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There’s ‘no reason to panic’ when it comes to our food supply: Albertsons CEO

Albertsons CEO Vivek Sankaran joins Yahoo Finance Live to weigh in on the state of grocery stores amid the pandemic and discuss what consumers are buying as the holidays near.

Video Transcript

BRIAN SOZZI: Vivek, good to speak with you here. What are you seeing right now in some of these stores that are surrounded by rising infection cases? We've talked to a lot of executives in the food space. Consumers appear to be back out there really hoarding goods like they were back at the start of the pandemic, and a lot of companies are seeing out of stocks.

VIVEK SANKARAN: Yeah, Brian, good morning. I wouldn't say it's back like March, April. It's not that way. We were ready. We expected that consumers will shop differently when we got to the second wave. And you know, it coincides with Thanksgiving.

So people are pulling up some of the Thanksgiving shopping. We are seeing consumers shopping a lot more of paper goods, cleaning supplies, disinfectants, the usual things. But we're not seeing yet the surge in shopping in other areas of the store. What we're seeing is people pulling up some of the Thanksgiving shopping to a week earlier.

We're selling a lot more turkeys than we did at the same time last year. That's as expected. A lot more small turkeys because we think they'll be smaller gatherings. But I want to make sure people know that there's plenty of food. There's no reason to panic when it comes to the food supply.

JULIA LA ROCHE: Vivek, it's Julia La Roche and certainly good to hear that. And I was going to ask you what Thanksgiving might be looking like during COVID-19. So thank you so much for sharing that.

I do want to dig in on just a broader conversation we were having earlier about omnichannel and this kind of secular trend that we are seeing within the grocery retail space. We'd love to kind of understand what you all are seeing across your store footprint. And what are some of the trends that you think will persist going forward?

VIVEK SANKARAN: Yeah, Julia, good morning. The omnichannel-- the pandemic has accelerated the trend, right? So I always imagined that omnichannel will get to 10% penetration in the market around 2025. I think that will be pulled forward. And people started engaging in omnichannel as part of the pandemic, but now, they're seeing the value in it for convenience.

And we offer Drive Up and Go where you just pull up curbside, and we bring it to your car. We offer deliveries. What we are excited about is that we're seeing new consumers coming to our franchise because of that. We're seeing existing consumers who engage in omnichannel spending more with us, which is really exciting because that's-- and they buy bigger baskets. They buy bigger baskets. They still come to the store and do that.

We have a lot more headroom. So we are in 950 stores as of end of last quarter. We'll get that 1800 stores in the next 12 to 18 months.

So we see a lot of upside. We see that being a part of the repertoire of how consumers shop the store in the future. It'll just be how we do things every day.

BRIAN SOZZI: Vivek, I am very interested. You have-- obviously, Albertsons' has pharmacies in its stores. You play in this space. How are you preparing for a COVID-19 vaccine rollout?

VIVEK SANKARAN: Yeah, Brian, in our pharmacies, we have a history of immunizations. We provide that to all our customers, typically flu, shingles and such. We are prepared. We have worked with all the state agencies to make sure we are also-- we have the vaccines available because we are in certain markets. We have such a strong presence that we can be of great service to our customers.

So we're ready. Looking forward to it. It's been great news over the last few days. We just hope that it gets to the markets pretty quickly.

JULIA LA ROCHE: Vivek, I want to go back to what you were just talking about earlier around omnichannel and some of the key points there. And of course, when I look at your most recent quarter-- the second quarter is what you all reported-- digital grew 243%. So I kind of want to ask you a bit of a strategy question here because Albertsons has so many different brands.

When it comes to executing on your digital strategy, how do you think about that? Is that more of a centralized process or a decentralized process where you try out different things, different brands, and then kind of iterate and scale across your footprint? Would love to kind of go inside that playbook.

VIVEK SANKARAN: Sure, Julia. It's a little bit of both. So let me start with what our brands stand for. If you go to Dallas, TomTom is a brand in Dallas. Many generations have shopped TomTom. You go to Boston, it's Shaw's. Many generations have shopped Shaw's, and each of them have a little bit of a unique flavor that's totally adapted for that local market.

And so we want the brands to stand on their own locally. But everything you see behind that brand-- so the app says TomTom, but the engine behind it is the same engine that you'll see at Shaw's, that you'll see a Jewel-Osco, that you'll see at Safeway and Albertsons. So we like this notion of being locally great and nationally strong, and we think there's value. It's very hard to be vanilla in grocery. You've got to adapt to local markets and this approach allows us to do that.

BRIAN SOZZI: Vivek, you've highlighted some initiatives on tap next year. I guess a customer could drive into your parking lot, and they have those groceries delivered out to them, but also a lot more self checkouts. Talk to us through some of those rollouts, and how are they changing your business?

VIVEK SANKARAN: Yeah, Brian, you know, when I think of a store, I think of three pieces to it, right? There is the right side of the store. It's the fresh product. It's the meats. It's the bakery, the smells, the visuals, the fruit and vegetables.

I mean, it's an exciting part of the store. People shop that slowly, right? And they engage.

Then you go up and down the aisles to pick up what are typical grocery items. And there, you're going through a list. You're trying to shop that really fast.

And then you get to the checkout. And at the checkout, we believe you should have one of two experiences. One somebody says, hi. You have a conversation. You enjoy that.

Or you don't remember anything about it because it was so smooth and convenient. That's what these self checkouts do for us. We have a scan and go approach now. We continue to innovate on that front because for a segment of the population, absolute speed and convenience matters at the checkout lane. And by the way, it's also a good labor productivity opportunity on the other side.

JULIA LA ROCHE: All right, let's talk about labor, Vivek, because you were just referencing, you know, some of the changes that we'll see at the checkout. I know I can tell you this as a shopper. I love curbside, and I don't know if I'll go back to going in the store when I'm in the suburbs going forward. So how do you rethink your labor and the talent within the stores and within, I guess, your distribution network as well? How are you thinking about that going forward?

VIVEK SANKARAN: Oh, it's a great question, Julia. So first is we are thinking of applying a lot of technology to improve productivity in everything we do. Everything we do in a store and everything we do outside a store. So that's the overarching theme.

And then, when you think about what's happening in a store today, you have what has been the traditional store labor. It's somebody cutting the meat, baking little cake, et cetera. You have that. You have the cashiers, people who stock the shelves.

But you also have labor that is acting much like a distribution center. They're going around and picking product. That's a different mindset. It's a distribution center mindset.

And so we're trying to do both in stores. We want the service orientation of the people behind the counter and at the check lanes. But we also want the productivity mindset of people picking product in the store. And we continue to improve that with algorithms, software, reallocation of product.

And then the big breakthrough is in automation of that picking. That's when we're going to make a step change in our industry, and certainly at Albertsons, on cost of labor for the omnichannel business. So that even if you come and pick it up at curbside, we are giving you all of the service without adding a whole lot of cost to our business. And then that's where we're all heading.

BRIAN SOZZI: What I've heard from you, really, is this is a different company than when I think back to the Safeway merger in 2015. You have a lot of tech integrations. You're also executing on $1 billion in cost savings through fiscal year 2022, and you also have the sales lift from the pandemic. Do you think the street understands the story yet?

VIVEK SANKARAN: I think they're beginning to Brian, but you know, I'm focused completely on performance. You are right. We integrated Safeway and Albertsons for the first few years. We started the transformation journey that's accelerated through the pandemic. We're going to come out stronger out of the pandemic than we went into it, and it's because of all the things you mentioned. We are delighted about our progress and our potential.