Safeway, Inc. will boost its marketing budget for 2005 to build on the growth it eked out in 2004.
Safeway has spent the year recovering from the hit it took when United Food & Commercial Workers union members went on a 20-week strike against Safeway’s California stores that ended in March when workers ratified a new contract (April PROMO). The strike affected 900 stores (289 of them Safeway’s, the rest Kroger’s and Albertson’s) and cost grocers an estimated $1 billion-plus in lost sales.
“We expect to benefit from the significant progress we made in restructuring our labor contracts and from our improved organizational structure,” said Safeway President-CEO Steve Burd in a statement.
Safeway’s sales fell 1.1% to $24.3 billion in the first three quarters of 2004, ended Sept. 11. Safeway blames the strike.
For 2005, Safeway plans to spend $1.4 billion to open 30 to 35 new stores and remodel 275 to 285 stores. Increased marketing spending will support all stores but especially Vons, where Safeway execs expect “a gradual strike recovery,” per a company statement. Pleasanton, CA-based Safeway expects same-store sales (excluding fuel) will rise 1.2% to 1.5% in 2005, lower for Vons in the first quarter.
“We made substantial progress in differentiating our offering in 2004, and we plan to step up those efforts in 2005. We have made dramatic improvements in our perishable departments, have grown our proprietary products substantially, and have confirmed the value of our store remodel program,” Burd said. “In 2005, we plan to make substantial brand building and other marketing investments to improve sales momentum.”
Safeway’s 1,815 stores in the U.S. and Canada reported 2003 sales of $35.6 billion.
Network
