Taking Stock

Jeff Martin To Enter Vendor World; Will Become SVP of Business Development At Utz

When Jeff Martin abruptly resigned as executive VP-merchandising and marketing at Ahold USA last June it caught many of us off guard.

Martin was so good at his job – both in executing the exhausting day-to-day blocking that such a big role in the $25 billion organization entailed, but also utilizing his uncannily strong people skills – that his resignation certainly left a void at the largest supermarket retailer in the Northeast.

While Martin did admit that his grueling schedule had taken a toll on him, he also acknowledged that he needed to reshape his life as he approached his 50th birthday.

Prime among that reshaping was his friendship and subsequent marriage to Andrea Astrachan, who once worked with Jeff as Ahold USA’s VP-consumer affairs. He admitted that his relationship with Andrea caused him to rethink a lot of his priorities including becoming closer to his adult daughter who resides in Hagerstown, MD, the small city where Jeff was also born and raised.

Having spoken with Jeff several times after he resigned, it was clear that he would take his time before deciding on his next career move. Obviously, a one year non-compete with Ahold USA was a factor in his thinking, but when I’d speak with Jeff it became increasingly clear that he didn’t want to relocate from his Central Pennsylvania home where the couple live and where Jeff is helping Andrea raise her two children.

According to Jeff, the Utz opportunity came from out of the blue, originating from a phone call that he received from current Utz Quality Foods president Dylan Lissette shortly before Christmas. According to Jeff, a lot of common ground was covered in that initial conversation and within eight weeks a deal was hammered out.

When I spoke to Jeff and Dylan (separately) on February 13, both were excited. Jeff sees this as an opportunity to help accelerate the growth of one of the best regional brands in the country. He also recognized that he will be entering a culture that’s family-oriented with a terrific work ethic, not unlike the one he knew when he started at Martin’s in Hagerstown and helped maintain during his rise through the ranks at Giant/Carlisle and then Ahold USA.

Lissette, a member of the fourth generation of Utz leadership who has been with Utz for almost 18 years, and became president of the privately held 92 year old company in mid-2012, views Jeff’s role as a very important, necessary component to continue the company’s recent fast-track growth.

In the last two years, the Hanover, PA snack foods company has acquired Louisiana-based Zappe Endeavors (Zapp’s, Dirty and California potato chips), purchased Massachusetts-based Wachusett Potato Chip Co., and bought most of the assets of Reading, PA-based The Bachman Co. Additionally, the company has made further penetration into New England and expanded its diverse snack line into the Atlanta market.

“Our goal is to continue to grow our strong brands,” said Lissette, who’s only 41. “I think Jeff can help us with that objective. He knows the grocery business very well and, based on our relationship with him when he was at Ahold, it’s clear that he brings a wealth of knowledge in strategic planning, business development and leadership to Utz. I’m also very confident that his excellent people skills will allow him to mesh immediately with our diverse and very talented senior leadership team.”

Martin added: “I am excited to join Utz…it’s the largest independent privately held snack brand in theU.S.Its success in the snack foods market has been built upon a strong reputation of superior product quality and excellent customer service since 1921. It’s family owned, and we share a lot of the same core values. With over $500 million in sales, nine manufacturing plants and almost 50 distribution centers, I look forward to utilizing my diverse retail background to assist in the continued growth of Utz. They’re well positioned for continued growth and success and I’m pleased to be a part of the team.”

We wish both gentlemen well in this exciting new endeavor. With what I know about this successful Utz team, it will be fun to watch this franchise expand!

Wayne Sales To Collect King’s Ransom; New CEO Sam Duncan Already Engaged

It’s good to be Wayne Sales, newly departed chief executive of Supervalu. Wayne couldn’t even wait around to see his final act completed. Then again, why bother to stay at the company that is going to richly reward you ($12.8 million) for seven months of tortuous work engaging your friends at Goldman Sachs and Dunhill & Co. to unload a company that you watched unravel from your director’s seat and (since 2010) as non-executive chairman of the board?

No point in hanging in for another six weeks until the transaction is completed. Wayne, give yourself a pat on the back and a few more vanity mirrors for engineering such a coup. Besides the horrific sales, earnings and morale issues that have stunk up the joint in Eden Prairie and at its operating divisions and distribution centers, weren’t you one of the biggest proponents of hiring Craig Herkert to become CEO in 2009? Where were you and your fellow board members during the entirety of Herkert’s tenure, in which earnings and overall sales declined and ID revenue dropped every single quarter for the 38 months “The Spinmeister” was at the helm? How misguided was your stewardship during that period? How about fiduciary responsibility to the shareholders?

