Publix Pharmacy and Grocery – Case Study

History of Publix Pharmacy and Grocery stores

In 1930, George W. Jenkins set out to open a retail store that provides the type of friendly customer service that drives loyalty. Along with five other employees and their specialized knowledge of the grocery business, the group started a new type of grocery store. They started Publix Pharmacy with their first location being next to Jenkins’ former employer, Piggly Wiggly.[1]

Despite opening during the Great Depression, Publix Pharmacy was able to survive and beat their neighboring competition. The following few years were turbulent. America was entering the Second World War, prompting a materials shortage. This inhibited the grocer’s ability to expand. As a result, Jenkins turned to acquisition for expansion. They bought All American Food Stores, the 19-location grocery chain of Lakeland Grocery Company.

Today, Publix Pharmacy operates over 1200 stores across seven states. They employ over 200,000 individuals and are one of eight companies to be continuously listed as one of Fortune 100’s Best Companies to Work For since the ranking’s inception.

The Supermarkets and Grocery Store industry

In the United States, the Supermarkets and Grocery Store industry is a $682B market. Over the five years up to 2020, the industry grew at 1.2% per year. Growth has been driven by increase in disposable income and changing food preferences. As consumers become more health conscious, their preferences for organic and food free of GMOs is increasing. With that, consumers are willing to pay a premium for greener food. This leads to higher revenues for stores.[2]

From 2020 to 2025, the industry will grow at an annual rate of 1.2%. This results in the overall grocery market valued at $724B in 2025. Drivers of growth are continuation of previous trends, namely increase in disposable income and health consciousness. As the millennial population grows to become the largest population base in the US, their preferences for green products and value will come with a premium price, and ultimately revenue growth. [3]

Competitive landscape

The competitive landscape of the Supermarkets and Grocery Store industry is low, with major players accounting for only 30% of the overall market share. Leading the incumbents is The Kroger Co. (16.0%), which operates Dillons, Food4Less, Kroger, Owen’s, Pay Less Super Markets, Smith’s, Ralph’s, and Harris Teeter. Following that is Albertsons Companies Inc. with 8.9% and then Publix Super Markets Inc. with 5.9%.

Despite the low concentration, companies within the industry face pressures from external competition. Online grocers, such as Amazon, and mass merchandisers, like Walmart and Target, all provide grocery offerings as part of their store formats. This increases pressures for companies to compete on service and price. Companies that can provide the most convenience to end customers are more likely to capture the millennial market.

Publix pharmacy and grocery business model

Like many grocery and pharmacy stores, Publix generates revenues by selling grocery items at prices greater than cost. When Jenkins’ first opened his “food palace” concept in Florida, the store had amenities, such as air condition and in-store doughnut shops, which were unheard of for a grocer at the time. The company went on to expand their offerings. Their stores now include pharmacies and their own Presto! ATM network. They also have a cooling school called Aprons. This diverse set of offerings all contribute revenues to Publix’s bottom line.

In addition to an expansive product offering, Publix also holds unique in two traits. First, the company is owned by former and current Publix employees along with the Jenkins’ family. Two, the pharmacy is known for giving away free prescription medications (for certain types of drugs). Both of these factors offer unique value proposition to customers.

Publix Pharmacy success factors

One factor of Publix’s success is their employee ownership structure. Having employees take part ownership in the organization creates alignment between organizational objectives and employee incentives. Thus, employees are likely to behave in ways that support the organization’s profitability. For example, Canadian airline company, Westjet, is an organization which thrived under employee ownership.

Prior to being purchased by private equity company, Onex, Westjet was owned by its employees. The company demonstrably performed better than their competitors in terms of net profit performance. Some argue that Westjet’s earlier success is due to the employee ownership structure, which creates a culture of customer service that was truly Westjet’s competitive advantage.

Another success factor is the regional focus of Publix. The company’s focus is in the southeast states of the US, namely Florida, Georgia, Alabama, South Carolina, North Carolina, Tennessee, and Virginia. Of top three large incumbents, they are the only one which has experienced revenue growth in the last five years. They have grown organically in these key markets, allowing them to develop a deep expertise and relationship with their customer base.

Looking ahead

As millennial consumers drive industry growth, Publix will need to evolve their products and services in order to capture these customers. Providing convenience driven services, such as online purchase and grocery delivery, is one way to offer value to this customer base. Additionally, Publix can reinvent the place that grocery stores hold within a consumers life by helping them discover new green products. Continuously diversifying their product offerings and finding ways to engage and connect with the customer base is another.

Related Readings

Professional Leadership Institute (PLI) is an educational website providing professionals from all types of businesses with practical education in human resources and leadership. To keep evolving your leadership toolkit, additional PLI resources below will be useful:

 

[1] Lakeland Ledger, July 6, 1980, accessed August 2020, https://news.google.com/newspapers?nid=1346&dat=19800706&id=4PEvAAAAIBAJ&sjid=H_sDAAAAIBAJ&pg=3639,1678730.

[2] Cecilia Fernandez, “Supermarkets & Grocery Stores in the US,” IBISWorld, May 2020

[3] Cecilia Fernandez, “Supermarkets & Grocery Stores in the US,” IBISWorld, May 2020

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