MUST READ THE INSTRUCTION FIRST
Individual Case Analysis Paper Guidelines
For this assignment, you are asked to read the accompanying Wall Street Journal articles, do your own analysis of the situation described and then write a short, i.e. two (2) page, analysis and recommendation. Given the page restriction, you will need to be very concise but provide sufficient explanations of your analysis, recommendations and plan for implementation.
Case Analysis Paper #2:
Read the provided WSJ articles:
1. “Online Grocers Are Getting a Preview of Their Future”
2. “A Coronavirus Bull Market for Groceries”
3. “Coronavirus Pushes Restaurants Into the Grocery Business”
4. “America’s Biggest Supermarket Company Struggles With Online Grocery Upheaval”
5. “Kroger Seeks Patience As It Works to Reshape Business”
NOTE: For this assignment, you may focus on Kroger’s situation or a different grocer’s situation that you are familiar with. In either case, you are to address what they should do going forward to be successful.
The question you must address is: Based on recent changes in the macro environment, current industry changes and Kroger’s internal environment (or other grocer’s internal situation), what do you recommend Kroger (or other grocer) to do successfully move forward given its current situation?
Case Analysis Outline (abbreviated)
(Derived from: Analyzing a case study and writing a case study analysis, Hill 12e, pp C4-C11)
1. Introduction to the issue or problem (two to three sentences only).
2. Identify the company’s internal strengths and weaknesses (Think in terms of resources, capabilities and distinctive competence).
3. Analyze the external environment (Consider the macro environment and the industry).
4. Summarize the SWOT analysis
5. Describe the corporate level or business level strategy
6. Make recommendations regarding WHAT the company should do and HOW it should do it. This is your recommendation about what to do and your plan for implementing the recommendation.
Two pages only. No title page required. Standard single spacing (default setting on most docs), 1 inch margins for top, bottom and sides.
At the top of page, list your name and the assignment title, for example: “Don Rumsfeld, Case Analysis #2”.
Submit the finished paper through the assignment submission link provided in the assignment folder.
Online Grocers Are Getting a Preview of Their Future
Major supermarkets are struggling to meet surging demand for home delivery, but the coronavirus crisis will leave their web businesses sharper
Preparing an online order into a Peapod delivery bin at a Stop & Shop supermarket in Windsor, Connecticut, U.S.
PHOTO: SCOTT EISEN/BLOOMBERG NEWS
By Carol Ryan, The Wall Street Journal
March 27, 2020 5:52 am ET
If the Covid-19 outbreak provides a global test for buying food online, it is one that supermarkets are by and large failing. Yet their e-commerce businesses should be in a different league after the crisis.
Since the pandemic began, the websites of major food retailers have been as inundated as their physical stores.
Pressure on these still-small online operations
is only likely to increase as more nations place their populations on full lockdown.
Average daily traffic to
’s grocery site reached 1.1 million between March 1 and March 20, according to analytics company SimilarWeb—a 55% increase on average daily visitor numbers during the previous two months.
, Peapod, Instacart, Carrefour and
have also experienced big surges in daily traffic. The number of U.S. households ordering groceries online roughly doubled this month to 40 million compared with levels recorded in August 2019, data released Thursday by consulting firm Brick Meets Click shows.
Although supermarkets have invested heavily in their online businesses in recent years, they are not ready for current levels of demand. Infrastructure is still immature globally: 7.6% of groceries in the U.K. were bought over the web before the outbreak, while in Spain just 2.4% of sales have moved online, according to Kantar data. The U.S. has around 3.1% penetration.
During the pandemic, it is proving harder to ramp-up capacity quickly online than in physical stores. Automated warehouses in the U.K., like the ones that Kroger is currently building with grocery-tech company Ocado in the U.S., need time to increase output. And getting additional delivery vans on the roads is complicated by the fact that they need to be specially kitted out with refrigerators for chilled orders.
That is leading to a frustrating experience for web shoppers in many markets. U.S. consumers face delays when using the services of retailers such as Walmart and
Fresh. Ocado, which runs one of the most advanced e-commerce operations in the U.K. in partnership with local retailer
Marks & Spencer
, is no longer accepting new customer registrations. The risk is that some consumers trying the service for the first time will be turned off for good.
