Klein’s and Brown To Open Oasis In Baltimore Food Desert
With business as tough as it’s ever been, there aren’t nearly as many “feel good” stories as there used to be. But here’s one: two Wakefern member/owners, the Klein family and Jeff Brown, are pooling their talents to build a new store in one of Baltimore City’s most underserved areas.
The two ShopRite retailers, one based in Harford County, MD and the other in the Delaware Valley, will open a new ShopRite in the Howard Park section (Liberty Heights Road) of Baltimore.
The announcement that a new ShopRite is coming to Howard Park is not exactly groundbreaking news (we reported about the possibility almost a year ago). But the effort of both Jeff Brown and the Klein family is both unique and interesting.
Brown (Brown’s Super Stores Inc.) currently operates 10 ShopRites in the Philadelphia area, many of them in areas where the residents are impoverished and the neighborhoods are drug and crime ridden. Not only has Brown dared to be different by opening stores with unique challenges, he has made them successful by hiring local residents and merchandising his stores with products that his customers desire. Beyond that, Brown and his wife, Sandy, operate a non-profit venture called UpLift Solutions (designed to create a model for operating profitable supermarkets in low income communities by listening to and responding to the community’s specific needs. By creating synergies between government agencies, non-profits and businesses, UpLift provides consultation support and technical assistance to utilize all of their various resources for improving “at-risk” communities).
Jeff Brown is not only a successful supermarket operator, he’s a wonderful, caring person whose altruism is truly special.
As for the Klein family, if you are any kind of local food industry historian, you know that Ralph and Shirley Klein are shining examples of independent retailing in the state of Maryland. From their seven stores base primarily in Harford County, the Klein’s have been successful for more than 80 years. Along with Ralph and Shirley, sons Andy, Howard and Michael and grandchildren Marshall, Sarah, Stephen and Jacob are all active in the business.
More than two years ago, the family made the switch to Wakefern, becoming the first Maryland based retailer to join the large New Jersey based co-op. While some in the industry thought the Klein’s operating model might not be an ideal match for Wakefern, the wholesaler was looking for an opportunity to expand into Maryland and the Kleins were seeking an injection of vitality into their business. Yes, there was some retrofitting and customizing, but the arrangement has been a very productive one.
So, while many thought it would be Jeff Brown opening a new “food desert” store in Northwest Baltimore, the “rest of the story” is really about how two productive independent retailers worked together to make the project happen.
It’s been about 18 months since Baltimore City’s Baltimore Development Corp. (BDC) began its efforts to find a supermarket (and other retail development) in an area of the city that’s been without a grocery store since Super Pride departed a decade ago.
While Jeff Brown was first targeted as the city’s retailer of choice (because of his history of success with urban stores), Brown recognized that it would be difficult to operate stores both in the Philadelphia area and one that would be 100 miles away. Besides, Brown had another major project in another food desert on his plate (at the old Tastykake plant in the Hunting Park area of Philadelphia) where another major urban redevelopment plan was further along. Brown had worked with the Klein family, particularly Marshall Klein (Ralph and Shirley’s grandson and Andy’s son), when the Forest Hill, MD retailer first began integrating its business into Wakefern’s systems in 2008. Jeff and Marshall shared a lot of common traits including their passion for the supermarket business (Jeff’s father, Lenny was a well-known independent retailer in Philadelphia).
Brown knew he could lend his urban retailing expertise to the site and felt confident that Marshall and the Klein family could manage the day-to-day operation.
So, when Baltimore Mayor Stephanie Rawlings-Blake approved the BDC recommendation to move the project forward on March 2, the marriage was officially announced.
As for details, the new unit, which should open in about a year, will be 67,659 square foot in size and is projected to cost $13.5 million. It will employ 80 full-time and 200 part-time workers.
And in the end, an area that seemingly was forgotten will be given renewed life with a brand new supermarket operated by people who know how to do it right and care about the details.
Every once in awhile, good things happen to good people.
