ENLARGE
Target CEO Brian Cornell has been touring rival stores for ideas of how the retailer can freshen its grocery business, according to a source. Photo: Reuters
By
Paul Ziobro
Updated March 2, 2015 3:41 p.m. ET
Target Corp. plans to lean on Greek yogurt, bagged coffee, and craft beers in an effort to make its grocery aisles feel less like
Wal-Mart Stores Inc. and to attract younger shoppers.
Target has zeroed in on seven grocery categories—from granola and yogurt to candy and snacks—where it thinks it has the best chance of standing out to urban dwellers, younger families and Hispanics, two people familiar with the matter said. Along with a proclaimed goal of adding more organic, natural and gluten-free foods, Target is showing signs that its food direction will become less reliant on packaged and processed foods that are out of favor with many millennial consumers.
Fixing grocery—which accounts for about a fifth of Target’s $73 billion in annual sales—is a priority for Target’s new chief executive, Brian Cornell. Target expanded its grocery offerings in the hopes that shoppers would come to stores for low-margin food items and then indulge in purchases of higher profit items like a new blouse, a shower curtain or a throw rug. But that plan didn’t entirely pan out. After an initial increase, traffic started to fall and margins narrowed.
Since expanding its grocery offerings in 2008, Target’s selection hasn’t stood out. A survey of Target shoppers by the consultancy Kantar Retail found just 18% of customers felt that the food sold at the retailer matches up with what they like to cook or eat.
Mr. Cornell,
whose background includesstints at
PepsiCo Inc., Safeway Inc. and Sam’s Club, has made the grocery turnaround his own business. He has been touring rival stores like Trader Joe’s and Wegmans Food Market Inc. to get ideas of how Target can freshen its grocery business, according to one of the people.
Mr. Cornell is also involved in finding a new head for its grocery business, after replacing two executives in the past year. Target is looking to bring in an executive with grocery experience from elsewhere, and Mr. Cornell has personally been interviewing some candidates in recent weeks, a person familiar with the matter said.
On Tuesday, the retailer will announce a wide-ranging turnaround strategy to try to recapture some of its former cheap-chic cachet. A Target spokeswoman said Mr. Cornell and Chief Merchandising Officer Kathee Tesija plan to share more details on the grocery plans Tuesday during a meeting with investors in New York.
At that time, Target will lay out plans to focus on yogurt and granola; coffee and tea; candy; snacks; beer and wine; fresh meat, and produce, the people said. The categories won’t necessarily get extra space at Target, but will get more focus from merchandising teams, and receive greater prominence in displays and marketing, they said.
Target executives still expect several months to pass before any major changes are rolled out to stores, a person familiar with the matter said.
“We recognize we have a lot of work to do in food,” Mr. Cornell told investors last week. “We won’t get there overnight.”
The changes will likely build on an earlier pledge to add more organic, natural and gluten-free foods to its selection—a change that would mean less shelf space for some of the large packaged food companies like
Campbell Soup Co.,
General Mills Inc. and
Kraft Foods GroupInc. that have been starving for growth of late as consumer tastes change.
The new selection is skewing toward an assortment favored by so-called millennial consumers—those born in the 1980s and 1990s—who increasingly prefer a healthy lifestyle and have largely shunned the processed foods that their parents grew up with. Those younger families are making up a greater share of Target’s customer base, rivaling the spending power of baby boomers.
Beyond grocery, Mr. Cornell plans to convey his broad plans for Target to investors at Tuesday’s event. The starting points of his strategy have included a
decision to focus on a half dozen signature categories like home, apparel, children’s and wellness products. Among his other areas of focus: opening smaller format stores, improving Target’s digital sales, and having a more localized assortment in stores around the country.
The plan will require more investment. Mr. Cornell is seeking more cost cuts from the corporate level eliminating management layers also to help expedite decision making.
Target’s has already started that process by consolidating merchandising departments, leading to the departure of some senior buyers. Employees in Target’s Minneapolis headquarters are already bracing for another round of layoffs, following the 550 layoffs last month that were tied to
its shuttered Canadian operations.
Write to Paul Ziobro at
[email protected]