As many businesses around the world struggle, a Canadian disinfectant company is increasing production to keep up with demand during the novel coronavirus outbreak. Photo: Ron Kolumbus/WSJ
Still, some retailers are betting that the
extra demand will stick
. Ahold Delhaize, owner of the Peapod delivery service, has doubled its server capacity in the U.S. since the crisis began. Its website will be able to handle much higher order volumes after the spike subsides.
The rush of orders is bringing some benefits. Online grocers are learning how to allocate delivery slots most efficiently in times of peak demand. They are testing in real time how different order-fulfillment methods, such as manual picking in stores or from dedicated online warehouses, perform under stress.
But the constrained capacity online also has one important advantage. Sales delivered to a shopper’s home are far less profitable than those made in stores. Grocers need time to manage the shift online to avoid a big hit to their already thin operating margins.
Online grocery businesses may be struggling at the moment, but they will emerge from their unexpected trial better equipped for the future.
Seeks Patience As It Works to Reshape Business
Shares of nation’s biggest supermarket operator fell 12% over past 12 months
Kroger is grappling with tumult in the grocery sector, as e-commerce changes how consumers shop for food. PHOTO: LUKE SHARRETT/BLOOMBERG NEWS
By Micah Maidenberg
Updated June 20, 2019
executives are seeking patience from investors as they continue to oversee efforts to transform the business while facing heightened competition from a range of food retailers and shifting shopping patterns.
The nation’s biggest supermarket operator on Thursday reported same-store sales excluding fuel rose 1.5% in the latest quarter, a weaker performance compared with last year and below what analysts predicted for the period.
from growing discount chains like
as well as from
Inc., which is working to bring customers into its Whole Foods Market unit and plans to launch a separate grocery business.
Chief Executive Rodney McMullen said on a conference call that Kroger must “step up our game.”
“What we find is there’s a lag between when you make those improvements and when the customer starts rewarding you with their checkbook,” he said, referring to efforts to upgrade the experience for shoppers.
The company has been investing in its e-commerce operation and said on Thursday that home-delivery services or online-order-and-pickup at stores is now available at 93% of its locations. Digital sales grew 42% in the first quarter, which ended May 25.
Kroger has also been developing new businesses, such as selling consumer data and targeted advertising. The company said those efforts would yield $100 million in incremental operating profit in its current fiscal year compared with the prior one.
Shares of Kroger closed down 2% at $23.13 on Thursday and have fallen 12% over the past 12 months, compared with a 6.5% gain in the S&P 500.
The Cincinnati-based grocer reported $37.25 billion in revenue in the first quarter, down 1% from a year earlier but better than what analysts polled by FactSet had forecast.
The company attributed the most recent decline to the
sale of its convenience-store business
. Kroger has now reported year-over-year total sales declines for three consecutive quarters.
Pet products, natural foods and several beverage categories were strong performers in the latest period, executives said. Kroger also added 219 of new private-label products during the quarter. Sales of such brands grew faster than total sales, driven in part by products like pork-belly bites.
The profit margin for private-label products exceeds what Kroger gets from selling national brands. But overall gross profit margin fell in the quarter, primarily due to the performance from its pharmacy business, according to the company.
Kroger reported a profit of $772 million, or 95 cents a share, compared with $2.03 billion, or $2.37 a share, a year earlier, when the grocer recorded a gain on the sale of its convenience-store business.
After adjustments, Kroger reported a profit of 72 cents a share for the most recent period, beating Wall Street targets by a penny.
The grocer has been slimming down its operation and hunting for investment opportunities. In April, it sold a company that makes ice cream, ice teas and other products. Kroger said in May it formed a new venture with a private-equity firm to make investments in consumer brands.
Kroger recently struck new labor contracts with unions in Indianapolis, Denver and Louisville, and is working on deals with employees in several other cities, finance chief Gary Millerchip told analysts.
Like other companies, Kroger has been raising wages amid the tight labor market. The new contract covering Indianapolis workers increased starting pay from $8.50 to $10 per hour for most clerks, the company said in a statement Monday.
Corrections & Amplifications
A new contract covering Kroger’s Indianapolis workers increased starting pay from $8.50 to $10 per hour for most clerks. An earlier version of this article incorrectly stated that starting pay increased from $8 per hour. (June 20, 2019)
America’s Biggest Supermarket Company Struggles With Online Grocery Upheaval
adjusts operations and invests in technology to hang on to customers who avoid stores; ‘we’ve got to get our butts in gear’
By Heather Haddon
Updated April 21, 2019
Nobody can say Rodney McMullen doesn’t know the grocery business. He started as a bagger at
Kroger Co. when he was in college, rising through the ranks to become chief financial officer, then chief executive officer, of America’s biggest supermarket chain.
