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Food Lion’s new CEO: “We just have to get better”

Beth Newlands Campbell is going back to the basics in her attempt to turn Food Lion around: clean stores, fresh produce, helpful associates and consistency from store to store.

But Newlands Campbell, the grocer’s CEO since December, said she agrees with industry analysts who say that won’t be enough.

With fierce competition from everywhere on the price spectrum – Whole Foods, Publix and Harris Teeter on the higher end, Walmart and Aldi at the low end – her greatest challenge is giving shoppers a reason to choose Food Lion.

“There’s an imperative to set us apart,” Newlands Campbell told the Observer last week in her fourth-floor office at Food Lion’s headquarters in Salisbury. “You can’t be middle of the road.”

Newlands Campbell was brought in to head Food Lion after the grocer struggled to keep up with its competitors for years, closing 113 stores in January 2012. She replaced Cathy Green Burns, who had become the public face of Food Lion during a series of TV commercials during her three years as chief executive. Green Burns was recently named president of the Produce Marketing Association.

Experts say Food Lion, the largest subsidiary of Belgian grocery conglomerate Delhaize Group, faces a tough set of challenges.

Shoppers have more options. Consumers have higher expectations for food quality and in-store experience. And Food Lion acknowledges it has lost much of the perceived low-price advantage on which it built its reputation.

“Staying the same is not an option,” said Newlands Campbell, 48. “Am I a change agent? Absolutely.”

For 26 years, Newlands Campbell rose through the ranks at Hannaford, another Delhaize subsidiary. The upstate New York-native started in-store as a clerk, bagger and assistant store manager, and was tapped to head Hannaford, which has 181 stores, in 2009.

At Food Lion, Newlands Campbell’s charge is similar to that of Green Burns, the former CEO. Her plan also revolved around increasing produce options, lowering prices and making Food Lion a convenient place to shop.

Some analysts think Food Lion’s problems could be insurmountable. They point to other midmarket grocery chains – such as A&P, and Bi-Lo, which acquired Winn-Dixie – that struggled and were forced into bankruptcy to salvage their business.

David Livingston, an independent supermarket analyst, said Food Lion lacks a distinguishing trait to draw shoppers. “They’re just average price. They’re just right in the middle of the road with everyone else,” he said.

“I think they’re just going to fall in the trash can with all the other tired old banners that couldn’t figure it out,” said Livingston.

Newlands Campbell plans to prove the doubters wrong. When she talks about Food Lion’s issues, she fastidiously avoids the word “problem,” instead referring to “opportunities.”

“We just have to get better, and we have to do it every day,” she said. “This is about fixing Food Lion by being a better Food Lion.”

There are signs things are improving: Earlier this month, Delhaize reported the third straight quarter of higher sales at Food Lion.

Food Lion operates 1,117 stores, 71 fewer than at the end of 2011. Delhaize closed its upscale Bloom banner last year and is selling its 155 Harvey’s, Reid’s and Sweetbay store chains to Bi-Lo for $265 million. That will leave the company with Bottom Dollar, a relatively new, super-discount store similar to Aldi, and Hannaford, a Northeast supermarket chain, to focus on in the U.S., in addition to Food Lion.

In the Charlotte region, data from Chain Store Guide showed Food Lion lost 0.3 percent of its market share last year, slipping to 17.4 percent of grocery sales. The company stayed in the No. 3 spot, behind Harris Teeter and Walmart. Food Lion and Walmart have been targeting each other with price-comparison ads in recent months.

Assignment: ‘New energy’

Edward McLaughlin, director of the Food Industry Management Program at Cornell University, taught Newlands Campbell when she was an undergraduate. He said her reputation at Hannaford was as an effective leader with a firm grasp of retail basics.

“She’s not shy about making tough decisions,” McLaughlin said. “She earned her stripes in the stores.”

