MAHFOOD
WHEN GRACE-KENNEDY Limited bought the Hi-Lo chain of six supermarkets back in 1984, the tradition in the market was for the main distribution companies to protect their business by owning supermarkets.
Then, in the late 1990s, the retail landscape began to change. The industry saw the proliferation of supermarket chains, such as Super Plus and the stores operating under the Progressive Group umbrella that were not associated with the traditional distribution companies. In the meantime, the Hi-Lo stores were in need of upgrading in terms of physical structure as well as service. GraceKennedy saw the direction that had to be taken - Hi-Lo would have to stand on its own as a viable entity.
The competition from Super Plus Food Stores is formidable. Wayne Chen, chairman and chief executive officer of Super Plus, says his company is consolidating its operations as a first step towards becoming a listed entity on the Jamaica Stock Exchange (JSE).
Super Plus Food Stores was created on November 1, 1992 from the merger of five supermarkets individually owned by members of the Chen family. The company now has 39 wholesale and retail outlets, employs over 2,000 people and does over $10 billion in sales per month.
CHANGING PERCEPTIONS
For the past five years, Chief Operations Officer of GraceKennedy's Retail and Trading Division, John Mahfood, has led the Hi-Lo team towards the goal of making the chain more profitable. Customer surveys revealed various areas that needed attention in order for this to happen. Firstly, it was discovered that customers had a perception of Hi-Lo as being a high-priced supermarket and felt there was a lack of product variety in the stores. Customers also found fault with the physical store conditions and the level of customer service they experienced, and suggested there should be a wider network of Hi- Lo stores. (By this time the chain had grown from six stores to 13).
Turning its focus to these crucial areas, the company implemented a new computerised information system at a cost of some US$2 million aimed at improving customer service and the overall ability to manage the stores. The system serves the purpose of inventory management as well as profit monitoring, facilitating the tracking of product performance across all branches and allowing managers to identify fast-moving items and where they sell best and to quickly identify out-of-stock products.
To tackle its high-price perception, Hi-Lo came up with the 'we will not be beaten' concept by launching its own brand - some 60 key items, mostly food or household products, that would be guaranteed to be priced lower than any similar products in the market. A major advertising and marketing campaign was initiated to highlight the competitiveness of these products. Additionally, the company approached its suppliers to renegotiate prices so as to be able to offer the lowest retail prices possible to their customers.
Customer service is another focus area. John Mahfood feels that in time the quality of the customer service offered by Hi Lo will differentiate the chain from its competitors and make it the supermarket of choice for Jamaican consumers. To this end, the company has hired a customer service manager to ensure the delivery of first-rate customer service in all stores.
Hi Lo is making headway in many areas: with regard to stock-outs and product variety, the company has been working to fulfil the promise to make a visit to a Hi Lo store a one-stop shopping experience. A number of the stores have benefited from major renovations. One such branch is Hi Lo Manor Park where a J$50 million refurbishing has resulted in a new and inviting produce department. The focus on produce has met with great success and similar strategies are being adopted for other stores. The latest additions to the Hi Lo family are new stores in Port Maria and Ocho Rios.
Hi Lo's overall sales have been increasing despite the challenges of a slow-down in the economy, higher operating costs and its having to share business with a great many more supermarkets.
The company has been meeting these challenges by way of cost reduction strategies - negotiating new rates with suppliers of packaging materials and security providers, experimenting with effective ways to cut electricity consumption, and implementing a voluntary redundancy programme aimed at restructuring the company into a more efficient organisation. Mr Mahfood says he is satisfied with the progress being made and feels confident that the company will be in a profit position by the end of 2006.