Tom Infusino: The Greatest Independent Retailer Of All-Time
He only operated one grocery store, yet his legacy as arguably the greatest independent retailer of all-time is hard to dispute.
In a career that spanned more than 60 years, Tom Infusino, despite his modest record as an owner/operator, was the soul of perhaps the greatest collection of independent retailers of the past half century – Wakefern Food Corp.
Infusino literally epitomized the essence of the nation’s largest co-operative grocery wholesaler since 1953 and his indirect history with the co-op dates back to the mid-1940s when he and his brother Chuck opened their first grocery store in Newark, NJ with a loan co-signed by Sam Aidekman, one of Wakefern’s co-founders.
In 1953, Infusino opened the Nutley Park (NJ) ShopRite and joined Wakefern. That marked the beginning of a great marriage. It became evident early on that Infusino’s gift for teaching and team building were very well suited to help the emerging wholesaler grow. And there were other titans involved in Wakefern’s early success, too – Saker, Sumas, Romano, Glass, Gladstein, Tully, Wolfson, Sitar, Perlmutter, Druian, Colalillo – but Infusino’s deep belief that Wakefern’s model was best suited toward independent retailing and his altruistic spirit made him an ideal candidate to become actively involved in the wholesaler’s growth.
By 1965, Infusino joined Wakefern’s board and six years later he was elected president. That position was later expanded to encompass chairman and CEO. When he retired in 2005, Wakefern’s wholesale revenue had grown from $747 million to more than $8 billion annually.
To some, Infusino was the ultimate tough guy. And I can attest that he had very little tolerance for the media. But I know this wasn’t personal; Wakefern was a privately-hold organization and Infusino felt that that he was its guardian. Why reveal anything that could provide fodder for the competition?
I always thought of Tom Infusino as the Vince Lombardi of the grocery business. He was a combination of intelligence, toughness and passion with a work ethic that was off the charts. And as tough a boss as he could be (ask a few suppliers about it) there was a heart of gold attached to his entrepreneurial style. Charitable efforts, philanthropic projects, community needs and the importance of giving back and saying “thanks” were always very important to Infusino as witnessed by his speech on Ellis Island at Wakefern’s 50th anniversary in 1996.
“We could never have been successful without the help of many people and companies, first among these our families. Many of our operators today grew up going to the store with their fathers – not only to learn about the business or earn extra money, but also spend time together. And the wives and mothers often had two or three jobs – raising the children, making a home, and managing the company’s finances. Over the years, our families had to make a lot of sacrifices in order for us to grow.”
‘Round The Trade
There was a Craig Herkert sighting at the recent National Grocers Association (NGA) show in Las Vegas. According to several retailers and Supervalu executives who attended the retailer/wholesaler’s cocktail party held at the Mirage Hotel, Herkert briefly addressed the independent retailers and mingled for awhile. Sources described his speech as “upbeat.” The next day, Herkert met with the Rite Aid board to discuss the joint Save-A-Lot/Rite Aid effort the two struggling firms are testing in 10 stores in South Carolina. And we’ve waited a few weeks to gather some supplier feedback on the recent Supervalu vendor meeting held recently in Eden Prairie. Not surprisingly, the vendors were less than impressed. Several suppliers used the word “gall,” when describing SVU’s attempt to gain stronger promotions and more vendor money. In fact, executive VP Janel Haugarth, who recently added retail merchandising to her list of duties, indicated that SVU was going utilize “requests for proposal” (RFP) in all categories for suppliers to bid their best prices in order to lower Supervalu’s costs. The common sentiment of the approximately 10 sales