Taking Stock

ShopRite, Wegmans, Trader Joe’s Continue To Drive Sales As Most Others Feel The Squeeze Of Competitive Gridlock

It’s hard to believe that “The Great Recession” is now six years old. And while consumer confidence has improved slightly, the lingering effects of the prolonged economic slump have burned a lasting “mindset of thrift” into most Americans, even those fortunate enough to be in the higher economic strata.

That’s only one reason why so many food retailers once again found the retail landscape extremely challenging and difficult over the last 12 months. Throw in even more overstoring, differentiation of retailing styles and formats and an 11 percent reduction in SNAP (food stamps) benefits and you’ve got trouble in “RiverCity” for most retailers.

That’s not to say that everybody did poorly (although there was a growing number of merchants where sales declines were noteworthy). Most of the “winners” of the past few years – those who proved themselves recession-proof and somewhat undaunted by the fierce competitive climate – remained ahead of the curve.

Those included ShopRite, Wegmans, Whole Foods, Aldi and Trader Joe’s. Other retailers that were usually seen on that “dean’s list” such as Stop & Shop, Wal-Mart and Target all had years that were below their previous standards.

Above all other factors, the level of competition remained the biggest obstacle most retailers continued to face in the $93.1 billion, 70-county market. If you think the region is already so oversaturated that a new store (typically entering at a premium real estate cost) couldn’t possibly open in a given neighborhood or marketing territory, you’d better think again. There’s a strong likelihood that a new retailer will be opening across the street from you nine months later; it could be a Costco, Wegmans, Walgreens or a Dollar Tree. Whether the damage comes from carpet bombing or a thousand paper cuts, it all has an adverse impact on the existing retailers, and by class of trade, usually has the greatest impact on the supermarket channel.

Deep pockets? Virtually all the “growth merchants” possess those. The days of scaring off a group of independents or a small regional chain are over. Today, the competition is truly a heavyweight “mano a mano” battle. That may extend the surrender time for the losing retailer, but it doesn’t blunt the impact of the damage done. With so many styles of retailing now in play, it also makes defending against so much diversity an even more difficult task. That’s especially true for many conventional supermarket retailers.

Along with the measurable reasons why business is currently so difficult comes the financial mumbo jumbo that we’re forced to absorb. “Unemployment is on the consistent decline” and “job growth has significantly improved” are typical of the headlines we’ve seen over the 18 months. Really? And how is this manifesting itself in real sales growth in the overall economy? Unemployment numbers truthfully are somewhat irrelevant when you consider that many of the people who have re-entered the job market have done so at lower level jobs than they had previously held; and so many people remain underemployed despite the “fact” that actual unemployment is on the decline. While big boys such as ShopRite, Wegmans, Whole Foods, Trader Joe’s and upscale independents like McCaffrey’s or Stew Leonard’s may not be feeling as much of the sting of many people’s individual financial challenges, the still rocky, fluctuating economy is one of the primary reasons Wal-Mart has posted negative IDs for five consecutive quarters, and even the once “beloved” (by Wall Street) dollar store channel has flattened out. While there will be market shakeouts or corrections eventually, don’t expect major external changes in the next 2-3 years; however, the internal maneuverings – acquisitions and leadership changes – are already occurring.

So without further ado, here’s my annual take on the retailers operating in Food Trade News’ marketing area based on the year in review and what they may face in the near future.

ShopRite – The perennial juggernaut widened its lead in its two primary markets – New York and Philly. It operated 10 more stores than a year ago. It was among “best in class” when measuring ID sales. It’s about to open its first two member-owned Price Rite stores; its upscale Fresh Grocer banner will almost assuredly be unfurled in the near future. Wakefern’s string of successes over the past decade in increasingly difficult market conditions has an almost surreal quality to it. Despite the changing landscape, the retailers who own and operate ShopRite stores seem undaunted and almost unfazed by the new more ferocious level of competition. Although food retailing has always been a difficult and challenging business, ShopRite makes it seem effortless (although we know it’s not). There’s no reason to expect any stumbles in the next few years and there could be even more fruit on Wakefern’s plate if A&P elects to unload some stores. This lineup is loaded.

Giant/Carlisle – While parent firm Ahold USA lost significant traction across its network over the year, the only non-union division of the large international merchant more than held its own. In its core Central PA market, nearly one-third of all food and drug sales flow to G/C and in the eight-county Greater Philadelphia area Giant now is the leading retailer for the second straight year (in the broader 15-county Delaware Valley market, ShopRite is the market leader). In March, the company replaced popular president Rick Herring with industry veteran Tom Lenkevich (most recently with Save-A-Lot and a Central PA native) as AUSA COO James McCann attempts to make all four U.S. divisions more operations and merchandising-oriented with greater emphasis on private label and perishables. So far the new plan is off to a slow start corporately, but Giant’s favorable share positions, strong customer loyalty and excellent locations have helped the Carlisle, PA-based retailer maintain solid numbers.

