Last week, in my ongoing quest for “continuous learning,” I attended the UC Davis Agribusiness Executive Seminar in Newport Beach. I have been attending this biennial year 2.5-day seminar for the last 15 years. It is patterned after the Harvard Business School Agribusiness Seminar and uses case studies on businesses written by professional case study writers. As part of the seminar’s method, the CEO (protagonist) comes to the group to defend his/her business decisions and plan. Attendees at the seminar are sent the case studies in advance. We are expected to read them and be prepared to discuss them and to challenge the protagonists.
We had six case studies this year. One of the most interesting was about Raley’s, the privately owned supermarket-chain based in Sacramento, California. Chairman and Owner Michael Teel and his CEO, Keith Knopf, came to speak with us and “defend” their business position.
While I cannot divulge the details of the case study (we take a pledge of confidentiality), I wanted to share what is public knowledge.
Raley’s currently has about 121 stores, and about five years ago, Michael Teel decided to shift the operating strategy of his company. He decided Raley’s should become a purpose-driven company and wanted to position his company as a trusted advisor to the consumers who shop in his stores.
They call it “The Raley’s Way.” On the company website’s career page, it says: “changing the way the world eats, one plate at a time.”
Michael told us, as he was approaching age 60, he reflected on his life and saw a thread around health and wellness and alternative medicine. He made a connection between the products his supermarkets sell and the (poor) health of consumers. In his mind, the connection was not a positive one. Meaning, he was struck that the sugar and salt-filled foods and the choices his stores offered to shoppers were affecting their health in a negative way. That’s when he made the decision to shift his strategy and to be purpose driven.
Over the last five years, Raley’s has made some very dramatic changes. He removed candy from the checkout lanes and replaced it with healthier snacks. He stopped selling tobacco products in his stores and gave priority display space to the healthiest choices on his stores’ shelves. What you may not know about the supermarket industry is that big companies (we call them CPGs – Consumer Packaged Goods) seem to dictate what is sold in stores, because of the attractive incentives they give to retailers to stock those products. And if products are on the shelves at the store, consumers tend to buy them.
Michael saw that he could offer healthier choices. And that meant, he and his leadership team had to go against the conventional supermarket wisdom. Instead of listening to the recommendation of CPG companies, they started to make decisions based on being a trusted, health-oriented advisor to his shoppers.
Since Raley’s is a for-profit business, so you might ask yourself: Did his decision to change what was sold in his stores pay off? Or was this just a “feel good” move? Well, it was kind of both.
Initially the company sales took a dip. So, Mike and Keith and their management team made some adjustments to their plans, and during the course of the last five years, their company has become more profitable and their market share has grown! When they both got up to speak about their decisions, their company’s performance, the alignment in their management teams and their commitment to changing the way the world eats, the passion and caring was oozing from them.
I know there are other small and medium-sized supermarket chains in America that have made a similar decision to focus on healthy foods and lifestyles. I can’t help but think about regional retailers in the Northwest, like New Seasons, Town and Country and Green Zebra. And of course, chains like Mrs. Gooch’s and Bread & Circus (both purchased by Whole Foods more than 20 years ago) that helped Whole Foods become a national natural retailer.
But what is different about Michael Teel and Raley’s is that this is a third-generation family business with a long legacy of being a middle market retailer – long before Aldi, Costco and Walmart. As the succeeding grandson, Michael quickly figured out that being in the middle is never a good strategy.
To me, it was truly an example of not only putting your money where your mouth is, but showing, real time, that you can do well by doing good.
My hat is off to Michael, Keith and their entire team for making a commitment to being a purpose-driven company and sticking to their commitment. And for helping change the way the world eats, one plate at a time.