1. Analyze the U.S. grocery industry structure to assess its vulnerabilities in the light of troubles faced by traditional grocery stores.

2. What made Safeway’s expansion under Peter Magowan risky?

3. Evaluate Burd’s decisions to turnaround Safeway.

4. Should Safeway divest itself of its stores in Pennsylvania, Chicago, and Texas?

The case details the travails of Safeway, the third-largest supermarket chain the U.S. in 2001, as it is battered by competitive forces in a rapidly changing grocery industry. The grocery industry was rocked by the entry of big-box discount retailers such as Walmart, Target, Costco, and Kmart in the 1990s and 2000s. Within 10 years, by 2004, the share of such discount retailers in the U.S. grocery sales had increased from 9% to 32%. Clearly, something had to be done. Safeway’s business level strategy needed a serious overhaul. Operating as a private company, Safeway’s top management led a systematic effort to rebuild Safeway’s operations and turn the company around financially. The case reviews the changes in the grocery industry, as well as Safeway’s history, current operations, and the remaining challenges.