But can he lead the 2,764-store Cincinnati-based company through the changes upending the supermarket industry?
“You are in Cincinnati. You are a conservative bunch of people,” said Bill Smead, chief executive of Smead Capital Management and a Kroger investor. “Does anyone’s blood pulse through their veins with an entrepreneurial bent?”
Inc. first pushed into groceries in the late 1980s have traditional chains
faced so many challenges
. E-commerce is transforming the business, forcing cash-strapped companies to overhaul their operations and invest heavily in technology and talent to keep customers from straying to
Inc. At the same time, they have to keep food prices as low as consumers have come to expect.
Kroger CEO Rodney McMullen says he believes the company has devised a plan to help it grow again. PHOTO:SANGSUK SYLVIA KANG/THE WALL STREET JOURNAL
The transition has proven rough for Kroger, which stayed focused on store sales long after mass-merchant competitors were investing in online-ordering technology and delivery services. Executives have debated which investments to make and how drastically to change the company’s business model. Some would-be technology partners have been turned off by what they see as the grocer’s conservative culture—including members of one group who stormed out of a meeting in protest.
Mr. McMullen knows it is
a pivotal moment for the company
and that investors are concerned. “We’ve got to get our butts in gear,” he said in an interview. “There was no doubt we were behind.” He said he believes Kroger executives have devised a plan to help it grow again.
Few American retailers have managed the online transition smoothly.
Corp. and Walmart struggled before improving stores and e-commerce operations.
Corp. filed for bankruptcy protection in October. Toys “R” Us was liquidated in March 2018.
Online ordering and delivery has been around in the U.S. grocery business for decades, but it hasn’t caught on as rapidly as it has in other sectors. Many U.S. shoppers live close to supermarkets and prefer to select food from the aisles. That is changing as more young people form families and older people get more comfortable ordering online. One option proving especially popular is for consumers to order groceries online for pickup in a store’s parking lot.
Online purchases account for just 5% of the roughly $1 trillion U.S. food and consumer-product market, according to Nielsen. Yet online sales are growing 40% annually, while in-store sales have been flat for years.
“It’s like driving on the autobahn,” Mr. McMullen told investors last fall. “It’s incredibly exciting. But there’s a lot going on, and it’s going on fast.”
Years ago Walmart became the largest food seller in the U.S., while Kroger remains the biggest supermarket chain by stores and sales. Walmart boosted its delivery business with its 2016 purchase of Jet.com, bringing on Jet executives to accelerate online grocery sales. Target bought Shipt Inc., another grocery delivery service, in 2017. And Amazon broadened its reach into the grocery business
by buying Whole Foods in 2017
, although it, too, has struggled with online delivery of groceries.
To catch up, Kroger has budgeted $4 billion for investments, including warehouses managed by robots, a meal-kit company and digitally enabled shelves that market products to customers through LED displays. Last year, it formed a partnership with an autonomous-vehicle startup, Nuro Inc., and started selling its line of natural and organic products
on Alibaba Group Holding Ltd.’s Tmall site in China
Those investments are denting its profits at a time of intense competition to sell groceries cheaply. Its shares are down 17% since June 2017, when Amazon said it would buy Whole Foods, and
have dropped after five of Kroger’s eight latest quarterly earnings reports
Sapphire Star Capital, an investment fund, sold a $350,000 stake in Kroger in September. “We just had to cut them loose,” said Michael Borgen, the fund’s chief executive. “They just got too volatile.”
Kroger has invested in Ocado Group to build a network of automated warehouses for online retail akin to this Ocado facility in the U.K. PHOTO: PETER NICHOLLS/REUTERS
John San Marco, a research analyst at Neuberger Berman, an investment-management firm that owns Kroger stock, said the company is doing the right thing by investing in online operations, even if it dents profitability in the near term. “Kroger is in the very early innings of a business transformation,” he said. “This isn’t a one and done.”
Mr. McMullen, who became CEO in 2014, has acknowledged that Kroger was slow to invest online. He said many competitors also avoided investing in online operations until recently. On Kroger’s latest earnings call in March, he sought to reassure investors that Kroger’s investments will pay off. “You have to start somewhere, and you have to learn,” he said.
