The Mid-Atlantic retailer has revamped stores and deployed a shopper-centric strategy, earning it the honor of Grocery Headquarters’ 2013 Retailer of the Year.
David J. Hepfinger’s timing could not have been worse. He joined Weis Markets in 2008 when the economic meltdown hit America and triggered the worse recession since the Great Depression. “I could have picked a better time to start,” says the president and CEO of the Sunbury, Pa.-based company. “But that’s okay. You’ve got to play with the hand you’ve been dealt.”
And play he did.
A year after his arrival and the celebration of the chain’s 100-year anniversary, Hepfinger unveiled a five-year plan that concludes in 2013. Along the way, the chain has invested half a billion dollars to upgrade stores and build replacement ones. It has increased store count to 165 units under the Weis Markets banner in five states: Pennsylvania, Maryland, New York, New Jersey and West Virginia. The upgrade program, called “No Store Left Behind,” aims to increase sales, improve service departments and add amenities at every existing and replacement store.
“I would say not only have we held our own, we’ve been able to grow,” he says, describing Weis’ competitive position in the marketplace.
The numbers provide the latest evidence. For the 52-week period ended Dec. 29, the company’s net income increased 9.2% to $82.5 million compared to $75.6 million in 2011. For the year, the company’s operating income increased 11.2% to $127.0 million. During the same period, its earnings per share increased 26-cents to $3.07 per share.
“We continue to operate in an economy significantly impacted by slow economic growth, high unemployment and declining household income. As a result of these continuing trends, our customers were cautious in their spending in 2012,” say Hepfinger. “We successfully worked through these challenges by efficiently managing and improving our stores and supply chain, which helped us drive strong net income increases and maintain our market share. Our results also benefited from record investments in our store base, which will continue in 2013.”
But dollars and cents do not tell the whole story of this emerging regional power.
One of the keys to success has been a carefully designed and orchestrated focus on the shopper that has increased store loyalty. This shopper-centric strategy, coupled with a major investment in upgrading stores during tough times, made a strong case for Grocery Headquarters to name Weis Markets as its 2013 Retailer of the Year.
“Over the course of the last five years, we really have been in the midst of a renaissance or transformation,” says Hepfinger. “By the time we get to the end of this year, we will have invested about a half-billion dollars in five years. That includes completing over a hundred projects and a record number of IT investments to upgrade our software infrastructure.”
He is confident that Weis is well positioned for more growth once the economy regains solid footing. He points to improved facilities and better staff due to investment in training.
“We have business cycles that ebb and flow,” he says. “This one has been a lot more painful than we had hoped in a lot of cases. Customers remain cautious in their spending habits, but as this thing turns we’ll be ready to roll.”
Creating a new image
Hepfinger’s goal was to upgrade the image of the store in the mind of customers. Now, when they shop, they will feel like they are in a revamped Weis Markets, not one left over from generations ago, he says.
“Our main concern was to really make an easier shopping pattern for a consumer. With that, there was certainly consideration for appropriate adjacencies so the customer doesn’t have to go back and forth in search of their needs,” he adds.
There is no better example than the supermarket that Weis opened a year ago in Bellefonte, Pa. A dramatic new design for the prototype provides a wide-open feeling upon entering and roaming the aisles. The 65,000-square-foot unit replaced an older 40,000-square-foot store nearby that was past its prime. The new store added amenities such as seafood and bakery, foodservice, a beer café, pharmacy, more robust health and beauty care assortments and an expanded produce department featuring Asian and South American vegetables and organic products.
Weis sought to connect with the hometown spirit of shoppers by showcasing local products such as Gemilli Bakery bread; Middleswarth potato chips; meats from Meadows, Juniata, Kunzler, Bierly and Hogs Galore; Otto’s microbrew in the Beer Café’ and lunchmeats in the deli from Philadelphia-based Dietz & Watson.
“This store instantly became the number-one store in the company, with the biggest opening in the history of the company,” Kurt Schertle, senior vice president, sales and merchandising, said shortly after the doors opened for business.
