Bi-Lo Winn-Dixie cutting $100M in labor costs, to focus on customers
After Bi-Lo LLC acquired Jacksonville-based Winn-Dixie Stores Inc. in March 2012, the company began cutting $100 million in labor costs from the merged company, which has combined sales of $10 billion.
"When I first heard it, of course I jumped out the window, but eventually I came to and was able to figure it out," said Robert Devine, Winn-Dixie vice president of field human resources and team member relations.
Devine, who has been with Winn-Dixie for eight years, spoke Wednesday to the Southside Business Men's Club in one of the first Jacksonville community presentations by a company executive since the merger.
"Figuring it out" included consolidation of headquarters' positions — the "easy part" — because Winn-Dixie's headquarters remained in Jacksonville instead of moving to Greenville, S.C.
Instead, Bi-Lo LLC, formerly based in Greenville, moved the combined headquarters to Winn-Dixie's base at 5050 Edgewood Court in West Jacksonville.
Dallas-based Lone Star Funds, which owns Bi-Lo, bought Winn-Dixie for more than $560 million in a merger that was completed March 9, 2012.
Devine told the group Lone Star has been "a very good partner" with Winn-Dixie and "wants to turn us into a billion-dollar company," possibly to sell it or take it public in a stock offering, although that decision depends on Lone Star.
Winn-Dixie was a publicly traded company before the acquisition.
Brian Wright, senior director of communications, said the focus is on the customer.
"Lone Star Funds has shown strong commitment to our company. Like all private equity-sponsored transactions, an obligation to return their equity is expected," Wright said.
"But how and when is not what we are focused on. Our focus is on meeting the needs of our customers," he said.
Bi-Lo Holding LLC, the parent company of Bi-Lo and Winn-Dixie grocery stores, is the ninth-largest traditional supermarket chain in the United States.
It employs nearly 60,000 associates who serve customers in 686 grocery stores and 484 in-store pharmacies throughout the eight Southeastern states of Alabama, Florida, Georgia, Louisiana, Mississippi, North Carolina, South Carolina and Tennessee.
The winndixie.com site shows that Winn-Dixie operates more than 480 stores and 380 in-store pharmacies in Alabama, Florida, Georgia, Louisiana and Mississippi.
Bi-Lo operates 206 stores in North Carolina, South Carolina, Georgia and Tennessee.
Another move to reinvest recently took place when Winn-Dixie Properties LLC sold the West Jacksonville distribution center for almost $100 million to an affiliate of American Realty Capital of New York.
Bi-Lo Winn-Dixie CEO Randall Onstead is listed on state corporate records as the Winn-Dixie Properties LLC manager, president and CEO.
"Winn-Dixie entered into a sale-and-leaseback transaction. We will continue to occupy the facility through a lease agreement with no disruption or change in our business operations," Wright explained.
The sale and leaseback generates funds for other corporate use. "Companies monetize their assets so they can re-invest in the company," Wright said.
Bi-Lo CEO promised changes
Jacksonville-based Winn-Dixie, long one of the city's largest publicly traded companies, took shape in 1925 when W.M. Davis bought a Miami grocery store with his four sons.
The Davis brothers moved the company to Jacksonville in 1944 and changed the name to Winn-Dixie Stores Inc. in 1955.
Winn-Dixie and Bi-Lo faced widespread pressures in the fiercely competitive supermarket industry and ended up in bankruptcy court.
Both Winn-Dixie and Bi-Lo reorganized under federal bankruptcy laws in recent years. Winn-Dixie filed for Chapter 11 protection in 2005 and emerged in 2006. Bi-Lo filed for reorganization in 2009 and completed its restructuring in 2010.
Merger negotiations started in February 2011 when Onstead, Bi-Lo chairman, contacted Winn-Dixie Chairman and CEO Peter Lynch to say Bi-Lo and its owner, Lone Star Funds, were interested in a possible buyout.
Winn-Dixie shareholders approved the $560 million acquisition in a meeting March 9, 2012, in which Bi-Lo would pay $9.50 a share to buy all of Winn-Dixie's stock.
At the time, the two companies said they would maintain a significant presence in both Jacksonville and Greenville and that they would continue to operate their supermarkets under their Winn-Dixie and Bi-Lo banners.
The companies already had announced Onstead would be president and CEO of the combined company.