Stop & Shop – The distance between the closest Giant/Carlisle and Stop & Shop stores is about 55 miles, but there’s a bigger gap than that in terms of results and progress. Competitive market conditions in Metro New York area stores really stifled Stoppie’s progress over the past 12 months. The leadership switch from Carl Schlicker to the aforementioned James McCann also has proved to be a less than smooth transition. Let’s face it – it’s tough to slug it out with ShopRite, Wegmans, Wal-Mart, Costco, Whole Foods and Trader Joe’s on a daily basis. But some of Stop & Shop’s issues are of their own making. The stores are becoming too vanilla and the new real estate pipeline is no longer flowing, it’s trickling. Even the A&P carcass, which competitors have feasted on for years, has been picked pretty clean. If Stop & Shop wants to prosper as it did only a few years ago, it’s got to make a better connection with its customers on price, perishables image and the entire shopping experience. 

A&P – I hear “Taps” in the background. The music’s getting louder. Yes, I could write the same scathing analysis of the Tea Company as I did in 2013…and 2012…and 2011…and…As bad as it’s been, it really was worse this year because under any banner’s view, sales are even poorer. Yucaipa and Burkle have already utilized the company’s cash flow to its advantage and also prospered from its solid real estate portfolio. But selling more groceries? Please don’t insult us. What’s next? A bigger store sell off? More store closings? Seeking Chapter 11 bankruptcy protection again? There’s a Gilbert Gottfried schtick called “Death or Oog-Goo?” It’s very profane and extremely funny. Listen to it and you might find a connection.

Wal-Mart – We all know by now that Wal-Mart had one of its poorest years ever. But don’t mistake Wal-Mart “poor” for A&P “poor.” The old adage “everything is relative” applies here and after five consecutive quarters of negative ID sales, Wal-Mart’s sales patterns bear watching. But this is far from an impending train wreck. Look at the average per store sales, examine the customer counts and scrutinize basket sizes. All are still well above the industry average. But there’s no denying that the Behemoth certainly has been tamed to a degree as competing retailers know how to better deal with Wal-Mart’s strengths and also attack its weaknesses. The Bentonville, AR merchant still has about a dozen SuperCenters (net new units or conversions) scheduled to open in the relatively near term and look for more Neighborhood Markets to open in the 70-county region (the only one in the market currently is located in Levittown, NY). Now that Wal-Mart has been shaken a bit, expect the internal stirring to accelerate and pay dividends again within the next 18 months.

Acme Markets – Enjoyed its first good year in a decade. Part of the recent improvement at Malvern-PA based division of Cerberus/New Albertson Inc. lies in the professionalism, talent and insight of its management team corporately (Bob Miller) and locally (Jim Perkins) when compared to the last three Supervalu and Albertsons clowns, I mean chief executives – Larry “The Milkman” Johnson, Jeff “I Know Nothing About Retail” Noddle and Craig “The Spinmeister” Herkert. Miller, Perkins and their leadership teams have executed the basics skillfully – the stores are cleaner, retail pricing has been rationalized, more local decision-making is encouraged and morale among the associates has improved (but these areas will still need more attention). Over the past year, Acme seemed to have regained its soul. Now the question is: can it retain that vibe and improve their mojo going forward? It won’t be easy since Cerberus isn’t committing to a lot of capital expenditures for new or replacement stores, the competition remains very tough and Acme’s relationship with the UFCW remains somewhat rocky. How will the numbers look once Acme has to recycle its much improved first year ID sales? All told, give these guys credit – they’re helping make Acme a more enjoyable place to do business and they’re having lots of fun doing it.

Wegmans – With the addition of only one new store this year – in King of Prussia, PA – it wasn’t an especially explosive year for the Rochester, NY-based regional chain. But, that’s not the point. With each new 125,000 square foot store drawing from a legitimate shopping range of up to 15 miles, Wegmans can have an impact on a local market more than any other retailer in the Northeast. Wegmans will continue to gain steady market share growth without the quantity of stores typical of other retailers. And in the next few years when the family-owned merchant opens stores in Concordville, PA, Montvale, NJ and Hanover Township, NJ its coverage net will only become wider. Additionally, with the recent opening of its new smaller (80,000 square foot) prototype in tony Chestnut Hill, MA, the uber-retailer has proven it can get most of its package in a store that’s 40 percent smaller than its larger models. That reduced footprint potentially gives the family-owned merchant markedly better opportunities to penetrate more demographically favorable areas that were not accessible before due to real estate challenges. A Wegmans in CenterCityPhiladelphia? Perhaps an 80,000 square footer near the Main Line? A new Wegmans in emerging yuppie haven Brooklyn? It’s certainly more plausible than a year ago. And one more thing about Wegmans: Over the past 18 months, I’ve heard several industry executives comment that the retailer’s in-store execution has slipped a bit and they’re not as sharp as they were five years ago. My response: pure fiction. Sure, every day might not appear like a grand opening celebration and, by 6:00 p.m., their stores might look a little beaten up. But by comparative standards, Wegmans continues to execute at the highest industry levels. Just check their customer loyalty scores, their average basket size and their sales rings against all comers.

