Onex seeks ‘world-class’ leader; Claus out by ‘mutual agreement’

Jon Springer | Apr 04, 2017

Claus earlier this year directed Save-A-Lot to close all 13 of its stores and its distribution center on the West Coast, saying the investment needed to build density there was better served supporting existing franchises in core territories. In a surprise announcement Save-A-Lot late Monday said it had appointed former Lidl executive Kenneth McGrath as its new CEO, replacing Eric Claus.

McGrath, 42, is a former CEO of Lidl Ireland and was appointed in 2013 to lead Lidl’s U.S. expansion but left the company in 2015. Most recently McGrath served as CEO of the Caribbean and Central America region at wireless telecommunications firm Digicel.

The move is the first major personnel announcement for Save-A-Lot since its acquisition by the private equity firm Onex and would appear to demonstrate how seriously U.S. discounters are taking the prospect of Lidl, their German counterpart that has yet to sell its first head of lettuce in the U.S. but has plans to build at least 100 stores beginning this summer.

“To me this signals Save-A-Lot is going to knuckle up and compete,” Mark Thompson, managing director of Crossman & Co., a real estate services firm in Orlando, Fla., told SN.

Claus was named CEO at Save-A-Lot less than two years ago when Save-A-Lot’s former owner Supervalu was preparing to spin the discounter into a standalone public company. Those plans were scuttled by a market downturn and by a deterioration in sales sparked by competition, deflation, and by changes to federal food benefit programs affecting Save-A-Lot’s core customers. Those conditions resulted in Supervalu changing course on the IPO and instead selling the 1,300-store business for $1.4 billion to Onex late last year. The company at the time was posting same-store sales declines of around 5%, and industry conditions have improved little since then.

McGrath spent 13 years over two tenures at Lidl Ireland, and also spent two years as a managing director at an Ireland-based competitor, Superquinn.

As Lidl’s first U.S. CEO, McGrath led recruiting and hiring including the development of Lidl’s “Future Leader” program that trained recent graduates in Europe for 18 months. According to a profile on LinkedIn, McGrath “created an output-focused and results-oriented culture from Day 1,” and exceeded aggressive operational targets.

McGrath was succeeded by former Lidl Ireland colleague Brendan Proctor in May of 2015. McGrath, along with Lidl’s US EVP of real estate Kevin Proctor (no relation to Brendan), both left to take roles at Jamaica-based Digicel, a telecom company focused on the Caribbean and South Pacific owned by Irish businessman Denis O’Brien. Digicel subsequently filed for a listing on the New York Stock Exchange in 2015 but withdrew that request last summer, citing unfavorable market conditions.

 “We are thrilled that Kenneth has chosen to lead Save-A-Lot as we chart a new course for the company after its separation from Supervalu,” Matthew Ross, chairman of the Save-A-Lot board of directors and managing director at Onex, based in Toronto. “Kenneth is a strong executive that brings to Save-A-Lot tremendous experience in hard discount retailing. He is highly capable of building a world-class organization, investing in the company’s capabilities and systems, and returning Save-A-Lot to industry-leading growth by leveraging its unique market position.”

During his tenure as CEO of Lidl Ireland, McGrath oversaw a period of exceptional customer and revenue growth while also maintaining a cost leadership position within Lidl’s global operations, Onex said.

“The opportunity to lead Save-A-Lot at this exciting phase is a real privilege,” McGrath said. “Save-A-Lot has a proud history of delivering exceptional value to its customers throughout the U.S. I am looking forward to working with Save-A-Lot’s dedicated associates and licensees to serve customers in ways that enhance their experience and, in doing so, driving a period of sustained growth for the organization.”

A Europe-based observer who asked not to be identified told SN Tuesday that given experience with Lidl, McGrath would be “used to an autocratic culture and won't be used to dealing with franchisees, independents or free thinkers.”

Founded in Cahokia, Ill. in 1976, Save-A-Lot is a pioneering U.S. hard discounter which grew quickly behind entrepreneurial independent licensees and a limited selection, low-cost offering capable of profitable sales at lower volumes than traditional supermarkets. It has attracted high-profile international leaders before, including Claus, known for success with discounters in his native Canada, and former Walmart executive Santiago Roces, who ran the chain while under Supervalu’s ownership between 2011 and 2013.

It’s unclear at this point what the latest executive change may mean for Claus’s Save-A-Lot strategy which included elements that would seemingly position Save-A-Lot closer to its German hard discount competitors, while also distinguishing it behind an expansion of national brands and fresh.

In an interview with SN earlier this year, Claus said his strategy was designed to increase sales volumes by turning light shoppers into heavy shoppers.

Onex said it and Claus “mutually agreed” to part ways. “We want to thank Eric for his contributions to Save-A-Lot over the past year,” Ross said. “Eric is an outstanding retailer and led Save-A-Lot through a difficult separation process.”