reps who attended the meeting that I communicated with was: why should suppliers offer SVU lower costs when the return on their investment has been declining for years? The answer is that they shouldn’t. It’s 2011 and performance is based almost exclusively on how many boxes you sell. Maybe Herkert, Haugarth and the rest of the executive team should be offering vendors rebates on what they failed to deliver over the past four years. Vendors today have more discretionary choices on where to spend their promotional dollars. So, would you choose Supervalu over Publix, Wegmans, Ahold, Costco or Target, to name a few of many productive retailers? As one vendor who attended the both the SVU meeting and several Ahold vendor sessions over the past few years, noted, “What a world of difference. Supervalu seemed disorganized and unprepared to deal with the real concerns of their vendor partners. There hasn’t been a ‘partnership’ between both sides in a long time. Supervalu keeps asking for more, when by every measure they are the poorest performing customer in the industry. If we’re going to spend time and money flying to Eden Prairie, why not pattern the meeting after Ahold’s where the program is productive, interactive and respects the contributions its vendor partners have offered over the years.” In related, SVU news, as Target continues to move toward more self-distribution (and away from SVU), Supervalu is offering buyout opportunities to 57 associates at its Champaign, IL and Urbana, IL (produce) depots. And Duncan Mac Naughton, who left Supervalu to head Wal-Mart’s merchandising effort in Canada, has been promoted to chief merchandising officer (CMO) for the Behemoth’s 3,700 U.S. stores, reporting to Bill Simon, Wal-Mart’s CEO for the U.S. Duncan is certainly a smart guy who knows the grocery biz, but let’s not forget that he was chief engineer of SVU’s SuperFusion effort, arguably the worst centralized merchandising plan ever conceived and executed by any grocery company. I also found it interesting that while Wal-Mart is legally contesting former North region president Hank Mullany’s departure to CVS, the world’s largest retailer sought considerably less when Craig Herkert left the Behemoth to join Supervalu. Think the boys from Bentonville know something?…our buddy (and former Wal-Mart executive) Jim Donald is stepping down as president and CEO of Haggen, the 30 store regional chain based in Bellingham, WA. Donald, who will remain an adviser to the retailer, joined the 78 year old chain as chief executive in 2009, after serving as a consultant to brothers Don and Rick Haggen. What precipitated the change was private equity firm Comvest Group’s majority purchase of the retailer. The Haggen family will retain a “significant” minority stake in the company…Wal-Mart’s fourth quarter earnings rose 27 percent to $6.06 billion for the period ending January 28. However, overall sales in the U.S. fell 0.5 percent and comp store revenue declined 1.8 percent, marking the seventh consecutive quarter that comp sales dipped, For its full fiscal year, Wal-Mart’s sales reached a whopping $419 billion Generally, the financial trends of those publicly-trade food and drug companies have inched up a bit. Retailers are telling us that the economic issues are still playing a significant role in spending habits and now commodity increase (particularly fuel) have become worrisome. Here’s a brief recap of some of the country’s largest retailers. Wal-Mart’s chief rival, Target is trending in the opposite direction from the Bentonville behemoth. The Minneapolis, MN mass merchant saw its fourth quarter profit increase 10.5 percent for the period ended January 29. Overall sales were up 2.4 percent and comparable store revenue also rose 2.4 percent for the quarter. For its 52 week fiscal year, Target’s sales were $67.4 billion, an increase that was driven in large part by its ongoing conversions of stores to its P-Fresh hybrid food concept. In the supermarket sector, Safeway rebounded from several poor quarters to earn $229.6 million for its fourth quarter ended January 28. Overall sales for the period were $12.8 billion, a slight increase after last year’s corresponding revenue figure of $12.7 billion. However, identical store sales declined 0.8 percent (excluding fuel). “We are pleased with the improving trends in sales in 2010, driven by our price reductions, reinvigorated private label brands and targeted marketing period. These trends have continued into the first quarter of 2011,” said Steve Burd, president and CEO. “We are also encouraged by the results of our efforts to achieve cost reduction, especially in shrink and store level efficiencies, as well as our strong annual free cash flow.” Safeway has also introduced new in-store shelf system designed to make it easier for shoppers to locate better nutrition choices for foods and beverages. Safeway’s version of what is becoming a fast-growing industry trend is called “SimpleNutrition.” The Pleasanton, CA chain also recently unveiled its “Open Nature” private label line of 100 percent natural foods. With more than 100 SKUs rolled out late last month, “Open Nature” joins “O” and “Eating Right” as own-store health and wellness brands. Also, it appears that Safeway will be consolidating all of its ethnic and specialty business to one distributor and we hear that UNFI will be named to service more than 1,700 stores At Kroger, the nation’s largest pure play supermarket operator, its’ fourth quarter profit jumped nine percent to $278.8 and ID revenue (ex-fuel) grew by 3.8 percent. For its fiscal year Kroger posted record sales of $82.1 billion. “We increased identical supermarket sales, gained more loyal customers and strengthened our competitive position among grocery retailers,” said David Dillon, chairman and CEO of the 2458 store chain. At Ahold, the news was mixed. Globally, the Amsterdam based retail chain saw earnings drop 43.2 percent to $214.6 million in its fourth quarter ended January 2. At its U.S. division, earnings dipped 38.4 percent to $180 million. Part of that decline can be attributed to more than $35 million in impairment and restructuring charges. The company fared much better in the U.S. when viewing identical store sales, which improved by 0.9 percent (excluding gas). Brand new Royal Ahold CEO Dick Boer said the company expects 2011 to remain challenging for the food retailing industry although there are signs of a gradual economic recovery. The veteran Dutch executive believes consumer will remain focused on value and cautious spending in an inflationary environment. The big retailer reaffirmed its mid-term targets of five percent net sales growth (primarily from ID sales) and an underlying operating margin of five percent, while maintaining an investment grade credit rating. In the club segment, market leader
Costco posted a 16 percent earnings increase in its second quarter ended February 13, The Issaquah, WA based company earned $348 million in the quarter while overall sales rose 11 percent. Identical store sales grew 5 percent in the U.S, while membership fees rose 10 percent to $426 million. At BJ’s, fourth quarter earnings were $10.2 million (which includes a $41.1 million impairment charge) and comp store revenue rose 1.7 percent (ex-fuel). Laura Sen, BJ’s president and CEO, said, “I am very pleased with our results for the fourth quarter and full year, which reflect continued margin expansion and excellent cost control. Consistent growth in member visits, membership renewals and sales of perishable food demonstrate that BJ’s is continuing to capture market share from other retail channels.” Also reporting full year and fourth quarter earnings for the first time was Greensboro, NC based The Fresh Market, which went public late last year. The perishables driven merchant reported a net loss of $18.1 million for the period ended December 31, 2010. However, much of that loss was attributed to expenses related to its initial public offering. Sales results were very strong, with overall revenue increasing 13.1 percent and comp store sales rising six percent. On a related note, the company plans to open 12 to 14 new stores in fiscal 2011 including opening new stores in Vienna, VA, Towson, MD and Rockville, MD.