However, when the pressure became so great that Herkert had to be relieved of his duties, who better than a former tire salesman (please note that I didn’t say “used tire” salesman) to lead the charge? After all, it appeared that not many people would be qualified to lead a company in such disarray. And, even if someone could be found, would he or she want to move toMinneapolisand, then, how much would you have to overpay him to accept the job, especially since Herkert would have to be paid a large severance because of a new contract he signed that you approved?

Yes, it must have been obvious by your own deduction skills that you, Wayne “The Commission-er” Sales, were the right man for the job. By that point, last July, the only remedy was to dump the company and hopefully gain some value for Supervalu’s shareholders who had been brutally punished during your entire tenure as director.

It was pretty smart of you to negotiate a generous contract even as you continued to lay off people and freeze bonuses and other compensation for the loyal worker bees who already had suffered greatly over the past six years.

However, your real coup wasn’t fully uncloaked until the SEC mandated the filing of a 14D-9 tender offer filing which revealed your richly deserved severance. What a plan: move from chairman to CEO of a company that you helped damage, collect a king’s ransom for seven months of liaison work and then leave before the final whistle blows.

Brilliant, man, brilliant!

By the way, “The Commission-er’s” package breaks down to $8.1 million in cash and $4.7 million in equity. Also gaining lucrative exit packages were CFO Sherry Smith ($3.51 million); Janel Haugarth, president of SVU’s independent business ($3.65 million); and Andy Herring, EVP-real estate, market development and legal ($2.82 million). Those payments will be made when those executives are terminated from their positions within two years of the acquisition closing. All three executives also received retention bonuses after the company was put on the sales block last July.

On the other hand, I can’t praise the efforts of new CEO Sam Duncan enough. In the slightly more than three weeks since it was announced he would become chief executive of Supervalu and in the subsequent two weeks since he was officially installed, more than a dozen retailers (both from the independent ranks and from the regional chains that Duncan leads) have contacted me to praise Duncan’s willingness to meet with them, openly discuss problems and seek solutions.

Essentially, in fewer than 40 days, Sam Duncan has accomplished more than Craig Herkert did in more than three years on the throne.

Especially noteworthy were the positive comments of several independent retailers who met and chatted with Duncan and incoming Supervalu chairman Bob Miller at SVU’s cocktail party at the recent National Grocer’s Association (NGA) convention held in Las Vegas earlier this month.

This should come as no surprise to anybody who’s tracked Miller and Duncan’s careers. They are both operators who don’t tolerate a lot of process or BS. Their records indicate that sales come first and they’ve proven they can adapt to change quickly. That in itself will be a very refreshing change to the many divisional Supervalu associates who have been watching the “rope-a-dope” act of Herkert since 2009 and the inertia that existed from the Jeff Noddle regime three years before that.

Miller alone has a legacy that’s Hall of Fame worthy, dating from his leadership positions at the original Albertsons in the 1960s to Fred Meyer, Kroger, Rite Aid, Wild Oats and most recently as CEO of Albertson LLC (nowCerberusAB). He’s mentored so many people in the industry his genealogy tree would be a tall one. Here’s a sampling of Miller’s “branches.” He not only mentored Sam Duncan, he tutored current EVP-operations of Albertsons LLC Bob Butler, who may be in line to become CEO of the newly expanded grocery firm. Other Miller connections include John Standley, a Fred Meyer alum, who is now CEO of Rite Aid (where Miller once served as chairman) and who was chief executive of Pathmark under the stewardship of Ron Burkle. Additionally, veteran industry executives Jim Donald (ex-CEO of both Pathmark and Starbucks, who now is chief executive at Extended Stay Hotels) and Ron Dennis (retired president of SVU owned-Farm Fresh) both worked for Bob Miller in the 1970s. And there are at least another half-dozen retail executives who have a link to Miller.

It appears that March 18 will be the dawning of a new era for Supervalu. There will be a lot of difficult and painful decisions to be made based on the carnage that Miller, Duncan and their team will inherit.

However, I’m fairly certain that better days are coming for what was once one of the grocery industry’s most admired companies.

