Safeway provides glimpse of new wellness platform

PLEASANTON, Calif. — Safeway on Wednesday offered a glimpse of its new wellness platform, slated to launch in the second quarter, to analysts during the chain's 2013 investor conference here. "Today, we're a supermarket company … selling wellness services and wellness products," Steve Burd, Safeway chairman and CEO, told analysts. Within 10 years, Safeway will transform into a wellness company that happens to sell food, Burd said. 

The face of the program will include a simplified shopping experience across the self-care aisles and more accessible staff and pharmacists. "When I go to the cough and cold aisle, I don't have a clue what I need to buy," Burd said. "The pharmacists in our stores will know more about what you should take than most physicians. This is their game. And we want to give them free access to the sales floor. And they will play more of a role counseling patients on their medications and providing advice."

The goal is to capture patient traffic with the additional staff and expose them to a robust wellness service offering, Burd said, and then incrementally grow that patient's weekly Safeway shopping spend. 

"[Health care] should be the highest growth piece of our business for the next 10 years, and I think Safeway can own the wellness space," Burd said. "The addressable market, now that's the market in the areas and geography in the U.S. in which we have stores, we think that market is about $4 billion today. And we think that market is going to double over the next five years to an $8 billion market."

Safeway's Just for U loyalty program provides one route of access to that $8 billion market. Safeway has already evolved its loyalty proposition into a core competency with its Just for U program, which boasts 5.4 million registered users as of Feb. 23. According to third-party surveys cited by Burd, 86% of Just for U users would recommend the app to their friends and family. "We can drive core pharmacy growth through some loyalty programs, and we're trying to transform really the patient care model," Burd said. 

"We've been very good at acquiring new patients, retaining them," Burd added. "We were really among the first to be in the immunization business," he said, and Safeway is moving toward a broader specialty pharmacy offering. "Specialty drugs — in 10 years time, if you're not in specialty drugs, you're not in the pharmacy business," Burd said. "Diplomat is our specialty pharmacy partner. We elected to partner with somebody rather than start that from scratch."

Already Safeway offers a number of counseling opportunities across its pharmacy, including diabetes and Safeway's recent partnership with the University of California San Francisco School of Pharmacy on smoking cessation. "We have 11 million smokers in our market. Eight million of them would like to quit," Burd said. "Working with UCSF and doing a combination of the right smoking cessation product in combination with some behavioral modification is really the key to [quitting the habit]."

Safeway is also making it easier for its shoppers to shop for healthier fare. "We've created a tag system called SimpleNutrition that calls out the basic feature of the product," Burd said. "That will soon be supported by a website that will allow someone who's been told to lower their sodium content [to] design a whole new dietary program for them. It will be integrated to what you see in the store. And then we make personalized better for you options available on Just for U."

Safeway also reconfigured its department adjacencies with three broad destinations — meals and ingredients, living healthy and everyday essentials. "The real overarching objective is to integrate the center of the store with all of the work we had done previously in lifestyle area stores," noted Robert Gordon, Safeway SVP, secretary and general counsel. In addition to the center of store base remodel, Safeway has identified some 300 locations that would benefit from a "premium" remodel. "What we're seeing is growing need from customers that fit into this demographic for a more organic, more natural, more local products, more products that have [an] international theme," Gordon said. 

In support of quickly ramping its new wellness concept, Safeway has increased its capital expenditure commitment to $250 million for new stores (up $60 million from 2012) and $260 million on remodels (up $44 million).