Within days of the acquisition, Bi-Lo Winn-Dixie announced the headquarters of the merged company would be in Jacksonville.
Mayor Alvin Brown and City and state representatives announced at a City Hall news conference that pending approvals, Bi-Lo would receive $6.6 million in incentives to move the headquarters and that the company would add 100 jobs and invest $93 million in capital projects.
The deal also included the pledge to keep 900 local Winn-Dixie jobs at the headquarters, which created more than 1,000 jobs with the additional positions.
Brown and JAXUSA Partnership President Jerry Mallot said those headquarters jobs would pay an average $84,000 a year. Onstead said a few people would be moving from Greenville and most of the additional jobs would be new hires.
Onstead said customers won't see anything in Winn-Dixie stores with the Bi-Lo name. He also said the Westside headquarters building would continue to have the Winn-Dixie name. Bi-Lo will continue to operate offices in Greenville with that name.
Onstead said he hoped to take the "best practices" from both supermarket chains and implement them in all the stores.
"I think both are doing certain things well," he said, but he would not discuss specific programs.
Onstead said the incentives package was one factor in the decision to put the headquarters in Jacksonville.
"There were a lot of things that went into our decision-making and some carried more weight than others," he said.
Other factors included Winn-Dixie's facilities in Jacksonville, including its distribution center, and its central location for the eight-state store network.
The $6.6 million in incentives consists of:
• $1.04 million through Florida's Quick Response Training program used for training costs for new and existing employees.
• $3.6 million in a state Quick Action Closing Fund to offset the costs of relocation expenses and equipment purchases.
• Up to $2 million from the City through a Recapture Enhanced Value grant over 10 years. A REV grant is based on the increased taxes generated by property improvements and is repaid to a company after it pays taxes.
The Jacksonville incentives deal was approved.
Bi-Lo, Winn-Dixie keep names
Don't expect a name change, either.
"We want to be very clear that at no time have we considered re-bannering our stores," Wright said.
"On the contrary, both banners have strong ties to our communities and neighborhoods and are rich in history," he said.
"Bi-Lo stores will remain Bi-Lo, and Winn-Dixie will remain Winn-Dixie."
Bi-Lo Winn-Dixie follows five operating principles, which Devine described and Wright outlined as:
• Working backward from the customer. "We are working backward from our customers and from the store associates who serve them."
• Empowerment. "We are empowering store associates to make better decisions for our customers. This helps create a culture of trust and accountability."
• Simplicity. "We are striving to keep our business simple. Doing business with us should be easy. After all, we are in the business of giving people what they want for their families."
• Right now. "We are responding to customer needs with a sense of urgency. Our customers deserve quick responses to their questions and requests. To be big, we have to act small,
and that means sometimes cutting through the red-tape of
procedure to give our customers great service."
• Fueling the engine. "We are only spending on what matters most so we can reinvest to drive more sales. We're cutting unnecessary expense so we can invest those savings into building sales, and continuing to have strong promotions."
It was widely reported in March, a year after the merger, that Bi-Lo Holding was making structural changes to leadership in Winn-Dixie stores that would include some eliminated positions, although no numbers were reported.
Wright was quoted as saying changes would not include hourly employees in nonleadership positions.
He said there likely would be more newly open leadership positions than those being eliminated.
"We are making changes to our store leadership, and at the end of the day, we likely will have more new, open leadership positions than we have current store leaders," spokesman Todd Lynch with St. John & Partners said in March.
Devine said last week the company has added more store managers and adjusted the ratio of full-time and part-time employees in favor of part-time staffing levels.
He said that at the time of the merger, Winn-Dixie had 60 percent full-time employment to 40 percent part-time, and the goal is to switch that to 60 percent part-time and 40 percent full-time.
The flexibility in scheduling part-time employees — or "prime-time" employees as Devine calls them — during busier times allows for better customer response and satisfaction.
Part-time employees are those working fewer than 30 hours a week.
He said the levels now are 52 percent part-time to 48 percent full-time.
As part of the cost analysis, Devine said there has been a practice to "look back and ask why you're doing what you're doing."
Business practices and processes that aren't the most effective can be replaced, he said.
Since the merger, Winn-Dixie has instituted new operating principles, he said.
Store directors now are at the top of the leadership pyramid — even above top-level executives, Devine said.