‘Round The Trade

Good news for two premium operators – Inserra’s ShopRite and Fairway Market – which respectively have reopened and will shortly reopen two stores that were ravaged by Superstorm Sandy last October. On February 9, Inserra’s store reopened inHoboken,NJto enthusiastic crowds and $8 million of repairs and improvements. On March 1, Fairway’s largest volume store in the Red Hook section of Brooklyn, which was also gutted by the effects ofSandy, will reopen. “Our store in Red Hook is the cornerstone of the neighborhood,” said Howie Glickberg, whose grandfather found Fairway in 1934. “I am so proud of what we have done. That store was devastated.” Fairway, which is currently in a “quiet period” while it attempts to gain enough capital support to go public (Sterling Investment Partners acquired controlling interest of the chain in 2007), is also doing well with its new Manhattan store, located in the Kips Bay section of the city, which opened in late December. Fairway plans another new unit later this year in Nanuet, NY (Rockland County)…not far from Fairway’s offices in Manhattan sits Gristede’s headquarters. The urban grocer’s CEO, John Catsimatidis, who also serves as chairman of the Red Apple Group (a mini-conglomerate consisting of oil, aviation and real estate interests), announced that he will enter the 2013 mayoral race in New York City as a Republican, seeking to fill a seat that’s been held for nearly the entire millennium by Michael Bloomberg, who is retiring because of term limits (including an extra term he helped create for himself). Catsimatidis, one of the most colorful individuals in the any industry, praised Bloomberg for helping restore confidence in New York City, but also offered this gem to politiker.com: “It’s not that I’m only a business person, I came from 135th Street(Harlem). I never forgot where I came from. I’m not a Mike Bloomberg billionaire, I’m not wearing a $5,000 suit. I think my wife paid $100 for this,” adding that his suit came from the discount rack at Joseph A. Bank. He then said he’d work cheaper than Bloomberg’s $1 a year annual salary. “I’m a grocer, I’ll work for 99 cents”…in other industry news, there’s a lot of chatter about Harris Teeter’s announcement that it is exploring its potential options for its future. The Matthews, NC upscale merchant acknowledged it has retained J.P Morgan Securities LLC as its advisor, inferring that approaches by two private equity companies caused the company to make an announcement. Its official press release states: “While it is the long-standing policy of Harris Teeter Supermarkets, Inc. not to comment on rumors regarding mergers and acquisitions, in response to certain media articles as well as to remove any disruption to the conduct of its business and its associates, the company confirmed on February 13 that it has retained J.P. Morgan Securities LLC to assist the retailer in holding discussions with certain parties regarding strategic alternatives.” Harris Teeter said it was approached by two private equity firms who expressed an interest in purchasing the company. In order to fulfill its duty to its shareholders to evaluate opportunities to increase shareholder value, Harris Teeter has will conduct discussions with certain highly qualified parties. The company said it intends to continue its strategic new store growth plan and maintain the employment of its associates in its stores, and its distribution and manufacturing facilities in Indian Trail, Greensboro, and High Point,NC, as well as at its corporate headquarters in Matthews, NC. The release added, “There can be no assurance that these discussions will result in any transaction. If a transaction were entered into, there can be no assurance as to the price, timing or other terms of such transaction.” Harris Teeter said it does not plan to provide any additional information until such discussions are concluded. The retailer currently operates 211 stores in North Carolina, Virginia, Washington, DC, Maryland, Tennessee, Florida and Delaware. So here’s my take (and that of about 20 callers and emailers who contacted me in the two days before we went to press on February 15): where there’s smoke, there’s fire. In my 40 years of covering this industry I’d say 90-95 percent of all “explorations” have ultimately led to sales. And to drill into the Harris Teeter scenario a bit deeper, the company, while publicly-traded, is closely held by the (non-grocer) Dickson