A key addition to the shopping experience is a Weis Gas ‘n Go Station adjacent to the store. A gas rewards program lets shoppers earn a 20-cent per gallon discount for every $100 spent on groceries in the store. In addition, Weis has contracted with Sheetz, a convenience store operator, to enable consumers to redeem their accumulated points at over 125 Sheetz gas stations.
“We now have fuel stations next to 13 stores and we’re adding a few each year,” says Hepfinger. “But in order to run a fuel program throughout the chain, we’ve got this great partnership with Sheetz.”
While shoppers obviously appreciate their gas rewards, the chain’s best customers give an enthusiastic thumbs-up to the Weis Preferred Shopper Gold Card, which offers special savings. Launched in 2011 as an enhancement to the original card that debuted in 1996, the loyalty program is open to households whose annual purchases are greater than $3,500. These top shoppers are rewarded for their loyalty with personalized offers and discounts sent via special e-mailings.
“We’ve become more shopper-centric,” says Hepfinger. “The Gold Card program takes care of the top 11% or 12% of our customers who account for almost half of our sales. If you’re going to focus somewhere, this is the consumer you need to talk to. We’re rewarding them on a regular basis. Promotions go out to that group of 250,000 to 300,000 consumers each quarter to make the program stronger.”
The data gathered from the program enables Weis to analyze the purchases and shopping patterns of this important group of customers. Assisting the retailer in this effort is Spire, a provider of shopper analytics and marketing program execution. The vendor’s Core Shopper Program helps Weis facilitate shopper-centric activation to drive profitable growth. The program uses a sophisticated shopper segmentation process to identify the right shoppers, and then uses high-end analytics to identify the most relevant offers and delivers them in the most effective way. The program spans multiple delivery vehicles that are designed to reach shoppers in-home, away from home and in-store in a way that is relevant to each shopper.
“We are monitoring our results continuously with Spire, and making improvements to our offers and our delivery vehicles based on our success,” says Brian Holt, vice president of advertising, marketing and public relations for the chain. “The more we learn from past behaviors, the more relevant we are moving forward.”
Creating a price freeze
Something that all Weis Markets shoppers appreciate is the Price Freeze program. In January, the chain launched its 10th round of price freezes, effective in all store locations. More than 2,000 products were reduced in price and would stay at those lower levels for 90 days. Since the company began its price freezes in January 2009, Weis shoppers have saved more than $40 million dollars.
“Weis Markets is committed to saving our customers money every time they visit one of our stores,” says Schertle. “With price inflation on food expected to continue in 2013, we hope to help mitigate the impact on our customers with our Price Freeze program, allowing our customers to enjoy long-term value on everyday items.”
The program includes name brand and store brand products in grocery, frozen, dairy, meat, health, beauty care and general merchandise. Store signage and shelf tags help shoppers easily spot items in the program, which are also featured in weekly circulars.
“During a time when food inflation has been a significant factor,” says Hepfinger, “we’ve been able to leverage our buying capabilities and offer these 90-day price freeze programs. Each one includes 1,500 to 2,500 items. I really think customers implicitly understand the value and appreciate what it can do for them in terms of savings.”
Hepfinger understands that price is always part of the retail equation. However, as a smaller regional chain and a promotional merchant, he says Weis is “not going to allow price to be our soul. We compete on value rather than price. Our focus is really on the overall value proposition. Along with that overall value proposition, we won’t give when it comes to things like quality. There are quality thresholds that we must meet, and we won’t drive a quality standard down, be that a standard or a size that will allow us to drive down to a different price level. We maintain those specs.”
Hepfinger points with pride to the quality of the chain’s private label program, which is conducted to accentuate the company’s view of store brands in the overall mix of products. Weis has been selling private brands since the doors of its first store opened in 1912. In fact, he adds, that Harry and Sigmund Weis were making their own salad dressings and grinding their own coffee in the early days.
