It’s easy to write about the carnage in markets like the Delaware Valley and Metro New York, because the damages are so readily seen.
Did it surprise anybody that A&P finally raised the white flag and sought to reorganize itself through the court system?
Is anybody shocked that Acme had another poor year, when it offered no perceptible improvements to its customer shopping experience? When you put little capital into your operation and remain directed by the type of poor leadership that now exists in Eden Prairie, MN, what can one expect?
And Genuardi’s seems like it is being treated like the red-headed stepchild of the Safeway family.
With A&P’s fate to be determined by a bankruptcy court later this year, Acme facing short-term critical decisions about its long-term viability (Should it sell? Can it sell?) and Genuardi’s closing and selling more stores annually, the former “Big Three” (including Pathmark) have seen their combined market share decline from 30.22 percent in 2006 to 20.83 percent this year. In a market as large as the $19.6 billion Del-Val area, that’s an avalanche.
More than any other merchant, ShopRite has made the most progress. The stats in this issue are a testament to how much the Wakefern member/owners have grown, but the refinement of the culture and the improvement in its overall skill set at the grocery wholesale co-op are equally impressive to this observer. Sure, the independent retailers who carry the ShopRite banner are as competitive and tenacious as any group of merchants in the country, but what has helped the company immensely is its attention to detail, its creative go-to-market strategy and a management team that is as talented and focused as any that I’ve encountered over the past 20 years.
This year, ShopRite attained a milestone in the 33rd year of publishing these market studies. The big retailer posted the first “triple crown” in the history of the food and drug business in Philly and Metro New York by establishing leadership positions in the 11 county Northern New Jersey market, the 15 county Delaware Valley market and the eight county Greater Philadelphia market.
So, here’s my take on the winners and losers over the past year in the ultra-competitive, overstored Delaware Valley market.
ShopRite – It would be easy just to say that ShopRite’s significant market share gain in the Delaware Valley came only from the decline of Acme, A&P/Pathmark and Genuardi’s. And, while, as noted above, it is true the former “Big Three” have slipped precipitously over the past five years, that would be doing a disservice to the powerful group of Wakefern members who helped the co-op reach new highs this year by leading the field in both the Delaware Valley (15 counties) and the Greater Philadelphia market (eight counties). ShopRite’s sales increased $117 million with the same number (66) in the Delaware Valley and its market share increased 0.54 percent in the large $19.6 billion area. For the retailers who proudly fly the ShopRite banner, it really didn’t matter who the competitor was or under which trade classification they operated. ShopRite is poised to gain even more market share in the Delaware Valley over the next few years, as it adds several net new or new replacement stores (Hatfield, PA, Philadelphia – Hunting Park and Tacony Street, Hamilton Township, NJ and Bear, DE). The tenacity and creativity of the ShopRite independents, coupled with the continued decline of the former “Big Three” (who show no signs of changing course), should only enhance the members of the big co-op in the next few years.
Acme Markets – I’ve got to give president Dan Sanders some props for working his butt off in trying to move the Acme needle forward again. And because of Sanders’ grit, Acme will finally open a new store during the next 12 months (a replacement unit Bryn Mawr, PA). But, despite all of the hard work and Sanders’ ability to improve the culture at headquarters in Malvern, PA, the numbers continue to slide steeply. During the past year, Acme closed 10 stores in Del Val, its share dropped 1.53 percent, and there are few blue skies on the horizon. The decline of Acme may go down as a business school case study – a once great company that was milked and milked by several management regimes. Now, under the guidance of Supervalu and its rudderless leader, Craig Herkert, one wonders what Acme has going for it for these days, other than the convenience of its locations. The chain has lowered some prices, but is anybody really noticing? Many of the stores are old, tired and too small to compete in the evolving marketplace. Without the necessary capital required to demonstrate significant change and the seemingly meaningless direction from Herkert and his executive acolyte, Pete Van Helden, does anybody see a turnaround in the near term? The next 12 months should be very interesting ones for Acme as the ultra-competitive Del Val market continues to evolve. There may be some opportunity with potential A&P/Pathmark fallout, but the operators that have dented Acme the most in recent years – ShopRite, Giant/Carlisle, Wal-Mart, Target, Wegmans and even Wawa – are gaining momentum. Will more stores be closed or sold? If it decides to sell Acme, can Supervalu get any real value at this point? A turning point is at hand.
Wawa – The amazing story continues. The nation’s best run convenience store chain is now closer to surpassing Acme than Acme is to overtaking ShopRite. With 371 stores (six more than last year) in the 15 county area, Wawa’s sales increased more than $96 million over the past 12 months and its share grew from 9.29 percent to 9.75 percent. Wawa has some ambitious initiatives ahead, including a geographic expansion into the Orlando and Tampa, FL markets. However, unlike Supervalu, Wawa has strong leadership at the corporate helm. Howard Stoeckel, who has guided the Wawa ship for many years with a steady hand, has proven to be a superior chief executive. He has steered the former local dairy to innovative new heights, and based on Wawa’s growth chart over the past decade, is in position to overtake Acme as the second leading retailer in the Delaware Valley market in the next three years.