Weis – The numbers indicate that it was not a good year for the closely-held publicly-traded retailer. But the numbers are only part of the story. When Dave Hepfinger left last September and vice chairman Jonathan Weis became chief executive and promoted Kurt Schertle to COO, a fundamental change was about to occur. No more cronyism, no “margin tricks” to make the earnings look palpable. The new management team, which continues to evolve and adds more talented industry veterans, is now fully-focused on sales. So you can expect the bottom line to suffer for a few more quarters before the repositioning is complete. The blueprint is already in place and I expect Weis to grow sales and share, especially against its main rival, Giant/Carlisle, if that unit of Ahold doesn’t improve its go-to-market package. Giant’s share of Central Pennsylvania and the LehighValley is so large, it’s a big target and you can expect Weis to go directly after it. The Sunbury, PA-based chain still has a lot of heavy lifting to do, but the new leadership is demonstrating that it’s not afraid to spend extra time in the weight room. 

Wawa – The best c-store strategic plan in the country. The Wawa, PA-based convenience store chain hasn’t seemed to miss a beat over the last 18 months since iconic CEO Howard Stoeckel retired and was replaced by the company’s former CFO Chris Gheysens. Besides a high level of execution (a very hard task to achieve at a c-store chain), Wawa has witnessed an excellent customer response with its Florida expansion plan which began in 2012; it now operates nearly 45 stores in the Orlando and Tampa-St. Petersburg markets. The new foodservice-oriented store design looks great and the company’s slow but steady expansion into North Jersey is also going well. The employee-owned organization sports a great culture filled with creative, innovative and passionate associates. Wawa is truly a unique organization – what other c-store operator in the country ranks as high as third among all food and drug retailers in a market comparably sized to Philadelphia?

Chris Michael: A Stellar 41 Year Career Devoted To The Independent Retailer 

There was no retirement tour, no grand announcement of his stepping down, no fanfare about his many past accomplishments. That’s not surprising, because if you know Chris Michael, you know he wouldn’t have wanted any hoopla surrounding the recent announcement that after 41 years with Associated Wholesalers Inc. (AWI), he was leaving the company that became his life’s mission – a mission he carried out with passion, dedication and a burning desire to improve the status of his members and for that matter, all independent retailers.

Chris and I are the same age (63) and he was one of the first people I met when we formed Best-Met Publishing Co. in 1978. At that time, Chris served on AWI’s board as a second generation independent grocer whose family owned a supermarket in York, PA. One could tell almost immediately that Chris had the intellect, work ethic and leadership skills to take AWI to another level. By 1980, he was named president and CEO, replacing Harlan Helzer, who retired after many years of service. Chris Michael was only 29 years old when he was elected.

During his early tenure, he pushed AWI to merge with United Associated Grocers and, about a decade later under his guidance, the Central Pennsylvania cooperative wholesaler acquired another co-op, Affiliated Food Distributors, based in Scranton.

Always a risk taker, Chris saw an opportunity to broaden AWI’s reach in 2006. Acknowledging that the wholesale business was evolving and consolidating, he knew that to grow his company’s business he needed to find a different way to attract independent retailers. With the White Rose acquisition, AWI could offer independents a distribution alternative to the member-owned concept and at the same time expand the company’s footprint into the largest grocery market in the U.S.

On paper, the strategy seemed sound, although Chris told me at the time that blending different business models and cultures would be a challenge and that AWI would move cautiously to integrate the two businesses.

Objectively, that integration never worked out as planned. Perhaps the differences between the two wholesale firms – in customers bases, internal cultures and the sheer division of doing business on a daily basis in Robesonia, PA vs. Metro New York – was difficult to overcome.

So, as AWI attempts to restructure its business, it will do so without the man who was the linchpin in an earlier restructuring, bringing a somewhat sleepy group of Central PA wholesale grocers together to form the second largest grocery co-op in the Northeast.

Chris, we wish you and Linda all the best in retirement and in whatever future endeavors you might seek. Now’s the time to enjoy life and have fun. And also know that you made a difference.

White Rose Sale Critical To AWI’s Future Success 

New AWI chief executive Matt Saunders steps into the leadership role with his plate full. The veteran wholesale executive, who was brought into the Robesonia, PA co-op by Chris Michael two years ago, knows that selling White Rose is key to the long-term success of AWI, a point also echoed by vice chairman Mike Rothwell, the respected owner of Pennington Quality Market in Pennington, NJ, who noted, “A sale of White Rose will give AWI the opportunity to get back to our co-op roots, with a sharp focus on growing the core business.”

