Target disclosed Monday that it hired PetSmart (PETM) executive Anne Dament to lead its grocery business. Dament previously was responsible for overseeing PetSmart's service business that generated $860 million a year, as well as helping to build out its customer analytics platform. Prior to Petsmart, Dament held numerous food merchandising positions at grocery store chain Safeway (SWY). She will assume the position of senior vice president of merchandising, according to Target. Previously, Kathryn Tesija, Target's executive vice president and chief merchandising and supply chain officer, had overseen the retailer's entire grocery business.
Dament's experience in managing multiple food categories, from fresh meat to packaged alcoholic beverages, likely attracted the attention of Target, which is attempting to revamp a food business it first launched in 2009. Under the leadership of new Target Chairman and CEO Brian Cornell, the company has been analyzing everything from how it merchandises its fresh food to consumers to the way the food sections are laid out.
It's vital that Target gets things right now, as food sales comprise about 20% of its annual sales. "Overall, we lack a clear positioning, and the shopping experience hasn't matched with what our guests expect of our brand," said Tesija at a Mar. 3 meeting with the investment community. "Food is something that our guests shop for while they are at Target, not why they come to Target, and that has to change."
By hitting the reset button on a business that has long been viewed as an afterthought to Target's cheap-chic, higher-margin apparel and home collections, the company hopes to attract more frequent visits to its U.S. stores.
TheStreet takes a look at four challenges Dament will likely have to tackle over the next 12 months to make the food business a stronger performer for Target. Comments from Tesija below came from the investors meeting last month.
1. More organic food options.
"Wellness is a must, more organics and naturals," said Tesija. One way Target has started to address this is through its "Made to Matter" program. The partnership revolves around companies that agree to create better for you products exclusively for Target. After testing products from 16 vendors in 2014, many of which sell organic food and all-natural cleaning products, the program will be expanded to 31 vendors this year. Target expects sales from this collaboration to reach $1 billion this year. The exclusive products give Target an edge over the increasing selection of organic products at Walmart (WMT) and Kroger (KR).
2. More foods that cater to social occasions.
Target's groceries section, as it stands, is a hodgepodge of items that could build a great meal. But what Target needs are instant meal solutions and the accompanying signage to show this offering. The signage would help Target be viewed as a one-stop-shop for hurried parents coming home from work to a hungry family. Social gatherings, such as birthdays and dinner parties, as well as meal solutions, are a significant sales opportunity, according to Tesija.
3. Improve operations to run more like a grocery store.
Target has laid the groundwork for operating as if selling groceries is its No. 1 business. "We are cutting our transit time from farm to store by 30%, and we are displaying products in a way that signals freshness and abundance," noted Tesija. One area badly in need of attention is Target's fresh vegetable display, which tends to be too small to hold multiple product categories.
4. Make the food aisles easier to shop.
"Segmenting local brands for staples like coffee and bread has been something that we've done for years, but we need to broaden that to all categories and incorporate presentation and signage," admitted Tesija. Target has started to test and revamp some sections of its local staples in Chicago. It expects to have most stores "re-merchandised" by this summer.