Today, in the chain’s prototype store in Bellefonte, most of the ice cream assortment consists of one-and-a-half quarts of Weis Quality store brands. All of the flavors are manufactured at the company’s ice cream plant in its headquarters city of Sunbury.
“We view private brands as more of a marathon rather than a sprint,” says Hepfinger. “We put a lot of effort into developing our brand equity and offer market-best combinations of value and quality. We’ve got some 6,300 private label SKUs today.
“At the same time, we have to have the right balance. My concern is that we never let private brand grow at the expense of overall variety. We’ve actually worked our balance where over the last couple of years, quite frankly, we took our private label penetration down a little bit because national brands are truly the foundation of our business. I’m not going to sell private brands at the expense of national brands.”
Weis Markets may be winding down the impressive and sweeping “No Store Left Behind” program, but that doesn’t mean it will be satisfied with the status quo. Hepfinger’s eye is still on growth, but perhaps at a more relaxed pace.
“We will continue to look for logical expansion growth, be it with acquisitions, certainly it will be smaller acquisitions, not monsters,” he says. “We’ve got some great areas for growth in the future. We’ve got a lot of areas contiguous to our existing footprint where we’ve got plenty of room for growth and expansion.”
He listed several locales: Maryland, Binghamton, N.Y. and the Delaware Valley along the Philadelphia corridor. Weis already has a toehold to those areas. In 2009, it completed the acquisition of Giant Markets, an independent grocer in the Binghamton area. There are now 10 Weis Markets in the New York’s Southern Tier plus one in Elmira. Weis recently acquired three Genuardi’s stores in the Delaware Valley as well.
Hepfinger stresses that all stores, whether acquired, remodeled or newly built will be “better managed stores with better in-stock position, better freshness, and a higher level of customer service than we’ve ever had.”
It sounds like no store will ever be left behind.
Striving to be sustainable
Weis Markets has been recycling plastic bags and cardboard for decades. However, for the past five years, the retailer has ramped up efforts in sustainability, including reducing its carbon footprint.
“It is part of our effort to be a good neighbor wherever we operate,” says David J. Hepfinger, president and CEO. “It’s a practical program that’s built for the long haul. It helps us reduce our costs as well as the impact on the environment, which go hand in hand.”
Five months ago, the grocer opened its first LEED-registered supermarket in Fogelsville, Pa. The 65,800-square-foot store uses 60% less refrigerant. Electric lighting is reduced via skylights and energy-efficient fluorescents with dimming controls.
Hepfinger says more LEED-registered stores are planned, but they typically will be new units. “You almost need to start fresh from the ground up. Whenever you start doing remodeling and working with somewhat of an existing footprint, even though you’re tearing out walls, it’s hard to get it all the way back to LEED, if you will. But that is now built right into our fundamental construction process,” he says.
Weis Markets has four pillars of sustainability: Green Practices, Natural Resources, Food and Agriculture and Social Responsibility. Here is a closer look at each:
All new stores conserve energy and water through efficient building design. As Weis remodels, renovates and upgrades its older buildings, it looks to replace old technology such as plumbing, HVAC, lighting, energy management systems and refrigeration systems with new specifications that reduce water consumption and energy use.
Weis Markets provides associates and customers with products and processes that enable and encourage them to take part in efforts to preserve natural resources. They include convenient recycling opportunities and sustainable packaging.
Food and Agriculture
Weis Markets partners with local businesses and communities to advance sustainable agriculture and to develop initiatives for expansion. For example, stocking fresh and sustainably produced food and produce from local farmers. The retailer processes its own milk and uses the excess butterfat to make Weis Quality Ice Cream.
Giving back to the local communities is important to Weis Markets. The company makes direct and in-kind donations to several charities and organizations throughout its trading area, including food banks, community-based health care organizations, schools, pet shelters, the United Way and many other local charities. The annual Fight Hunger program results in hundreds of thousands of dollars in product and direct donations by customers to local food banks, pantries and emergency food providers. Weis supplements their giving with a matching corporate donation.