As to who might buy the Carteret, NJ distributor, that’s wide open to speculation, but one thing seems consistent when talking to other industry analysts and observers – selling any wholesale business today, especially one that is unionized and based in the New York metropolitan area, will be a tough task.

Saunders will relocate to Wyomissing, PA and must also deal with a membership that is concerned about the financial stability of AWI itself. Much of that concern stems from the company’s inability to maintain its liquidity level as determined by its banks. As such, earlier this year AWI paid its members only 50 percent of their annual patronage (rebate) for fiscal 2013, which the company stated was $10 million. To account for the other half of that annual payment to the member/owners, AWI issued new Class “B” stock. That new stock can ultimately be converted to Class “A,” but only if approved by AWI’s board as part of the redemption process.

Additionally, a letter from Michael to AWI’s members earlier this year, he stated, “…the Class ‘B’ shares have no maturity and will be redeemed by a majority vote of the board of directors from time to time after a minimum period of one year…the modifications were immediately necessary to maintain our financing facility, minimize our interest expense and provide the necessary liquidity to maximize the annual patronage dividend payment.”

From June 17-19, Saunders and his team led a series of “town hall” meetings in Scranton, Robesonia, York and Pittsburgh to personally inform and update AWI’s members about the current state of affairs and assure them that, with the proposed sale of White Rose, AWI can return to the form of previous years and use the proceeds to build a stronger company.

Saunders also acknowledged that financial advisor, Lazard Middle Management, has prepared a prospectus on White Rose and expects to circulate that “book” by the end of the June to interested parties.

There’s no sugar-coating the fact that it’s been a difficult year for the Robesonia, PA firm as it has tried to deal with challenges at White Rose that in turn have affected AWI’s internal balance.

If it can sell White Rose at a fair price, there’s every reason to believe that AWI’s core $1 billion a year business can remain intact and potentially even grow.

We should know more by the end of the summer.