family, where it seems there is no logical successor to perpetuate the business, which now only consists of Harris Teeter Supermarkets. Last year one of the company’s patriarchs Alan Dickson passed away at 81. His brother Stuart is 83, and no longer serves on the board, but his son, “Tad” is currently CEO of the company. Fred Morganthall, one of the most talented retail executives in the entire business, has skillfully served as president since 1997. As one of our readers noted, “You always want to dance with the prettiest girl at the prom,” and Harris Teeter has never looked better. Its stores are in great shape, its sales and earnings are solid and its share price continues to rise, performing well ahead of its industry peer group. So are there perpetuation issues, estate issues at play here, or just a need to seek an objective appraisal of its worth? From any perspective, there’s already a lot of buzz and interest. Aside from the two PE companies who have expressed their desires, Ahold, Kroger and even Publix, which already has begun a planned major market expansion into Charlotte, are all likely candidates to at least perform significant due diligence once a “book” (prospectus) is made available…another North Carolina based retailer, Delhaize America (DA) is also making news, but this ain’t the kind of news that will make you applaud. Roland “Chainsaw” Smith, who replaced the retired Ron Hodge as CEO last October, has already gutted his management staff and announced that about 45 stores (Food Lion, Sweetbay and Bottom Dollar units) would close by the end of this month. To perform that kind of whackin’ in only three months is quite remarkable. Clearly beleaguered DA needed a major overhaul, but the fear here is that Smith really hasn’t recruited any notable replacements from the outside or promoted broadly from within the ranks of the Salisbury, NC retailer. He seems to have essentially given more responsibility to those executives who made the cut. That’s putting enormous pressure on those who have taken on more responsibility without any visible payoff thus far at store level or with sales. In the past few weeks another round of layoffs was announced; this time 350 associates (500 if you include 150 “open” positions) above the store manager level were riffed. Smith’s mandate clearly is to “change the view” at the struggling Belgian-owned retailer, but you’ve got to wonder how this will pay off in the long run without a discernible new game plan…one former Delhaize America executive has found a new home. Rick Anicetti, former Food Lion CEO, has re-emerged as interim CEO of 99 Cents Only stores, a Los Angeles based dollar store merchant that was acquired last year by private equity firm Ares management and the Canada Pension Plan Investment Board for $1.6 billion. Anicetti, who abruptly left Food Lion in 2010, has served on the 99 Cents Only’s board for the past eight months. He replaces Eric Schiffer, part of the family management team that sold the company, which operates 311 discount units in California, Texas, Arizona and Nevada…as we noted last month, fast growing Flowers Foods is in another expansion binge. The Thomasville, GA-based baker, which acquired Tastykake in 2011, has agreed to purchase the prime time bread brands and bakeries from Hostess, which closed up shop in November following its second bankruptcy. Flowers will acquire Wonder Bread, Nature’s Pride, Butternut, Home Pride and Merita as well as 20 former Hostess bakeries and 38 depots for $360 million. In a separate deal, Flowers has agreed t
o acquire Hostess’ Beefsteak brand for $30 million. Now two other private equity firms – C. Dean Metropolous & Co. and Apollo Global Management – have emerged as the lead bidders to acquire Hostess’ snack cake business (Twinkies, HoHos, Ding Dongs, etc.) and McKee Foods (Little Debbie) is set to acquire the company’s Drake’s line of products (Devil Dogs, Yodels, Ring Dings, etc.)…and just before presstime, Warren Buffet’s Berkshire Hathaway group and Brazilian businessman Jorge Paulo Lemann, principal in 3G Capital (a couple of billionaires who happen to be personal friends), have agreed to acquire H.J. Heinz for $28 billion including the assumption of $4 billion in debt. Both parties will control 50 percent of the acquisition. That’s a whopper of a deal especially for Lemann, whose firm acquired control of Burger King in 2010, and might know a little bit about ketchup consumption.

