Now that it seems likely that the once great Genuardi’s Family Markets will shortly become extinct (or at the least radically downsized) and that two other stalwart chains, A&P (Super Fresh, Pathmark) and Acme, continue to head south at a rapid rate, which retailers will remain stalwart and strong in the $17.9 billion Delaware Valley food and drug market and which supermarket operators will continue to struggle in one of the most competitive marketplaces in the country? Gentlemen, the envelope please.
The Survivors/Winners
ShopRite – Yes, they run conventional stores. Yes, they are fully unionized. Yes, they are constantly scrutinized over perpetuation issues. While those types of issues might adversely impact many retailers in the Philadelphia area, the retail members of Wakefern have turned them into an advantage. Slowly building its store base in the market (led by Jeff Brown), no other retailer has grown same store sales and advanced its market share over the past five years more than ShopRite. Strong execution at store level which is based on the skill and tenacity of its independent ownership base. And, the outstanding high/low merchandising plan and leadership from Mother Wakefern that’s at or near the top of any observer’s list makes ShopRite not only the most powerful player in the market, but one that seems most likely to grow even more.
Giant/Carlisle – Now that it opened its first store in Philadelphia store, this non-union unit of Ahold USA has begun to tap into underserved areas in the region. Giant’s stores may not have the “pop” of ShopRite’s units, but its execution is very good and its merchandising (even after its huge re-org) remains consumer-friendly. With more than $3 billion at its behest for future acquisitions, a potential Genuardi’s deal could be the beginning of a big run for the company over the next 12 months. Like ShopRite, Giant has excellent leadership and is very tenacious at protecting market share.
Wegmans – One could argue that with only seven store in the area, Wegmans sample is not large enough, but I’d beg to differ. Each Wegmans store that opens has the ability to “crater” any given trading area. At $1.5-$2 million per week per store, the Rochester, NY based uber-retailer offers something special that competing retailers are hard-pressed to match. If you’re a competitor, the good news is that the regional chain has only one more unit scheduled to open in the near term in Del-Val (King of Prussia, PA next year). Instead, the family-owned retailer is setting its sights on three New England projects and five more stores in the Baltimore-Washington market. If Wegmans could find the sites that it needs (demographics and space) and had a larger infrastructure, it could have 15 stores open in the market over the next seven years.
The Decliners/Losers
Acme Markets – I’m still waiting to hear Supervalu CEO Craig Herkert inform his shareholders how he is specifically going to turn Acme around (no, the answer is not “Hyperlocal” or “Sizzlin’ Summer Giveaways”). Even if Acme really did lower its everyday prices to truly competitive levels and even if it received better cooperation from its UFCW locals, would there really be much hope left? Forget for a moment the perennially plunging ID sales (which if you aggregated those declines over a five year period you’d get a scary negative composite number). Minimize the impact of its nearly non-existent real estate cap-ex program (not to mention a current store base that’s too old and too small) and factor out the day-to-day morale of its associates. Even if those three components weren’t significant mitigating factors towards a downwards spiral, how would you fix Acme? The toothpaste is out of the tube. ShopRite, Giant, Wegmans, Wal-Mart, Wawa and several other players have outperformed Acme for so long now, the discussion for 2012 should center on how many stores it can sell and how many must it close.
A&P (Super Fresh, Pathmark) – I’m fairly certain you won’t see an auction that would include all 54 of the Tea Company’s Del-Val units being sold or closed, but there will be a process that ultimately yields fewer stores in the market. Like Acme, there are enough quality locations to interest potential buyers, but the fact that the chain’s store base is physically small and the chain is unionized will eliminate some interested parties (at least in the first round of bidding). While A&P has struggled for years in the Delaware Valley, its handling of the Pathmark stores since its 2007 acquisition has been particularly disastrous. The new management team led by Sam Martin “gets it,” but the hole that was dug by former CEO Christian Haub and his many management teams is a cavernous one and it’s going to take a lot more than one new Super Fresh in Philadelphia to keep A&P significantly afloat in the market.
Bottom Dollar Foods – Now officially one year old, I’m still not certain what this unit Delhaize America represents. Are they a quasi-full service discounter, an extreme value operator or some of “all of the above?” Perhaps as much as its confusing identity, Bottom Dollar suffers from having “last operator in” syndrome and some questionable locations. Even Delhaize CEO Pierre Beckers said that Bottom Dollar’s results are “less than optimal.” Actually, store execution, both with in-stock conditions and cleanliness, are solid. I just don’t think Bottom Dollar has made a strong connection with customers at many of its locations. If you want to put Bottom Dollar in the extreme value category, Save-A-Lot and Aldi have done a better job; and Trader Joe’s is a superior “treasure hunt” player. And if Bottom Dollar’s plan was to take share from conventional supermarkets, it just hasn’t taken enough to this point. Hard to see from where the improvements are going to come, particularly since its niche seems very narrow and there are still too many operators in the market offering many diverse retailing styles.
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