Kroger has a record of dabbling in digital projects without committing to more significant changes to its business, current and former employees say.
In 2000, when Mr. McMullen was CFO, Kroger canceled a pilot delivery program in Columbus, Ohio, because of low demand. Another pilot has been running at Kroger’s King Soopers chain in Denver for two decades without expanding to additional parts of the country.
Another such effort began about seven years ago when executives were told that Amazon had surpassed Kroger as a top seller of
Procter & Gamble
Co. ’s diapers.
At the time, Kroger’s digital-operations staff fit into a small room at its Cincinnati headquarters. They started meeting every Friday at 7 a.m. to discuss ways to improve Kroger’s digital efforts. The operation soon expanded.
Kroger didn’t have the infrastructure to ship goods to customers. Building warehouses and wooing tech talent to build an online-grocery portal would have cost hundreds of millions of dollars, employees say.
Kroger is experimenting with using autonomous vehicles to deliver groceries. PHOTO: KROGER/ASSOCIATED PRESS
Kroger managers remained focused on their stores, where sales determine their compensation and chances for advancement. Some believed boosting online sales would create extra work and distract the company from maximizing store revenues, former executives said.
“Most of us, when we say the digital world, automatically conclude that e-commerce is where everything is going,” then-CEO David Dillon told investors in 2013. “I don’t draw that same conclusion.” Reaching customers digitally also included things like online coupons and social media, he said.
Amazon continued to siphon diaper sales from Kroger and other retailers, notching roughly $500 million in diaper sales last year, according to estimates by market research firm Edge by Ascential.
Kroger turned to acquisitions to boost its digital reach. It bought Vitacost.com, an online retailer of natural foods and supplements, for $280 million in 2014. But Kroger was slow to integrate Vitacost’s technology into its operations. That frustrated Vitacost’s founders and Kroger employees who had brokered the deal, according to people from both companies.
A meeting at Vitacost’s Boca Raton, Fla., headquarters soon after the deal closed underscored the divide. Vitacost employees suggested emailing promotions to customers so that discounts could be tweaked more often than through the paper circulars that Kroger planned months in advance.
Kroger executives balked, with one marketing head saying that Vitacost was a rounding error in the company’s overall balance sheet and it wouldn’t just change its promotional plans, according to people from both companies. Some Vitacost executives walked out in protest.
Kroger was slow to add a link to Vitacost on its website or place signs in its stores promoting Vitacost. Officials from the two operations clashed over whether to let Vitacost accept Apple Pay or PayPal, the people said. Vitacost’s revenue grew less than that company had expected. Engineers and executives left the company. Other Vitacost executives have remained at Kroger and helped on various technology initiatives.
Although Walmart is the largest food seller in the U.S., Kroger remains the biggest supermarket chain by stores and sales. PHOTO: ERIK S. LESSER/EPA/SHUTTERSTOCK
Some at Kroger acknowledge more could have been done to make its Vitacost investment pay off. “Some look at us and argue we haven’t done much with Vitacost,” said Michael Schlotman, who stepped down as chief financial officer this month and will retire at the end of the year. “It’s a fair assessment.”
Kroger now accepts PayPal on Vitacost but not its other e-commerce sites. It uses Vitacost’s technology for a ship-to-home grocery service that made its debut last year. Executives hope the service will win back business from Amazon’s subscription service for staple goods.
“It’s just starting to get legs,” Mr. McMullen said.
Kroger recently tried to partner with, invest in or acquire three different startups: Shipt, the online grocery delivery service; meal-kit company Plated; and Boxed.com, a bulk online retailer, according to people familiar with those efforts. None panned out.
Target bought Shipt in December 2017. National grocery chain Albertsons Cos. purchased Plated in 2017 for more than Kroger offered, according to people familiar with the negotiations. Boxed executives and investors balked over terms offered by Kroger in negotiations, talks stalled and Kroger never made a formal offer.
“They aren’t willing to pay enough to buy technical talent,” said one person involved in negotiations between Kroger and those startups.
Amazon broadened its reach into the grocery business by buying Whole Foods in 2017. PHOTO: JOHN MINCHILLO/ASSOCIATED PRESS
Yael Cosset, Kroger’s chief digital officer, declined to comment on any negotiations. He said the company tends to be more conservative in rolling out tech pilots that directly affect customers in stores, but has moved faster behind the scenes on other efforts.
