

Grocery Outlet is too small and too early in the process to get this right. The move from generic nameless commodity goods to private label that competes with brand names has been going for 40 years, and now they're at the ground floor of the same process. Maybe they can sign a deal with Loblaw group and get their hands on President's Choice, which would have me camping out in front of the store on launch day if it ever happened. Ironically the last time we could get PC was at Lucky and I recall GO was trying to use the Lucky trademarks a few years ago but was stopped?

They're steering their little subcompact car into the big truck lane and didn't look in the mirror to see that Walmart semi, Aldi semi, and so forth driving full speed ahead that will crush them like a bug. There is nowhere to go with this program that wins. Like I said if they can't get enough surplus to keep the shelves filled anymore then it's time to cull the bottom stores and keep going until they have enough surplus available again. There was nothing really wrong with their core concept aside from some crappy execution store to store that needs tightening up, but they're going to try to turn into something they aren't instead of staying in their lane. They're going to get hurt, bad, and maybe they realized that and that's why the CEO is out.

[babs]

Grocery Outlet is really two chains. The discount suburban chain and a chain that locates many of their stores in small towns with little competition. For instance in Oregon and Washington they have stores in LaPine, Hines, Madras, Prineville, Omak, Coville, Winston, Myrtle Creek, White City, Veneta, Rainer the list goes on and on.

I've been to some of these small town stores and they are busy. Most of these towns are fairly poor so a discount focused grocery store is appealing and the chains will ignore these towns due to small population and awful demographics yet GO may have a winning formula here. I wish I had access to the data to see if the small town focus is the way for them to go because it sure seems like it has a potential for a winning formula.

[ClownLoach]

Grocery Outlet is really two chains. The discount suburban chain and a chain that locates many of their stores in small towns with little competition. For instance in Oregon and Washington they have stores in LaPine, Hines, Madras, Prineville, Omak, Coville, Winston, Myrtle Creek, White City, Veneta, Rainer the list goes on and on.

I've been to some of these small town stores and they are busy. Most of these towns are fairly poor so a discount focused grocery store is appealing and the chains will ignore these towns due to small population and awful demographics yet GO may have a winning formula here. I wish I had access to the data to see if the small town focus is the way for them to go because it sure seems like it has a potential for a winning formula.

For the small town strategy you're talking about - the private brand conversion is probably just fine and not any kind of problem so long as they can still curate the assortment to the community. Probably a step up from Dollar General who would otherwise come in and be the only place to shop.

I am not sure what kind of growth you're seeing there in the small town format, but it seems like they're trying to open a GO on every other corner in competitive areas of California with many other options. Here changing the format to a private label focused store just makes them a redundant format where they are unlikely to win against Walmart and Aldi especially.

I agree that when I visit a Grocery Outlet in a smaller town they're usually better operated and more customized in their assortment. That also makes me worry that they may be making mistakes if this private label matter results in a more standardized store which will absolutely work against them. If these stores standardize they will make the customer base hungry for a competitor to enter and wipe out GO. A curated and customized assortment is important in foods. This is one of the reasons why Kroger looks like a clown show operation in some parts of California like the San Luis Obispo Ralphs that didn't have large Tri-Tips available in what is likely the worldwide capital of consumption of the cut. Ralphs also has large displays of Gallo jug wine in the heart of Wine Country there while even Grocery Outlet has many of the local area wineries. Because Kroger refuses to customize the stores they have ceded those entire areas to Albertsons. You can see how a lack of customization would be catastrophic for the small town format you know well and the competitive markets here.

Hopefully they figure this out and fast. If they need to retreat from some stores I'm sure they can close a few of the four that have opened up around here. It feels like their current strategy here is to block and tackle by trying to lease every site Aldi might be interested in. Sprouts was doing the same thing and leased every possible site Whole Foods might want to land on locally. Costco is apparently doing this throughout the NorCal market trying to get sites where Sam's Club could return to in the future. Ultimately the trying to play hopscotch with your competitors is a very costly game that never ends well, especially when it's a David vs Goliath like GO vs Aldi. Love them or hate them, Aldi will manage to get themselves to at least 10,000 stores in the US and be in every state. GO is wasting too much money trying to fight the inevitable.

[pseudo3d]

Was "Grocery Outlet Bargains Only!" a sub-brand of Grocery Outlet? I've found that in a few archived newspapers from the early 2000s and that's what they used in Texas, failing miserably (closing within months).