‘Round The Trade 

There was huge news coming out of Demoulas Market Basket as we neared presstime. After more than a decade of demonstrating that a “family feud” can be an unending media show, the high-volume supermarket chain’s board, led by director Arthur S. Demoulas, fired current CEO Arthur T. Demoulas (first cousin of Arthur S.). While Arthur S.’s faction controlled the board and the feud between the two families was an ongoing, unseemly distraction, many observers felt that the board would be reluctant to fire Arthur T., who was supremely popular among the associates, and also led the 71-store New England chain to great heights and earned admiration from many other retailers and the vendor community. Also departing on “Bloody Monday” were two of Market Basket’s oldest and most trusted executives, Joe Rockwell and Bill Marsden. In a statement to the Lawrence (MA) Eagle, Marsden, director of store operations, stated, “Along with Arthur T. Demoulas, I was also fired as was Joe Rockwell, vice president of grocery. Combined we have more than 110 years of service to the company. Our crime was our commitment to Arthur T. Demoulas, the employees and the promise to customers to always honor the Market Basket commitment to high-quality and value.” He added, “The board’s action today is driven by greed, pure and simple. Arthur T. Demoulas continued the tradition of his father (the legendary Mike Demoulas), promising customers ‘more for your dollar.’ He was fired today after he built the most successful supermarket chain in the Northeast, one of the top in the country by most metrics. He implemented a four percent across-the-board price-cut for 2014 at a time when people needed it. In reaction, some board members threatened his job and litigation, so concerned were they that this would cut into the company’s profit.” The board quickly named two of its members, Felicia Thornton and James Gooch, to assume senior management responsibilities immediately. Thornton most recently served as CEO of Knowledge Universe U.S., a Portland, OR-based private early childhood education provider. She also served as VP for Kroger and spent some time at Ralph’s/Fred Meyer. Gooch most recently served as CEO of RadioShack Corp. “They have become Market Basket’s chief operating officer and chief administrative officer, respectively, and co-chief executive officers of the company,” a spokesman for the board affirmed in a statement. “Arthur T. Demoulas, who was not re-elected president and will not retain any management responsibilities moving forward, remains a shareholder of the company.” In fact, Arthur T. is the largest shareholder and maintains a 14.1 equity stake in the company. While the board had the right to exercise its power and control, you can almost be assured there’ll be some pushback on this surprising decision (despite the infighting) from Demoulas’ associates, many of whom idolized Arthur T…Delhaize Group has named Kevin Holt as CEO for Delhaize America (Bottom Dollar, Food Lion and Hannaford), effective July 7. He will also become a member of the Delhaize Group’s executive committee. “I am very pleased to have Kevin join our team. Kevin brings both deep industry experience as well as a comprehensive customer orientation that will help our U.S. operations to continue to implement our existing strategy and build on the strong momentum of recent quarters. I am looking forward to working with him,” said Frans Muller, president and CEO of Delhaize Group. “I am excited about the opportunity to lead Delhaize America and work with Frans, the Delhaize America team and my colleagues in the group executive committee,” said Holt. “I look forward to reinforcing and executing the strategy and continuing to focus on our customers as I see tremendous opportunity in the business.” Some of our readers may remember Holt from his short stint as president of Supervalu’s retail operations. A related note on Delhaize Americas’ Bottom Dollar Food (BDF) subsidiary: The discount division of the global retailer opened three new stores this month (W. Girard Avenue in Philadelphia; Edgemont Avenue in Chester, PA; and Penn Avenue in Pittsburgh), which may be the last three BDF’s to open in the near future. Muller noted that while earnest capital will be spent to improve Food Lion and Hannaford stores in the near-term, no such commitment was made for the company’s BDF units. Muller said that the focus of its effort will be to make Bottom Dollar Foods more profitable…a rollicking good time was had by many at Wal-Mart’s annual meeting held earlier this month at the (where else?) Bud Walton Arena on the campus of the University of Arkansas in Fayetteville. More than 14,000 shareholders and Wal-Mart associates came to hear celebrities Harry Connick, Jr. (who also emceed), Pharrell Williams, Sarah McLachlan and Robin Thicke perform at the annual spectacle. When the show business ended and the real business began, Behemoth CEO Doug McMillon claimed that the biggest task facing the world’s largest merchant was to bring the changing world of e-commerce together with its physical stores to improve its customers’ shopping experience. “Our purpose of saving people money will always be relevant,” said the 23-year Wal-Mart veteran, who was elected chief executive in February. “We’re going to invent the new and bring together the digital world of e-commerce with the physical world of our stores.” In the meantime, McMillon and his team are continuing to deal with a prolonged slump. ID sales at its U.S. stores (which account for 60 percent of the retailer’s total sales) have now declined in five consecutive quarters and customer counts have also dipped. Clearly, Wal-Mart is being hurt by the slipping buying power of its primary customer base. Competitors have had 20 years to memorize the company’s playbook and have thus developed methods to defend against the Behemoth’s go-to-market initiatives. One of Wal-Mart’s ongoing problems is the numerous lawsuits and ethical issues it continues to face. The biggest of all, its Mexican bribery scandal, is now nearly three years old. You would expect that with so much time having elapsed along with Wal-Mart’s detailed, costly investigation into this “black mark,” that there would some answers to be gleaned by now. Not so, according to an excellent story in the New York Times on June 4. Although the Times piece detailed the connection of the bribery scandal with the departure of several former Wal-Mart executives and how the company has changed its compliance structure and personnel, there’s no indication that the investigation is nearing its end or that a report will soon be issued. What we do know is that Wal-Mart has reportedly spent $439 million on the investigations and restructuring of its compliance program. Geez, we put a man on the moon faster than this. And that’s really a critical problem that McMillon needs to improve. His predecessors – Lee Scott and Mike Duke (who ironically are both linked to the problems in Wal-MartMexico) – never worked hard enough to change Wal-Mart’s image as a somewhat sneaky, heavy-handed company that squeezed its associates and leveraged its huge clout to achieve its goals (Mel Brooks might have referred to them as “Engulf & Western”). McMillon has a real opportunity to change that image. More Wal-Mart news: the company is taking its online price comparison tool – “Savings Catcher” -nationally. “Savings Catcher” compares competitors’ ads for items at Wal-Mart and offers gift e-cards for the price differential when a competitor’s price for an eligible item is lower. Wal-Mart test-marketed the program in about a half a dozen markets this spring…Grocery Outlet, which is a significant factor on the West Coast and acquired New Holland, PA-based Amelia’s Grocery Outlet in 2011, is reportedly on the sales block, according to multiple sources. The small-box discounter is currently owned by PE firm Berkshire Partners LLC. The company operates approximately 180 stores and h
ad estimated annual sales of $1.4 billion, with earnings in the $100 million range. It is reportedly seeking at least $1 billion to sell…Advantage Sales & Marketing (ASM), which along with rival broker/agencies Acosta and Crossmark led the effort to take their businesses national, has a new owner. Leonard Green & Partners and CVC Capital Partners have acquired a majority interest in the Irvine, CA-based sales and marketing firm from another PE firm, Apax Partners. The price is reportedly in the $4 billion range for a company whose annual revenue is estimated to be $1.6 billion. Leonard Green marks the fourth private investment firm to own ASM since 2006. Leonard Green also has a stake in other food companies such as BJ’s, Petco and Jetro. I wonder if the Los Angeles investment company will seek to make ASM the first food brokerage firm to launch a public offering? Both Acosta and Crossmark are also controlled by Wall Street financial investment organizations…in the biggest food industry deal of the month, it looks like Tyson’s all cash $8.55 billion bid to acquire Hillshire Brands was enough to convince Hillshire’s board to win the competition between the large protein processor and Pinnacle Foods (Aunt Jemima, Duncan Hines, Wish Bone, etc.). Tyson’s bid also trumped an $8 billion offer made by Pilgrim’s Pride. The spoils of potentially losing aren’t so bad in this case. If Pinnacle elects to offer no further challenge to Tyson’s bid, it would receive a $163 million termination fee.