Kroger officials say the company is now working with
Corp. , IBM Corp. and other tech companies, and is spreading the word about Kroger to potential tech startup partners at the Cincinnati-based Cintrifuse startup investment fund.
“Kroger has been very bold in their vision,” said Luke Jensen, chief executive of Ocado Solutions, a division of U.K.-based automated-grocery company Ocado Group PLC that Kroger has invested in to build a network of automated warehouses for online retail in the U.S. “They are learning from us, but we are learning from them.”
Kroger spent years negotiating with Instacart Inc. before Amazon’s Whole Foods purchase spurred executives to strike a deal. Instacart now makes deliveries from more than 1,600 Kroger stores.
Some suppliers give Kroger executives credit for acknowledging the challenges they face. Last year, one grocery-delivery vendor told a Kroger technology executive that despite the company’s investments in automated online warehouses, it still wasn’t getting digital orders to customers as fast as its competitors.
The executive agreed, according to a person familiar with the conversation. To figure out how to make same-day deliveries, he told the vendor, Kroger might need to make another acquisition.
As the company tries to change, some senior executives are leaving. Mr. Schlotman is retiring after more than three decades at the company. Christopher Hjelm, the chief information officer who urged fellow executives to help him turn Kroger into “a technology company that just happens to sell food,” is also departing. Matt Thompson, the digital official who devised many of Kroger’s online pickup and delivery strategies, left earlier this month. Investment banker Robert Beyer is stepping down as lead independent director in June.
A Kroger supermarket in Cincinnati in 1948. PHOTO: BETZ-MARSH STUDIO/CINCINNATI MUSEUM CENTER/GETTY IMAGES
A Kroger spokeswoman said the retirements were long planned. Mr. McMullen has recruited new officials with technology experience at the executive and board levels, she said.
Executive bonuses have declined in the past two fiscal years, reflecting Kroger’s weaker sales. Financial filings show that executives hit less than 4% of their targets for performance-based bonuses in the last fiscal year, the lowest payout in at least two decades.
Mr. Cosset, the chief digital officer who is set to succeed Mr. Hjelm as chief information officer in May, has set ambitious time lines for opening online-pickup locations and other goals. Yet he has also been careful not to drift too far from Kroger’s focus on its stores.
“The traditional brick-and-mortar customer shouldn’t feel neglected,” he said.
Coronavirus Pushes Restaurants Into the Grocery Business
New York eateries tap their supply chains to bring customers fresh produce and meat as pandemic puts strain on grocers
Fort Defiance, a restaurant and bar in Red Hook, Brooklyn, has been filling a need for grocery options during the coronavirus crisis.
PHOTO: MARK SHORTLIFFE
By Charles Passy, The Wall Street Journal
April 15, 2020 4:38 pm ET
Soon after St. John Frizell was
forced to shut down Fort Defiance
, his restaurant and bar in Brooklyn’s Red Hook neighborhood, because of the pandemic, he struggled to figure out a way to bring in any revenue.
A plan to offer takeout fizzled. But Mr. Frizell couldn’t help but note that many in the community were hesitant to visit the local supermarkets and were finding it difficult to get a delivery time slot with online grocers.
So, Mr. Frizell decided to re-christen his dining and drinking spot as a mini grocery for locals, working with some of his key vendors to offer customers fresh produce, meat, fish and select other items on a pickup basis.
“It would be of more value to them then going up to my window and ordering an Irish coffee,” he said.
Mr. Frizell has plenty of company. Several restaurants in New York City, from independent operations to chains, are trying similar efforts, though the size and scope of the offerings varies.
Fort Defiance is working with some of his key vendors to offer customers fresh produce, meat, fish and select other items on a pickup basis.
PHOTO: FORT DEFIANCE
Just Salad, a New York-based salad chain, has launched a robust delivery program that incorporates not only produce and proteins, but also everything from meal kits to toilet paper. The operators of Taiyaki and the Dough Club, two New York-based establishments that specialize in Japanese desserts, have introduced an online grocery, Konveny.com, devoted strictly to Japanese products, from rice crackers to red-bean ice-cream bars.
Business has taken off with the Konveny platform to the point that Jimmy Chen, co-founder of Taiyaki and the Dough Club, is worried about keeping pace with the demand and finding storage space for his items, particularly frozen ones.
“If you know anyone with a freezer, I’m buying,” he said.
Other food-related businesses are forging their own path in the grocery realm as well. Baldor Specialty Foods, a New York-based importer and distributor of produce and other items, is venturing beyond the wholesale market for the first time to deliver food directly to customers, with a $250 minimum.
