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Sweetbay's new chief tackles job

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BY MICHAEL SASSO

THE TAMPA TRIBUNE

Published: February 6, 2009

Back at Colby College, a small liberal arts school in Maine, Mike Vail chased rival quarterbacks as a defensive end on the football team, nicknamed the Mules.

Six-foot-two and 220 pounds in his playing days, Vail now strikes an imposing figure as president and chief operating officer of Sweetbay Supermarket. In at least one way, the new job bears a resemblance to his football days: They're both about the fundamentals, blocking and tackling.

It's been more than four years since the Kash n' Karry chain started morphing into the more glamorous Sweetbay. Much of Sweetbay's early buzz has worn off, and the dynamic leader who led the transition, Shelley Broader, left in the summer to join the craft chain Michaels Stores.

Vail hasn't been as high-profile as the outgoing Broader, who could pass for a motivational speaker. He is active in community affairs, including the hunger relief organization America's Second Harvest, but he's less visible doing it. Vail's job in the now-established Sweetbay is more behind the scenes.

In an interview at Sweetbay's corporate office east of Tampa, Vail, 46, to talk about expansion, the continued dominance of Publix Super Markets in Florida, and fallout from a massive security breach at Sweetbay. In March, identity thieves stole 1.6 million customer credit and debit card numbers from Sweetbay's computers.

Vail took over from Broader in June after serving as Sweetbay's senior vice president of retail operations. He has been with Sweetbay and its sister company, Hannaford Bros., for more than 20 years. Both companies are owned by Belgium-based Delhaize Group, which also owns the Food Lion chain.

Here are excerpts from the interview:

Aldi, the low-price, low-frills grocer, opened its first stores in the Tampa Bay area in September. What kind of impact is it having in the market?

They're establishing their brand in an economy that's perfectly suited for what they offer, which is low price. In terms of their impact, we're ahead of where we expected to be in terms of impacts.

We talk about (Aldi) being sort of death by a thousand paper cuts. You know, one Wal-Mart can open in one of my markets and it can have a pretty big impact on two or three of my stores. But one Aldi opens and we might barely feel it. But five years from now, there might be 15 Aldis around five of my stores and together they have an impact.

Your store count, 108, hasn't really changed much since you converted from Kash n' Karry. Why haven't you expanded more?

We had somewhere north of 130 stores back in 2003, and that was including the Orlando market.

We looked at the Orlando market and it was almost exclusively comprised of former Food Lion stores.

But the (old) Food Lion stores were smaller stores, typically about 28,000 square feet. A good Sweetbay needs to be about 42,000 square feet. As we looked to launch the Sweetbay brand, we felt like the locations weren't great locations, the store sizes were small and Kash n' Karry was not doing well in Orlando, so we divested the Orlando market.

It frankly comes down to economics. We are still a new company. We've publicly said that this is not a profitable business yet. As it becomes more profitable - we expect profitability in 2010 - and as the landscape improves, we'll be looking to grow. We've invested almost $300 million in this business the last three years.

Sometimes when driving around it seems as if there's nothing but Publixes. Do you worry that as you try to get profitable, Publix is eating up more market share?

Publix is a great competitor, but Publix isn't the only business that's going to sell groceries to people in Florida. Certainly their acquisition of Albertsons was both an offensive and defensive move. There was an offensive piece of that in terms of them seeing some locations that would help improve their business. And it seems pretty clear to me that there's a defensive move to try to keep other supermarkets from growing faster and keep some other supermarkets from coming into the market.

We're going to benefit from that. Not everyone wants to shop at Publix. There are plenty of other Publixes around that are pretty convenient for people. But for some reason, people were shopping at Albertsons. So when Albertsons comes out of the mix, people either need to shop at Publix or they need to go find somewhere else to shop.

Has there been a lasting impact from the theft of customer credit card information?

It's hard to tell what the impact has been, but I think there has been a lasting impact. I was in our Hyde Park store three months ago, and visited a delightful older woman whose son was helping her shop, who loves our store but hasn't used a credit card since last April. It would be foolish to think there still aren't people that have that on their mind.

We went and changed out every one of our credit card machines. I think it was $5 million in additional security that brought us to the highest level of security available.

Have food prices fallen a little bit recently?

I think like a lot of things, it feels like the manufacturers quickly tack on price increases and fuel surcharges as costs go up and as the market goes down they're slow to pull prices back down. We're seeing a slow reduction in commodity prices.

One of the things you're seeing now is that as people trade from name-brand to (store brand), the national manufacturers aren't doing the business they need to do. That helps to accelerate the decrease in costs, as they get their costs in line so that customers come back to the national brands.

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