Giant/Carlisle – The Delaware Valley has proven to be a highly lucrative marketing area for the only non-union banner operated by Ahold USA. Giant/Carlisle’s share continued to grow despite operating no stores in key parts of the region (Delaware and Southern New Jersey). With one net new store (Springfield, PA) and solid ID sales, Giant’s share increased from 7.44 percent to 7.83 percent. Giant/Carlisle has made strides in recent years by forming strong customer loyalties with its modified EDLP program and the ability to take business from Acme, A&P/Pathmark and Genuardi’s. From a glass half full perspective, the changing landscape, which also could include the closing and selling of many A&P/Pathmark stores and the continued decline of the former “Big Three” could create additional market share. From a potential glass half empty view, the continued growth of ShopRite, Wal-Mart, Target and Wegmans could impact Giant/Carlisle’s growth in the next few years.
A&P/Pathmark – A year ago, the train was already off its tracks. On December 12, 2010, the wreck became official, as A&P sought Chapter 11 bankruptcy status. The once mighty Tea Company is currently in reorganization mode and nobody is quite sure what the company will look like once it emerges from purgatory in the next eight months. ID sales, even after Chapter 11, continue to slide and the company is on its third CEO in the past 18 months. The good news is that the kind but inept Christian Haub is gone from heading the day-to-day business of A&P and the new management team seems enlightened and determined to purge recent A&P history from its books as though it was Russian history. However, the company structurally needs so much help one wonders if there will be any salvaging of heavily declining markets like the Delaware Valley. My vibe is that we are likely to see a store closing/auction later this year similar to what has been occurring in Maryland during the past six weeks. While many of its 54 remaining units in the Delaware Valley (13 fewer than last year) are not in “A” shape, the Tea Company still has many desirable locations with attractive leaseholds. If A&P goes the auction route, and Acme and Genuardi’s continue to close stores, you can expect the Delaware Valley market to look much different a year from today.
Wal-Mart – Wal-Mart’s national pattern of flat ID store sales was mirrored in the Delaware Valley. However, with one net new SuperCenter and still very impressive per unit volumes, the Behemoth isn’t going away any time soon. With several more SuperCenters to be opened or converted (Oxford, PA; Hilltown Township, PA; Kennett Square, PA; Pottstown, PA; Monroe Township, NJ; and Berlin Township, NJ) and with Wal-Mart’s announced plan to launch smaller format “Express Units,” the Bentonville, AR retailer is determined to improve its recent sales course, while still being the competitor all other retailers watch most closely. Wal-Mart’s sales malaise may be a part of a corporate culture that is too process-driven and inflexible, but it is trying to regionalize itself more effectively. A key loss over the past year was the departure of Division North president Hank Mullany, who was based in Horsham, PA (and is now CEO of ServiceMaster in Memphis, TN). After Mullany’s departure, Wal-Mart shuffled its deck and gave veteran Rosalind Brewer the responsibility for the chain’s Northeast units. She is based in Atlanta, GA. There is a lot of scrutiny currently being placed on the Behemoth as it endures the worst sales slump in recent company history. Despite criticism from Wall Street, if you are a competing retailer, vendor or trade observer it would be bad judgment to underestimate the power of Wal-Mart.
Wegmans – With only seven stores and a 2.18 percent share of the huge $19.6 billion marketing area, why would we list Wegmans on our leader board? Because no other retailer can crater a local marketing area like the uber-retailer from Rochester, NY. The family-owned regional chain only opened one store in the past 12 months – in Malvern, PA – but as usual, it produced big volume and affected competition within a 10 mile radius. If you are a retailer that has felt the pain of Wegmans, the good news is after next year’s King of Prussia, PA opening, there are no current plans in the works to build new Wegmans units in the Delaware Valley. Retailers such as ShopRite and Giant/Carlisle have proven that they can hold their own (but still feel some pain) against Wegmans, but Acme and A&P have felt the full brunt of a retail operation that is capable of producing $80 million (or more) of annual sales per store.
And, here’s my take on the Baltimore-Washington market:
Giant Food/Landover – There is a rumor making the rounds at Ahold that Giant/Landover interim president Don Sussman is doing such a good job leading the chain that he is never going to be allowed to return to his previous full time job of executive VP-supply chain at Ahold USA. Clearly, Sussman has brought calmness and more organized operating style to the banner that has proven to be an uplifting cultural change from his predecessor, the frenetic Robin Michel, who departed last November. Certainly, Michel deserved credit for her tireless work ethic and grit that helped to transform Giant from the sluggishness the division showed under the arrogance of previous Stop & Shop leadership. On the operating side, Giant continued to gain share with a more consistent operating approach and improved merchandise program, particularly its fuel partnership with Shell. The chain continues to get more mileage from its investment into remodels than in its new store performance, and with its prime locations seems headed for another strong run. As for Don Sussman, if business keeps going at this rate, he may never get to leave Landover.