Local Notes
We’ve been hearing from several vendors that A&P is dipping back into pre-bankruptcy vendor deals and deducting from those companies after the bankruptcy filing. Vendors have complained that those deals should no longer be relevant (because of the Chapter 11 filing). If that’s the case, as several suppliers have noted to us, that’s a “no-no.” Expect Judge Robert Drain to rule on this and a host of other issues at A&P’s next bankruptcy hearing on March 8 in White Plains, NY. Additionally, Teamsters Local 863, based in Mountainside, NJ, and its affiliates, have been leafleting a number of A&P, Super Fresh and Pathmark stores in New Jersey, Pennsylvania, Delaware and Maryland. The union is protesting the closure of the six New Jersey warehouses by A&P’s primary supplier, C&S, on February 6, which resulted in the termination of 1,300 workers. In a letter of response to its customers from A&P CEO Sam Martin, the retailer said the leafleting “does not have anything to do with A&P or Pathmark employees.” The Teamsters are linking A&P into this matter by claiming the Tea Company “didn’t support a 90-day moratorium to give workers, businesses and elected officials a chance to save these jobs.” One more thought related to A&P: the man Sam Martin replaced last July – Ron Marshall – is this year’s winner of the “get out of Dodge before the crap hits the fan” award. After the former Dart Group Corp. executive left A&P, the company went Chapter 11. Last week, another retailer that Marshall formerly led, Borders, filed for bankruptcy. And when Marshall left Nash Finch in 2006, it wasn’t exactly a ceremonious exit … vendors are still barking about the lack of cohesion concerning Ahold USA’s new centralized merchandising shift to Carlisle, but progress is certainly being made as the big retailer has begun to test its “single host” IT platform. Ahold promises that once its new IT system is running smoothly (which should occur in the next six weeks), many of the execution issues will go away. Vendors certainly hope so, although one constant that we hear from many of the reps and brokers is that, even when flowing smoothly, the new platform will have too many Stop & Shop/Giant-Landover features and not enough of the hallmarks that made Giant/Carlisle so successful. And seems obvious that Ahold’s challenges in getting its centralized merchandising effort in synch had an influence on Delhaize America’s (whose original reorganization plan resembles Ahold’s to a large degree) opting to keep both Salisbury, NC (Food Lion, Bottom Dollar, Bloom, etc.) and Scarborough, ME (Hannaford) operational as supply chain and merchandising support centers. Salisbury will serve as headquarters for produce, meat and seafood and Scarborough will be the merchandising center for deli and bakery. Center store will be managed from both locations (we’re told that there will be no duplication of categories, which will be consolidated into one location with that CM based in either Salisbury or Scarborough)…one retailer that is not experiencing much pain from the recession or competition is Whole Foods. The Austin, TX natural and organics retailer posted a 26 percent earnings increase for its first quarter ended January 16. Overall sales jumped 14 percent and ID revenue rose a very impressive 9.1 percent. Additionally, for the first three weeks of its second quarter (January 17-February 7), ID sales increased 8.6 percent. Six new leases were signed during the 16 week first quarter. Whole Foods has agreed to build new stores in the Foggy Bottom section of Washington, DC and replace two other units in Rockville, MD and Charlottesville, VA…entering the pearly gates recently was Kenneth Mars, 75, the character actor who was a staple in two of Mel Brooks’ funniest films, The Producers (1968) and Young Frankenstein (1974). In the former flick, Mars played Franz Liebkind, who penned the awful play, “Springtime for Hitler,” in which conniving producers Zero Mostel and Gene Wilder bilked little old ladies into investing (the sequence in which the title song is performed might be the funniest five minute scene in movie history). Mars also played one-armed Inspector Kemp in search of mad scientist Gene Wilder’s monster. In both movies, Mars managed to steal almost every scene he was in. I’m also sorry to report the death of Len Lesser, 88, veteran character actor who appeared in more than 160 films and TV shows dating back to the late 1940s. Lesser is probably best known for playing Jerry Seinfeld’s crotchety “Uncle Leo” in 15 episodes. If you had to memorialize Lesser with only one Seinfeld show, it would have to be “The Watch (1992),” which captures the essence of how funny “Uncle Leo” really was. And a salute to Edwin “Duke” Snider, who passed away this earlier this month at the age of 84. “The Duke of Flatbush” was usually thought of as the “third banana” of center fielders who played for the three New York baseball teams in the 1950s. He may not have had the athletic skills of Willie Mays (Giants), or the charisma and power of Mickey Mantle (Yankees), but the Duke was a helluva player. He was underrated defensively in large part because Ebbets Field was such a bandbox. And at the plate, he was as consistent a left-handed power hitter as there was in his era. An eight-time All-Star and a member of the Baseball Hall of Fame, Snider batted .295 and swatted 407 home runs in a career that began the same year as Jackie Robinson’s (1947) and lasted until 1964. During the 1950s, he led all major leaguers in home runs (326) and RBI (1,031). And he was one of the game’s real gentlemen, to boot.