Now, she will have to run a chain six times larger than Hannaford, an upscale banner in the Northeast. Food Lion’s business model is more volume-oriented than Hannaford’s, McLaughlin said. “The volume is just so much more important down there,” he said.

Another challenge is reinvigorating a brand that’s seen by some as stagnant.

“Food Lion tried out a bunch of things that didn’t work out, and she’s been asked to bring some new energy,” McLaughlin said.

Over the past two years, Food Lion has been updating its stores – with new fixtures in the produce department, for instance – and lowering prices on more than 6,000 core items. The company is 80 percent finished with its store upgrades and plans to finish the rest by the end of this year.

Food Lion has also invested in a new, fresh produce initiative, managing what Newlands Campbell calls the “chill chain” to make sure that perishable food is as fresh as possible for customers.

But the most pressing issue might be whether there’s still a place for a midsize, neighborhood grocer in today’s increasingly fragmented grocery market.

“That is an area (in which Food Lion) struggled,” said Jeff Cohen, IBISWorld grocery analyst. “It didn’t have an identity of being a discount store. At the same time, it didn’t have an upscale identity like a Harris Teeter.”

Demand for freshness

Newlands Campbell said as Food Lion nails the basics, she’ll also focus on keeping goods “fresh and affordable.”

“It can be dangerous to have too many ‘ands,’” Newlands Campbell said. But, she added: “The consumer is demanding that we have fresh products, and they better be affordable. And you can’t trade one off for the other.”

Averaging 35,000 square feet, Food Lion’s stores are smaller than many of the chain’s rivals, such as Publix, which is building new grocery stores bigger than 50,000 square feet.

Newlands Campbell sees Food Lion’s smaller stores as a selling point. More consumers want convenient, easy shopping, she said. She pointed to retailers such as Walmart, which is opening more smaller, Neighborhood Market stores, as evidence that its Supercenters are falling out of favor.

“You can’t buy tires in our store, and we’re not going to sell tires,” Newlands Campbell said. “It’s a trade-off.”

Delhaize America cut 500 corporate positions earlier this year, including 350 workers and 150 unfilled jobs. More than 4,900 employees lost their jobs when Food Lion closed stores in 2012. Delhaize US employed 104,613 people at the end of 2012, down from 107,237 a year earlier.

“People were getting a little deflated,” Newlands Campbell said. “They want to win. Who doesn’t?”

She said the improving financial results are helping restore confidence. Sales at Delhaize’s U.S. stores, which are dominated by Food Lion, were up 0.4 percent from the same quarter a year ago, to $4.2 billion. Delhaize’s U.S. division posted an operating profit of $151 million, up 5.3 percent.

Food Lion was founded in 1957 in Salisbury by Ralph Ketner. The company grew by offering lower-priced food, a message spread with the cryptic-yet-popular bumper stickers reading “LFPINC” – “Lowest Food Prices In North Carolina.”

After moving down to Charlotte with her husband and two daughters, Newlands Campbell called Ketner, the company’s founder. She had lunch with him, invited him to speak at a management meeting, and has stayed in touch with him since.

‘A new culture’

Cohen, the analyst, said he thinks Food Lion’s changes are paying off. “This past year, (Food Lion) has been recovering quite dramatically,” he said.

Food Lion made up more than 64 percent of Delhaize’s 2012 sales, making its success critical to the Belgian company. Shares in Delhaize Group closed at $68.69 on Friday, up 42 percent over the past six months.

Delhaize CEO Pierre-Olivier Beckers praised Newlands Campbell last week during a conference call with investors for what he called “a new culture, new urgency around customer service.”

In May, the company announced it would seek to enhance service by adding 800 more staff members to 178 stores, the latest in a surge of new hires.

Newlands Campbell said there’s still an opportunity to add more staff in many stores and make sure people can get the help they need quickly, especially when checking out.

“You absolutely have to make the checkout experience easy and quick,” she said. “Have we delivered that every day? I think we have some work to do.”

Portillo: 704-358-5041 On Twitter @ESPortillo
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