Local Notes

It was another tough quarter for Ahold. The Zaandam, Netherlands-based international retailer posted operating income of $533.69 million in its first quarter ended April 20, down 6.2 percent and its U.S. ID sales remained slightly negative for the third consecutive period. Overall, U.S. sales were down 0.3 percent (at constant exchange rates) and ID sales (excluding fuel) also dipped by 0.1 percent. Underlying operating margin declined from 4.1 percent to 3.9 percent. Dick Boer, Ahold’s CEO, told analysts in late May that Ahold will invest more aggressively in the quality and merchandising of its fresh assortment as well as in employee training while also focusing more sharply on price, under a program called “Project Thunder” which was first test-marketed last year and now has been rolled out at about 200 stores. “We are accelerating our plans for further rollout, increasing the intensity of the program in New England (Stop & Shop) specifically,” Boer noted in a conference call with financial analysts in Zaandam. By the end of this year, Ahold said it expects the program to be implemented in more than 50 percent of its stores, largely funded by the expected $250 million of cost savings in the U.S.…and the sales and earnings numbers at Manhattan-based Fairway Market weren’t too rosy, either. The ‘like no other market’ retailer reported an $8.8 million loss in its fourth quarter ended March 30. Comp sales were also off an unhealthy 4.8 percent and in its first full year as a publicly traded company, Fairway’s stock has plummeted to $6.57 per share down from $28.87 a year ago. There’s nothing wrong with Fairway’s operating model. These guys can sell a lot of stuff. But the independent retailer desperately needs to upgrade its infrastructure and broaden its leadership team (I understand that headhunters are very busy these days actively looking to add more skilled grocery executives). It also needs to fare better in the suburbs if it expects to reach its goal of one day operating as many as 100 stores from Boston to Washington, DC. I greatly admire and enjoy the shopping experience at Fairway, where for years they’ve blown away the competition by offering a better, more exciting product. That “blow away” ability has been somewhat reduced recently as other upscale retailers – notably Whole Foods which late last year opened its first Brooklyn store – have impacted Fairway’s volume. It will be interesting to view Fairway’s next new unit which opens in July in affluent Lake Grove, NY (SuffolkCounty). A new store design will be featured at the 53,000 square foot supermarket, which is located across from the Smith Haven Mall. We’re told that the store will focus on educating and communicating more effectively with its new customer base at the new unit which will be farthest from its Manhattan home. While Fairway adapts to the scrutiny of being publicly-traded (it was controlled by private equity firm Sterling Investment Partners for six years and Sterling managing partner Charles Santoro remains Fairway’s chairman), another high-profile PE firm is making some “inside” alignment moves for a large pending deal. Cerberus and its AB Acquisition subsidiary recently engineered an intra-company transaction involving the private equity firm’s pending purchase of Safeway for $9.4 billion. Here’s the skinny: Safeway’s Eastern division was assigned by Cerberus/AB Acquisition to be part of its Albertsons LLC unit. That unit currently includes the nearly 200 Albertsons stores that the PE firm acquired from Supervalu in 2006 as well as the Albertsons stores that were part of another SVU purchase in March 2013 (totaling about 630 Albertsons and United Supermarkets in the West) and the pending Safeway deal. At that time of the March 2013 deal with Supervalu, Cerberus/AB Acquisition also formed a new operating company called New Albertsons, Inc. (NAI) which is comprised of Jewel-Osco, Acme and Shaw’s (approximately 450 units). Now that Safeway’s Eastern division has been added to that unit, it makes for a more logical geographic alignment and also will help with NAI’s debt rating. The “swap” from Albertsons LLC to NAI is valued at $659 million for the 124 Safeway stores primarily located in the B-W market…and the rough ride is continuing at another PE-owned company, Mrs. Green’s. The Irvington, NY-based organic grocer, a unit of Natural Markets Food Group (NMFG), which is part of Canadian hedge fund Catalyst Capital’s portfolio, apparently won’t be opening its first unit in Manhattan (Hudson Street) in June as planned. Word has it there have been permitting delays that have set back the store’s ribbon cutting. And when the WestVillage grocer does open it will be met with picketing from UFCW Local 1500 which is protesting the dismissal of eight employees in January at the Mrs. Green’s store in Mt. Kisco, NY. That case will be heard before a National Labor Relations Board (NLRB) judge on July 14. To even reach the administrative judge level, an NLRB regional office had to find merit in Local 1500’s claim that those eight former associates were unlawfully dismissed. Late last month, NMFG removed former Giant/Landover president Robin Michel as CEO and a search was begun to find her successor. A spokesman for the company admitted