Safeway – Safeway’s greatest strength is also the quality of its store locations. In recent years, the big chain’s Eastern division has taken advantage of on-site replacements of some of its best stores (Georgetown and 4th and M, SW in the District, Falls Church, VA Kensington, MD and coming soon – Bethesda, MD and Olney, MD). Those stores that have reopened as new generation “Lifestyle” units have paid consistent dividends. But, it is many of Safeway’s remaining stores that have slipped. Too many of those units seem dated and somewhat tired. Safeway clearly has been impacted by the new competitive landscape that has entered the B-W market in recent years. From marketing and merchandising perspective, Safeway has improved during the past year. The lowering of retails, which began nearly two years ago, has now been fully integrated. The retailer’s weekly ad looks crisper and is more price aggressive. Safeway has also done a fine job of highlighting its new price position at store level. The company remains a solid performer, but if it wants to move up to the next level, it needs corporate headquarters to give its profitable Eastern division more flexibility and also provide greater capital to invest in its total store base.
Shoppers Food & Pharmacy – It was another challenging year for the third largest retailer in the B-W area. Same store sales declined at a lesser rate than in 2010, but the “discount” unit of Supervalu closed seven stores and was still searching to regain its once strong price image. President Dick Bergman departed late last year and was replaced by Tim Lowe, who had headed store operations for Shoppers before leaving (to briefly join Burlington Coat Factory) and then returning as Shoppers new head man. Clearly, Shoppers’ issues won’t be eradicated until parent Supervalu improves its awful performance. The recent news of Shoppers’ pending acquisition of the Super Fresh store in Ellicott City, MD would be the retailer’s first new store in almost three years. The chain’s share has been particularly impacted in Northern Virginia, where Shoppers’ ambiguous identity has created slippage against a slew of new competitors. Will Shoppers ultimately be sold as a carrot in Supervalu’s long term strategy? And, how much longer can Supervalu continue to exist in its present struggling form?
Food Lion – It is going to be very difficult for Food Lion or its other B-W banners (Bloom, Bottom Dollar) to gain market share in the next few years based on its present perception. As previously noted, Shoppers Food & Pharmacy has seen its price image diminish; Food Lion’s once very strong price perception has also declined. Its physical plants aren’t large enough to compete with its bigger supermarket rivals, which also offer a broader selection and have a significant advantage in perishables. And those retailers that truly are discounters – Save-A-Lot, Aldi and Wal-Mart (a particular nemesis) – all play the price game better than Food Lion. As for its more high-end Bloom model, the fact remains that Bloom is neither upscale enough nor does it provide the level of service that would attract the more affluent customer base that Washington offers. Bottom Dollar may have the most potential, but sales indicate that the chain hasn’t achieved the necessary traction yet. However, Food Lion is in no danger of going away. It knows how to operate efficiently, is still is successful in many rural areas, and is the market leader in the adjacent markets of the Eastern Shore, Richmond and Tidewater. And while convenience of location may not be quite as important as it once was, nobody knows better than Food Lion that convenience still matters.
Harris Teeter – From a single store in the Ballston section of Arlington, VA 12 years ago, Harris Teeter now operates 29 stores in the $24.2 billion Baltimore-Washington market. That’s three more than last year, with at least another half dozen stores to follow. For the most part, Harris Teeter’s entry into the market has been successful, with its stores located inside the Washington beltway generally performing the best. Some newer units, such as Gainesville, VA and Warrenton, VA have struggled. But, clearly the upscale division of Ruddick Corp. is here to stay. Other than Wegmans, no other conventional supermarket retailer executes better at store level or places more of a premium on customer service than Harris Teeter does.
Wegmans – Wegmans continued its blistering pace of successful store openings when it debuted its new Landover, MD uber-store last fall. While all Wegmans stores in the B-W area generate more than $1 million a week in sales, the company’s first Prince George’s County unit is drawing a more diverse clientele and is doing exceptionally well with its salad bars and take-out business. The beat goes on for the Rochester, NY family-owned regional chain, as it opened its new Frederick, MD store on June 5th and will open its Bel Air, MD on September 18. No other retailer, including Wal-Mart, can crater an individual marketing area like Wegmans can. In the next two years, retailers that operate in Columbia, MD; Gambrills, MD; Germantown, MD; and Alexandria, VA will feel some Wegmans onset agita.
Wal-Mart – Once again, the Behemoth had a less than stellar year when viewing only the numbers. In Wal-Mart’s case, the numbers appear secondary (unless you are a financial analyst) to the chain’s ability to still carve out huge sales on a per unit basis. Just in the Washington area alone, Wal-Mart will be opening six new units (four in the District and two in Northern Virginia) and is in the process of converting several more of its “Division One” conventional stores to SuperCenters. And if Wal-Mart’s overall impact in the area hasn’t been felt enough over the past decade, the company’s recently announced smaller format “Express” model will be coming to many urban locations in the B-W market over the next five years. One or two flat years does not make the Behemoth any less formidable.