Outsourcery

In these days of furious consolidating, outsourcing is the way to go for both corporate giants and small outsourcers.

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When Robert Strickland walks into the headquarters of $9-billion Food Lion, he flashes his company badge, attends strategy meetings, and flies off on the corporate jet. The only thing he doesn't do is work there

AN INDUSTRY UNDER SIEGE: In the eyes of a traditional grocer, a supermarket is little more than a warehouse for food. Products enter through the back door, go onto the shelves, and exit through the front doors in the carts of shoppers. Selling groceries amounts to a high-volume, low-margin proposition; the typical supermarket chain nets less than a penny of profit on every dollar of sales.

Despite those threadbare margins, that economic model worked pretty well until about a decade ago, when competition on various fronts began to eat into the supermarkets' territory. Hyperefficient, high-volume retailers such as Wal-Mart, with their sprawling "supercenters" and their companion discount "clubs," began capturing more of the market. Then came the "category killers," specialty superstores stealing business in higher-margin goods such as health and beauty aids, and pet food. More recently, the trend toward eating out at restaurants and taking home ready-to-eat meals from operations like Boston Market has also taken its toll. The warehouse, alas, is under siege--and things aren't about to let up.

The industry is now furiously consolidating, in the prospect that an oligarchy of no more than 10 chains will one day rule the U.S. market, squeezing any competitor or vendor smaller than economy-size. Then there's the fickle consumer. Cooking is a dying art, and time a dwindling commodity, making convenience all the more precious. And what about grocery shopping on-line? One industry trend watcher predicts that within 10 years every supermarket in America will be on the Internet; of course, she adds, at that point there will be only half as many supermarkets around.

In an effort to win back business, the grocery industry has counterattacked--most notably by installing, over the past decade and a half, the delicatessen-bakery sections that nowadays no self-respecting supermarket is without. Many are elaborate, with seductive open kitchens behind the counter, and everything from goose-liver pÂtÉ to individual ready-to-eat servings of veal marsala displayed in front of it. Between 1982 and 1992 the percentage of U.S. supermarkets with deli-bakery sections rose from 50% to 80%, an increase from 14,000 units to almost 23,000. This year Wal-Mart alone will install 100 new bakeries in its stores.

But deli-bakeries--as they are known in the trade--are creating more consumer excitement than actual sales. They account for only about 5% of average store volume. Moreover, they're notoriously hard to run because of their high variable costs. "A lot of these delis don't make money," says Jerry Weil, president of St. Louis-based Swiss-American, a cheese processor and importer. "They add some icing to the cake, but they're also a drain on cash and energy."

Still, tacticians believe the fate of the supermarket may hinge on making the deli-bakery concept work. And store operators are turning to anyone whose help might better the odds.

THE FIXER: All this turmoil is not necessarily bad news for Robert Strickland, who this day is standing, tall, slim, and boyishly enthusiastic, in a Food Lion supermarket in Charlotte, N.C. Ask Strickland about deli-bakeries and soon you realize you have met a man who is master of all he surveys. His thoughts emerge as a rapid-fire jumble of jargon, acronym, and social science. "You shop the deli with your eyes," he says. "The strongest impulse occurs when you walk in the door." That's why the deli ideally should appear "first in line"--to the right of the front door. To lure stray shoppers to the deli, Strickland will often "dislocate" an item--put it elsewhere in the store--and "bogo" it.

Bogo?

"Buy one, get one."

When Strickland walks into Food Lion's headquarters, up the road in Salisbury, he flashes his company badge, logs into the company's database, attends strategy meetings with the top management, and flies off on the company jet on short notice. The only thing Strickland doesn't do at Food Lion is actually work for the corporation. Rather, he runs his own food-brokerage business, R.C. Strickland Co., in Charlotte, whose $2.5 million in sales (produced by 25 employees) would represent little more than a rounding error to Food Lion, whose 1996 revenues amounted to $9 billion.

So why then would mighty Food Lion, with all its resources, mess with a speck of a company like Strickland's? The short answer is that Strickland knows deli-bakery--very, very well. He has become a fixer of sorts to the chain, an outsider who knows the vendors he represents as well as he does the retailers he sells to. "We are able to provide value in the food manufacturer­retailer relationship," says Strickland. "There's a huge void between the two--of communication and trust, of understanding about how to market the product, of understanding about each other's financial objectives. We are able to fill that gap."

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