February 20, 2012

Culture Eats Strategy by Roger North  

Did you ever shop at Genuardi’s? A wonderful family owned supermarket chain, Genuardi’s was Wegmans before Wegmans. It was Whole Foods before Whole Foods. Whatever happened to Genuardi’s anyway?

Founded in 1920 by Italian immigrants, Genuardi’s was in family hands for five decades. By 2000, this one time corner grocer had grown to 39 stores with a brand known for two things: upscale foods that competitors didn’t carry and hyper attentive customer service.

Genuardi’s had created something great, and it was noticed. Safeway, a west of the Mississippi grocery chain, purchased Genuardi’s from the founding family at the end of 2000 for $530 million. Then in a more recent transaction, Safeway sold 16 of the remaining 27 Genuardi’s stores to Giant Food Stores for $106 million.

What do we see in those numbers? In about 11 years of ownership, Safeway took a “best in class supermarket” and turned it into a “good in class supermarket” according to food marketing professor John Stanton of St. Joseph’s University.

Now, I have no particular bone to pick with Safeway. In fact, I know little about them. But as I read about these transactions, I can’t help but see evidence of one of my colleague’s favorite sayings: Culture eats strategy for lunch.

Genuardi’s was led by the same family for five decades. I think it’s safe to assume that the family had particular beliefs and practices that profoundly affected how they and their employees did business. Surely providing unique, fresh, attractively displayed foods chartered their culture. Even more surely, hyper attentive customer service did.

When Safeway took over they emphasized efficient, tight management of inventory and stores. And why wouldn’t they? That’s Safeway culture. But it wasn’t Genuardi’s. While the name remained on the stores, the brand commitment was gutted. The two companies’ cultures were just too different.

So what does all this public company stuff mean for you and me? I think it tells us (again) that culture matters. In fact, it matters in a big way: your company culture is quite likely the only competitive advantage your competition can’t duplicate.

By the way, did you notice how culture matters when it comes to money? Well, Safeway paid Genuardi’s $13.6 million per store.  Price in the recent sale of stores to Giant? Only $6.6 million per store.

Culture eats strategy for lunch!

This article recently appeared as a guest post for the Lacher & Associates blog.