WHAT WAS SUPERVALU THINKING?

Implications: SuperValue owns some of the finest and most dominant local grocers in the country. They opened their first Sunflower store in January of 2006 and announced they intended to open 50 more over the next five years. These stores were a slightly smaller organic format designed to be competitive with Whole Foods and Trader Joe's. They actually opened only five stores over the next 12 months and last week they decided to shut them all down. What happened? Why? What were they thinking?

Analysis: In my opinion this SuperValu experiment is an excellent example of an all-to-common phenomenon in today's business world, the knock-off.

SuperValu thought that by copying the best parts of Whole Foods and Trader Joe's, they could develop a new type of national chain of supermarkets. They miscalculated however and they at least were smart enough to pull the plug before they lost even more money.

What went wrong? Was Whole Foods too tough? Was Trader Joe's too good? I have several theories that I would like to share with GLG readers.


First of all the problem began with the basic concept. In order to successfully compete with another "like kind" business you had better offer something more than just a reasonable facimile.  There are numerous examples of successful copy cats that were "prettier", smarter, faster, more service oriented, better organized or whatever.  There are almost no examples of successful copy cats that were "not quite as good". Unfortunately the Sunflower stores were not quite as good in many different and important ways.

In fact, the entire experiment was poorly conceived and executed.

The Sunflower stores were scattered around the country so as to make them almost impossible to supervise or advertise. 

They were located in direct competition to some of the most successful competitor's stores but were placed in inferior locations. 

They offered nothing that was not offered in greater abundance and in a more attractive ambiance  at their nearby (and better located) direct competitors.

While I am sure that some SuperValu executive will blame the "sub prime market " or the "recession" on the poor showing,  GLG readers will know what really happened.