And Purslane, a Brooklyn-based catering company, is delivering what it calls a weekly “farmers market box” to locals, along with prepared foods. It plans to increase offerings in the coming days to include olive oil, flour, butter and eggs.
While the obvious driving factor for all these businesses is the need to find alternate sources of sales during the pandemic, the effort for restaurants is also about maintaining a connection with customers with an eye on the post-pandemic return to normal. The hope is that patrons will be all the more loyal to these establishments when they fully reopen because of the grocery service each provided.
Some of the produce sold through the Fort Defiance General Store.
PHOTO: FORT DEFIANCE
“There’s a feel-good emotion” that will pay dividends down the road, said John Davie, chief executive of Dining Alliance, a company that works with independent restaurants on purchasing.
Mr. Davie and others in the industry also noted that restaurants are well-positioned at this time because their supply chain isn’t typically the same as that for supermarkets, which means they can sometimes procure hard-to-get items. On top of that, they often have access to high-quality fare, from prime-grade meats to heirloom produce, not found in markets.
That is something that Stacey Douglas Moverley, a resident of Red Hook in Brooklyn, has appreciated about the items she has picked up from Fort Defiance during the pandemic. She pointed to everything from a “lovely pork loin” to “amazing breakfast sausages,” saying such fare has kept her well fed during the health crisis.
“It’s just been a godsend,” she said.
A Coronavirus Bull Market for Groceries
The owner of Manhattan’s largest supermarket chain, John Catsimatidis, on panic buying, mask-clad cashiers, and how the pandemic will permanently change his business.
By Tunku Varadarajan
April 3, 2020 2:11 pm ET
John Catsimatidis ILLUSTRATION: KEN FALLIN
In the days before the Wuhan coronavirus hit America hard, widespread alarm ensued. This expressed itself most obviously in the flocking to supermarkets. Shelves were depleted of their contents, with a few items—such as hand sanitizer, disinfectant wipes and Lysol products—becoming prized and scarce. Of all the things dear to American civilization, toilet paper became the leitmotif of the country’s collective panic.
The run on toilet paper makes grocer John Catsimatidis angry, even though its recent sales are bound to have fattened his bottom line. “There’s a rumor that there will be a shortage of toilet paper—and then there is a shortage of toilet paper,” he sputters over the telephone. (This interview was conducted pursuant to social-distancing best practices.) There is no real shortage of toilet paper, he insists, describing any passing scarcity as the result of unhinged demand. “What do you normally have at home, maybe four rolls? Now homes have 12, 24, 36.” As for Purell, he says, people “normally don’t have it, or one bottle at home at best. Now they have one in every room.”
New York is the American city hardest hit by Covid-19, and Mr. Catsimatidis, 71, is New York’s grocer. He owns one chain of supermarkets, Gristedes, and a controlling interest in another, D’Agostino. With 34 stores in total, his is the largest supermarket presence in Manhattan (with a store each, he insists I note, in Brooklyn and on Roosevelt Island, which sits in the East River but is part of the borough of Manhattan). The Forbes 400 list of wealthiest Americans reckons his net worth at $3.3 billion, money made from loo paper gone gangbusters, real estate and oil.
“There is no reason to panic about supplies,” Mr. Catsimatidis says. “I want people to know that. Only panic buying causes shortages.” Immediately, he texts me a picture, taken at one of his stores, of shelves stacked with paper goods. The virus has doubled his business. “Before the jump in demand,” he says, “around 200 trucks unloaded at our stores every day. Now we’ve got 400 trucks daily.”
In a few days, the local supermarket was transformed from a mundane place every American took for granted into a shrine to human survival. Mr. Catsimatidis counsels Americans who wish to stock up to buy “no more than two to three weeks’ worth of supplies. Most people have stuff for three days, in normal times. They don’t need stuff for two or three months.”
The grocery industry is one of the few in America that are hiring at a time when many businesses are laying people off. Mr. Catsimatidis says that he’s hired 100 additional employees at his stores: “We found that our loyal staff were working something like 70 hours per week, and we had to lighten the load.” Will he keep them on after the crisis? “It depends on our needs,” he answers, “and it depends on the mood of New York’s people.”
