2024-04-09 03:05:38
The appointment of the brothers Yossi Amir and Shlomi Amir as joint CEOs of Shufersal chain officially ushered the food and pharma retail giant into a new era, completely different from anything that characterized it in the past decade. The most significant change concerns the transition from management by employees without a controlling owner to management by controlling owners In practice (24.9%), who specialized for decades in food retailing. The two examined and learned in the weeks that have passed since the acquisition of control in exchange for NIS 1.6 billion, all of the group’s activities, with an emphasis on the loss-making activities and those that need to be strengthened, and outlined the steps they would have to take.
Precisely the first step to cut expenses, through the dismissal of headquarters employees, is expected to be slightly postponed, due to the proximity of Passover and the desire to avoid layoffs before the holiday. Estimates are that the brothers will cut Shufersel’s headquarters expenses, which are estimated at about NIS 500 million a year, by about 30%, which reflects about NIS 150 million, as well as the network’s advertising budget, which is estimated at about NIS 150 million a year.
“Calcalist” learned that as part of the inspection of the main activities, last week the Amir brothers brought the high-tech entrepreneur Nir Tzuk to Shufersal’s automatic collection center in Modiin, which is suffering from numerous computer malfunctions. The purpose of the visit was to receive a set of tools to reduce breakdowns, and to improve service to customers of the activity, which constitutes 17.5% of Shufersal’s sales, with an annual volume of NIS 2.4 billion.
The automatic collection centers in Kadima and Modi’in were established during the tenure of Itzik Abarkhan as CEO with an investment of approximately NIS 700 million, and began operating gradually over the past two years. Apart from the depreciation expenses of NIS 40 million per year that they pass on to the company, the center in Modi’in, which is considered the largest of its kind in the world, has difficulty making ends meet its output capabilities and works on only about 55% of its volume. The center also suffers from multiple malfunctions, with each malfunction requiring repair and delaying all customers in the chain.
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Shufersal signed a maintenance agreement with the automation supplier KNAPP and will have to find a way to switch to an independent maintenance model, which will reduce its dependence on the supplier. In addition, since online competition has increased, the company has had to expand the circle of customers that the centers are required to serve, which increases distribution expenses based, among other things, on fuel and working time. The brothers will work to overcome the malfunctions and increase the productivity of the centers.
The most significant change, at least on the visual side, concerns the rebranding that the brothers want to do for the Be Pharm chain, in which the purple color that characterizes the brand will be removed. The brothers’ point of departure is that the chain has potential, but the consumer does not like the branding chosen by Uri Waterman, who was recruited to the position of CEO of the Pharm chain, after its purchase and towards its relaunch at the end of 2018. It can be estimated that in addition to changing the branding and design, the brothers will promote a promotion policy that will respond to the chains’ offers the competitors.
Taking care of the pharmacy chain, which has 93 branches and whose sales amount to approximately NIS 1 billion, is essential. Although it suffers from disadvantages in relation to the good locations of Super-Pharm branches, this is not its main problem, since even when it opened stores in successful malls such as the Rehovot Mall, it had difficulty succeeding. The difficulty of being a competition to Super Pharm stands out against the background of the success of Rami Levy’s young competitor Good Pharm and can be attributed to the lack of a distinct brand identity and management failures. Shufersal did manage to bring Be into balance, and will now work to create a differentiation that will drive consumers to its branches. This is a complex challenge, when Good Pharm offers a discount alternative that manages to bite into Super Pharm and Be sales.
In recent years Shufersal’s private brand has become responsible for over a quarter (27%) of the chain’s sales, yielding higher gross profitability than the supplier brands. However, not every product in the range is justified and the activity requires Shufersal to have a customer service system, which needs to respond to consumer inquiries on an ongoing basis and even more so when there are recall events. Estimates are that the Amir brothers are expected to expand their view of the private brand, in a way that does not require that it operate in every category under the brand bearing the chain’s name. Today there are about 6,200 SKUs under the brand, and it is estimated that the variety will be reduced, as they find quality products at a better price, even if they are not marketed under the Shufersal brand.
For example, a supplier who today sells Shufersal a product under his own brand at a certain price, and would be willing to offer the company at an attractive price an identical or similar product, under another brand, which is not his brand nor that of Shufersal, will be able to combine the product. The thinking behind the move is that this will cause the chain to buy both its brand and the additional brand from him, allowing him to give it a bigger discount. These sales, even if they will not be under Shufersal brand, will be attributed to the brand, in the form of a supported or controlled brand, depending on the circumstances.
The added value to the network will also be in increasing the discount, and in that the quality control system and customer service for those products will be transferred to the same suppliers, which will save expenses for Shofersal. In the meantime, in the meat sector, the chain, which until now mainly marketed Angus meat, is expected to start marketing an intermediate brand, which will allow it to respond to the competition in the industry.
One of the moves that has already started concerns the wholesale sales arm, which is carried out in three Kash & Kerry stores, in marketing to food stores in the rural and urban areas, as well as by the Amiga company that deals with the distribution of food products in the institutional market: cafes, restaurants, catering and catering companies, kindergartens, homes Avot and more, and the distribution company that carries out similar activity in the north of the country. The activity, to which Lior Lazer, former VP of trade and sales of Willifood and before that at the Beldi meat company, was recruited.
The Amir brothers immediately realized that while the activity in the wholesale stores and marketing to stores was profitable, Shamiga and the distributor were causing Shufersal losses. This is, among other things, because they work separately, with the distributor company operating from the northern region, while Amiga from Modi’in. Lazer, who will be appointed CEO of Shufersell Business, will work to unify the computer systems and the sales and distribution systems of Amiga and the distributor, along with increasing the sales of cash and carry stores. Soon the chain is expected to open another wholesale store, and the possibility of opening the store to private customers, who are interested in purchasing products in large packages, is also being examined This is while until now, the purchase in these stores requires the presentation of company details.
Shufersal has 5 central storage and distribution centers with a total area of about 110,000 square meters, headed by Marloh Shoham with fresh and chilled produce, Modi’in with dry food, Raslach with cleaning materials and Rosh Ha’Ein with non food, and 57% of the products are distributed from them to the branches by Shufersell, in exchange for a distribution fee.
The distribution fee is determined as a percentage of the sales turnover, which has not been adjusted for the increase in the prices of electricity, fuel and labor wages in the recent period. At the same time as the adjustments that will be made, the Amir brothers are expected to work to improve the operational efficiency of the marlogs, and to lower their distribution costs, so that they will be similar to those of external distributors.
Along with handling these activities, the brothers, who are characterized by intuitive management, will demand that consulting companies like McKinsey, whose program they froze, stabilize the company that has lost customers and become one of the most expensive chains in the food market. The path to change will have to go through intensive care in the Yesh Chesed network, which caters to the ultra-orthodox sector with low pricing at a rate that, according to estimates, is causing losses to the company. The stock company Dan Deal, which was acquired in recent years and was not merged, will also be dealt with in a way that would yield appropriate profitability. Unlike before, the Amir brothers are not expected to rush and close unprofitable branches, but to take care of them and transfer them to profitability. The implementation is expected to go through the suppliers, who will have to increase their participation in discounts and promotions.
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