that the search for a new CEO continues and we’re hearing from multiple sources that Pat Brown, former H-E-B/Central Market executive and most recently COO of Portland, OR-based natural and organic grocer New Seasons Market, is under consideration for the top job. If Brown is indeed the choice, I hope they compensate him well – he’ll earn every penny of it…more earnings news: Village Super Markets reported a 31 percent dip in its third quarter net income compared to last year’s corresponding period. The Springfield, NJ-based ShopRite member (and only publicly-traded one) had earnings of $3.2 million for the quarter ended April 26. The high-volume merchant, controlled by the Sumas family, attributed a little more than half of the decrease to costs associated with a replacement store in Union, NJ (which opened on May 4), and a tax payment of $440,000 because of a ruling made by the New Jersey Tax Court. The opening of a replacement store in Morristown, NJ last fall helped increase Village’s sales by 3.5 percent to $372.5 million. Same-store sales showed a slight increase of 0.4 percent. For the first nine months of its fiscal year the 29 store retailer posted a net loss of $825,000 due in part to more than  $10 million in New Jersey taxes, a store closing in Morris Plains, and two replacement store costs, the retailer stated…and the winner is – Pennsylvania. High quality deli manufacturer and distributor Dietz & Watson has agreed to build a $50 million, 200,000 square foot trucking and distribution center on 20 acres next to its Tacony Street headquarters and manufacturing facility in Philadelphia. That new facility will replace D&W’s former warehouse in Delanco, NJ that was destroyed last summer by an 11 alarm fire. Despite what CEO Lous Eni said was a better offer from the state of New Jersey, the Philadelphia site was where the 75 year old company wanted to be in the first place. Previously that site was unavailable. Currently at its processing facility, Dietz & Watson employs almost 700 people. The new facility will ultimately add 110 jobs…I attended the newly revamped and revitalized FMI Connect confab in Chicago earlier this month. The new show was a major improvement from the large association’s last exhibitor show in 2012 in Dallas, which to be polite, “stank to high heaven” (no dead skunk puns intended). While there’s still lots of room for improvement, moving the show back to Chicago (where it will remain for the next three years) was a wise move and, although there was still a dearth of large CPG companies exhibiting, the vibe was a lot better, the education forum was improved and FMI’s affiliation with United Fresh (produce) proved to be a valuable partnership. Although I’ve heard some rather loud criti
cisms of the show, my advice is to be patient. It’s the first year of a new show era and FMI CEO Leslie Sarasin and her revamped team having been working hard over the past five years attempting to purge the previous inertia that was created by her predecessor. And remember it’s never going to be like the old “swingin’ soiree” of the 1980s and ‘90s, when the annual FMI Show was more like a three-day party than a meaningful trade meeting. One show that consistently “hits it on the screws” is the annual IDDBA convention, held in Denver this year. Celebrating its 50th anniversary this year, the IDDBA Dairy-Deli-Bake show has grown rapidly over the past decade due to its ability to bring in both established and new vendors in key perishables areas while also attracting important decision makers from both large chains and independent retailers nationally. IDDBA will always play well because it takes a targeted, focused approach in its planning and offers the kind of platform where interaction with important decision makers is expected…it’s with mixed feelings that I report the recent retirement of Russ Reynolds, area sales director for Supervalu’s Eastern region. Russell was certainly more than an area sales director – he was really the embodiment of what comprises a great employee. Extremely loyal, unbelievably hard-working, smart and off-the-chart funny, Russell spent more than 40 years in this business and, despite some significant health issues, never had a bad day. I’ve taken an oath of silence about some adventures we had when Russell was in the brokerage business – those stories are best delivered in an oak-paneled room with some barstools. Suffice it to say that, as a salesman, confidant and most importantly as a person – you can’t find anyone better than Senor Reynolds. I know you’re going to hate leaving the business you love, but I hope there’s nothing but enjoyment and good times ahead, my friend…it’s been a very tough month for deaths – the obituary column is much too full. First, I want to express my condolences to Supervalu Eastern region president Kevin Kemp and his wife Lori on the death of Kevin’s mother, Jeanne T. “Bettylu” Kemp, who passed away last month in Jasper, IN at the age of 78. I also received the sad news of the death of David Jenkins, former CEO of Shaw’s Supermarkets. At the start of my career in New England, I found Dave Jenkins to be always accessible and anxious to teach others about the industry. More importantly, he emphasized integrity, honesty and pride. A man of