Local Notes

When you read the Gilberts v. Dollar Tree Tree story on page 1 of this issue, it’s important not only to note the courage and perseverance of the Gilbert family, especially patriarch Harry Gilbert, who could have easily just licked his wounds and saved hundreds of thousands of dollars in legal fees and five years of stress by just accepting what is a growing problem among supermarkets. Harry set an example for all retailers who see the terms of their leases violated or compromised. Nothing against Dollar Tree, one of the most successful and fastest growing merchants in the country and the best run, in my opinion, dollar store operator in the industry. Dollar Tree has a great operating model, but to deny that its store on Sackett Street in Northeast Philadelphia is not competing with the Gilberts’ Mayfair Shop ‘n Bag unit is profoundly absurd. In the end, neither Dollar Tree nor the landlord could provide a credible defense to the court, but as so often happens, big publicly-traded corporations believe their best strategy is to throw more money into the process hoping to deter the little guy. Unlike a lot of retailers (particularly independents), who face these types of competitive threats to their businesses and understandably find the field of battle too costly or exhausting to engage, old warhorse Harry Gilbert would have none of this attempted power play. Sure, Dollar Tree will appeal (it’s only the shareholder’s money) and wishfully the Appellate Court will once again rule in the Gilbert’s favor. And hopefully, this legal precedent will set the standard for other retailers to fight back and defend their tenant rights…in other independent news, McCaffrey’s Markets later this month will reap the harvest of hydroponic produce it has grown at its 50,000 square foot greenhouse. The project, in conjunction with New York City based BrightFarms, will yield enough leafy, baby greens, baby romaine, baby kale, baby arugula and spring mix to service its four stores and have additional product available to be wholesaled to non-competing customers…another top-flight Delaware Valley merchant, Jeff Brown drew more than 1,000 people to a preview event for his new 71,000 square foot ShopRite unit which will open this summer on the site of the old Tastykake plant in Hunting Park section of Philly, which will be the most arid of food desert locations in which Brown operates. In other Wakefern/ShopRite news, the proposed new 90,000 square foot store to be built by member Glass Gardens in Brooklyn, NY is officially a “go” and should be open by the fall of 2014. And the Garafalo family, operator of four ShopRite locations in Connecticut, will open its fifth unit in East Haven this fall, a 59,000 square foot supermarket that in another life was an A&P…Weis Markets has named Wayne Bailey, VP-supply chain and logistics, a new post at the Sunbury, PA retailer. Bailey, who’s spent his entire career at Weis, is well-suited for this emerging and important post, having previously served as VP-merchandising and most recently as a regional VP in store ops. We wish Wayne all the best as he gets fitted for a new Weis hat. The company also announced that two of the three A&P (Super Fresh) stores it acquired last year will open on March 3 in Towson, MD (55,476 square feet) and Woodlawn, MD (Security Blvd-58,027 square feet). Weis invested $14 million in the two stores. The third unit in the A&P acquisition, in Hillsborough, NJ, should open later this year…down the road in Carlisle, Ahold USA’s Giant division will cut the ribbon on its new Kutztown, PA (in the heart of Weis country) on February 27. Also, parent firm Ahold has elected to sell its 60 percent stake in Scandinavian grocer ICA to its partner in the joint venture, Hakon Invest, for a healthy $3.1 billion. The reasons: it could not gain full control of the enterprise and the Amsterdam based retailer can now use the proceeds to invest in future acquisitions (did I hear somebody say Harris Teeter, with a few Acmes, Shaw’s, A&Ps and Pathmarks sprinkled in?)…a couple of non-industry deaths to report. Passing on last month was Andre Cassagnes, 86, the French electrical technician who invented the Etch A Sketch, one of the greatest toys ever created, especially for people like me with limited artistic chops and a short attention span to boot. Cassagnes, who invented his device in the late 1950s, subsequently sold his meal ticket invention to the Ohio Arts Company, which still owns and produces Etch A Sketches for global pleasure. Also  abruptly departing this planet was John Alleman. Stumped you on this one, didn’t I? John Alleman was the spokesman for the Heart Attack Grill, the Las Vegas restaurant which features the “Quadruple Bypass Burger” (9,983 calories). Sadly, Alleman dropped dead of a heart attack earlier this month. He was only 54…some quick takeaways from the recent National Grocers Association (NGA) convention held this month inLas Vegas. First, it was the best NGA show I’ve ever been to and who would have thought Natan Tabak, senior VP and CIO at Wakefern was such a funny guy? Also, Joe Sheridan, Natan’s boss and this year’s NGA chairman, proved once again that he’s an enlightened and charismatic industry leader. Both appeared in an industry conference entitled “Growth Opportunities for Independents: Four Major Trends.” Also on the panel was Tom Furphy, CEO and managing director of Consumer Equity Partners. Clearly, a man with a 30 pound brain, Furphy previously was VP-consumables for amazon.com, which included AmazonFresh, where he supervised the Internet giant’s emerging grocery, HBC and fresh business. His message to traditional bricks and mortar retailers was daunting and somewhat scary, predicting exponential growth for online shopping in a short period of time…and, just before presstime, we learned that Jim Perkins, who formerly worked for Albertsons for more than 30 years and was most recently with Giant/Landover, has joined the new Cerberus AB operations team and has been performing some due diligence at Acme. You can bet there’ll b e a lot more changes at the Malvern, PA based unit (and also at Shaw’s and Jewel), once Bob Miller and his team get settled in over the next few months.

Jeff Metzger can be reached at [email protected]