An epidemic poses special challenges to face-to-face retail. “We’ve put up a visible guard between customers and employees at the checkout,” Mr. Catsimatidis says, as he texts me a photo of a masked employee behind a transparent screen at a register. “And we put tape on the floor near the checkout to mark a 6-foot distance for customers.” The stores are distributing masks to employees. “We have our stores fumigated every night, and we have our managers monitoring the temperature of every employee before they come in and log in.” He adds ruefully that “we’re short thermometers right now.”
In response to a question about employee morale, Mr. Catsimatidis says “we have a few” who are unhappy, “but not as many as Whole Foods or
.” It helps that he gets along with the unions that represent his employees: “I’m in business 51 years. We’ve been unionized 51 years. And we’ve worked with them 51 years.” Many of the employees at Gristedes and D’Agostino have been “very loyal, working with the company for 10, 20, 30 years.”
Mr. Catsimatidis says the pandemic will have a “huge impact” on how Americans live—and how they shop. He sees changes in behavior unfolding in real time that he doesn’t think will be reversed once the coronavirus abates. “You have the brick-and-mortar stores like ours, and the internet companies that deliver, like Instacart.” People are ordering “the heavy stuff, the paper goods” online, and won’t stop. “They’ll rather have it delivered and pay the extra dollar than—how do you say that Jewish word?—schlep it home themselves.”
With the paper-goods business migrating online and “half of all drugstore space now used for food,” Mr. Catsimatidis says supermarkets like his may have to repurpose themselves into “convenience stores where people come to buy specific food products.”
Yet the closure of restaurants is helping the supermarket business. Dining out is prohibited under emergency executive orders, and many eateries have shuttered takeout and delivery too. This redounds to the supermarkets’ advantage, and Mr. Catsimatidis thinks that may continue after the crisis.
In normal times, “60 cents of every food dollar spent in New York City is spent in restaurants,” he says. “Let me say that again: 60% of the food eaten in New York is made by restaurants. And this is where the real increase in business is coming to the supermarkets right now.” New Yorkers who seldom cooked have had to take to their kitchens under lockdown. “Some of them are making good food at home,” he says. “Really good food.”
Mr. Catsimatidis thinks the eclipse of restaurants could have a profound impact on New Yorkers’ habits. “People are getting used to staying home, and restaurants could be hurt by it if we decide we like eating at home.” The pandemic could accelerate a similar change in the entertainment business: “Tell me, when you go to the movies, do you know who you’re sitting next to? No, you don’t. Wouldn’t you rather stay home and pay
$30 to watch a first-run movie?”
The grocery mogul’s life, it could be said, is not unlike a movie script. Born on Nisyros, a tiny Greek island, he was 6 months old when his parents migrated to the U.S. They settled in Harlem, where he grew up on 135th street. His father worked as a busboy. Mr. Catsimatidis bought his first grocery store while he was an undergraduate at New York University. He dropped out eight credits short of graduation, and now lives palatially on Manhattan’s Fifth Avenue, a man of self-made wealth. In 2016 his native Greece honored him by putting his likeness on a postage stamp. A former “Bill Clinton Democrat,” he unsuccessfully sought the 2013 Republican nomination for mayor of New York. His opponent went on to lose to Democrat Bill de Blasio.
How would he handle the crisis if he were in City Hall? “I’d be sitting down with Donald Trump and saying, ‘What else can you do for me? Please. And thank you, sir.’ ” He contrasts this with the combative approach Gov. Andrew Cuomo initially took: “I gave Cuomo some advice. I said, ‘Donald Trump, whether you like him or not, is the president of the United States. You’ve got to decide. He can move mountains for you if you’re nice to him. You don’t want to be nice to him? You’re not going to get as many mountains.’ And I think I had an effect on Cuomo.”
The supermarket business, Mr. Catsimatidis says, “changes every 10 years or so.” The food he sells in his stores today bears little relation to the stock on display at his first Red Apple grocery half a century ago. The most notable change of late has been in the volume of produce sold. “Ten years ago,” he says, “your produce departments did 7% of store sales and your meat departments 17%. Now they have flipped. Produce and vegetables are way up there; meat products are way down.”
He expects the pandemic will drive the next great change, a demonstrative focus on hygiene. There will be a next generation of packaging. “People won’t be touching the produce so much, or touching it at all. Everything will be packaged around human handling.” Prodding the tomato or sniffing the melon before you buy may be a thing of the past. “The mood will demand that everything be clean, untouched. I think the people’s mood will be very important for us, in everything we do.”