high intellect (he graduated Phi Beta Kappa from WesleyanUniversity and earned his MBA from Harvard), Dave was one of those rare selfless executives who believed in collaboration – success could not be achieved without a team effort. Dave Jenkins was truly an industry leader and I mourn his passing…from the world of show business, among those who have left this good earth in the past month include Ann B. Davis, best known for her iconic role as housekeeper Alice Nelson on “The Brady Bunch,” who died at the age of 88… it is with sadness that I also report the death of Ruby Dee, 91, a great actress, who along with her late husband Ossie Davis, also raised the visibility and stature of African-American performers in a career that spanned an incredible 74 years…and, just before presstime, I learned of the death of one of my favorite character actors of all time – Eli Wallach. Essentially a stage actor (he won a Tony award in 1951 for his performance as Alvaro in Tennessee Williams’ “The Rose Tattoo”), two of Wallach’s film roles made an indelible impression on me. In both of those roles he played Mexican bad guys. In the 1960 film “The Magnificent Seven” Wallach played Calvera, a bandit who regularly raided a Mexican village for food until its inhabitants are forced to turn to the movie’s seven heroes for  protection. Six years later he played an even more nefarious villain named Tuco opposite Clint Eastwood in “The Good, The Bad, And The Ugly.”  Eli Wallach appeared in 160 movies and more than two dozen plays in a career that spanned 65 years. He was 98 years old when he passed…Casey Kasem, the internationally famous radio host and DJ who pioneered the weekly “American Top 40” show passed away at age 82. At least now, Kasem can find some peace after his wife Jean and his three adult children waged a battle over control of his health care that seemingly resulted in more legal wrangling than concern over Kasem’s well being…one of the most underrated jazz pianists and composers, Horace Silver, is dead at the age of 85. Known for his distinctive bop sound and creative arrangements, Silver had been a staple in the modern jazz scene since the early 1950s. Perhaps you never heard Silver’s work, but if you are familiar with Steely Dan’s 1974 hit “Rikki Don’t Lose That Number,” listen to Silver’s “Song for My Father.” You will quickly notice that either Donald Fagen or Walter Becker were paying homage to Silver or simply ripping off his riff. ..also passing away was the great pop lyricist Gerry Goffin. Along with his former wife, Carole King, Goffin wrote some of America’s greatest songs in 1960s which were made famous by other artists. Some of those pop and rock hits included: “Will You Love Me Tomorrow” (made famous by The Shirelles); “(You Make Me Feel) Like A Natural Woman” (Aretha Franklin); “Up On the Roof” (The Drifters); “Loco-Motion” (Little Eva); “I’m Into Something Good” (Herman’s Hermits); “Don’t Bring Me Down” (The Animals); and one of my favorites, “Goin’ Back” (The Byrds). Goffin, 75, was a member of both the Songwriters Hall of Fame and the Rock and Roll Hall of Fame…sports dignitaries who died this past month included Tony Gwynn, the Hall of Fame outfielder who spent his entire 20 year career with the San Diego Padres. Gwynn had an unbelievable career batting average of .338 and won eight National League batting titles. Nobody in the history of the game could place the ball more expertly through the gap between the third baseman and shortstop (he called it the “5.5 hole”) than Gwynn, who also grew up in San Diego and was a basketball star at San Diego State. Sadly, Gwynn was only 54 years old…Chuck Noll, Hall of Fame coach of the Pittsburgh Steelers, is dead at the age of 82. When he was hired in 1969, Noll began the transformation of the Steelers, then one of the worst teams in the NFL, into the most feared franchise in the league, winning four Super Bowls in a six-year period (1974, 1975, 1978 and 1979). “Chuck Noll is the best thing that happened to the Rooneys since they got on the boat in Ireland to go to America,” said Art Rooney II, son of the team founder…finally, we’ve lost the man who played alongside Jackie Robinson on the only Brooklyn Dodgers team to win the World Series, who coached Derek Jeter during the New York Yankees dynasty days of the late 1990s and whose manager near the end of his playing career was Casey Stengel. Don Zimmer died earlier this month at the age of 83. “Zim” was truly one of the most beloved characters in the modern era of baseball and he spent the last 66 years of his life drawing a paycheck from the game he was enamored with. During his lengthy career he served as a player, a manager, a bench coach and an advisor. So devoted was Zimmer to the game of baseball that he and his wife “Soot,” were married at home plate during a minor league game in 1951…before I wrap this up, I want to extend thanks to our readers and advertisers, who have really helped make our signature issue successful once again. It’s been a challenging year for everybody in the grocery industry; competition has never been fiercer at every level – there are simply no more layups. So to all of our supporters, a tip of the hat for making this market study among the most successful in our 36-year history.