"The CEO is not in charge," Devine explained. "We are now servants to the store managers. They are the ones at the top of the pyramid."
He said Winn Dixie had a top-down management approach in which corporate decision-makers would dictate how stores were run and where products were placed, he said.
Now, corporate is "not there to tell" and instead asks how it can help.
Energizing the workforce
Devine said he is in charge of human resources for Winn-Dixie's 42,000 employees.
"How do you train 42,000 people and not lose the message?" he asked, referring to being customer-oriented and the operating principles.
He said his No. 1 focus is to create a pipeline of leaders, emphasizing potential leadership ability over technical skills in identifying those with leadership competency.
The talent to be able to lead people needs to be present first, he said. It can be developed by coaching and training.
Devine also said changing the workforce culture means creating personal happier "energy" in every environment.
He said an energized workforce leads to more efficiency, effort and innovation, which is vital for long-term success.
The focus on customers will help "fuel the engine," a core principle, to drive sales and reinvest in the company to offer more value for shoppers.
Devine also said:
• The average Winn-Dixie store has 70,000 stock-keeping units, also called SKUs. Each unit represents an individual item. At one point the typical store had only 2,400 SKUs and Devine attributes the increase to people's taste, the rise of food-related TV and the consumer's "love affair" with cooking.
• Stores resemble almost a theme-park experience in variety. "People wanted a theme-park experience and the groceries are the souvenirs," he said.
• The "transformational store" concept — focusing on fruits, vegetables, wines and serving and specialty stations — are doing well. Devine said the only such store in Northeast Florida is along County Road 210 in St. Johns County.
While Winn-Dixie had embarked on a schedule of turning properties into the "transformational stores," Wright said that strategy is different under new ownership.
"We have stopped building 'transformational' stores and have adopted a new- and remodeled-store strategy that we believe will be a more efficient use of our capital," he said.
Write said there are differences in food preferences within the markets served by Bi-Lo Winn-Dixie.
"We are fortunate to operate in a part of the country where there are unique differences in the foods people prefer to eat. Our capital plans should complement these differences," he said.
That will be carried out in store plans.
"While 'transformational' stores serve us well, and have taught us a lot, we feel we need to build and remodel stores that cater to the neighborhoods we serve," Wright said.
He said that means the company will focus on departments and services that "make sense for each neighborhood and customer."
While he said it sounded odd, Devine admitted to loving Publix. The reason? Competition.
"When you have competition that is driving you … you become better as a company," he said.
"Publix, Whole Foods, Fresh Market are all in this area and do a good job in what they do," he said.
Devine said those three competitors were part of a "high-fidelity" market, where a brand is established that creates a desire for people to shop.
On the other end of the spectrum come the "low-friction" stores that offer value, such as Walmart and Costco. In the middle comes Winn-Dixie, with stores that have both elements.
The Shelby Report of the Southeast supermarket industry trade publication reported in its March issue that Walmart remains the No. 1 supermarket retailer in North Florida and South Georgia, while Publix Super Markets Inc. is a close No. 2, with less than a half-point percentage difference.
The Shelby Report found that Walmart's 62 stores were No. 1 in sales volume, with a 30.1 percent market share, followed closely by Publix's 108 stores, with a 29.7 percent market share.
Winn-Dixie remained No. 3. Its 93 area stores captured 18.1 percent of the market.
Together, the top three account for 77.9 percent of the market share.
The broad market area includes the Jacksonville, Daytona Beach and Tallahassee areas in Florida and the Albany and Brunswick areas of South Georgia.
Walmart is based in Bentonville, Ark., and Publix is based in Lakeland.
The CEO to speak
More information about the merged cultures and plans could be shared soon.
Onstead, the Bi-Lo Winn-Dixie CEO, is scheduled to speak May 30 to the JAXUSA Partnership economic development arm of the JAX Chamber in his first major public appearance in Jacksonville since the merger.
Onstead has been relatively quiet, which isn't unusual for the CEO of a privately held company. Customers and shareholders were long accustomed to Winn-Dixie's visibility as a public company.
The event is scheduled 11:30 a.m.-1:30 p.m. at the Hyatt. For information, visit myjaxchamber.com.
His program is titled: "Well positioned to prosper."
Daily Record writer Mark Basch contributed to this report