Taking Stock

More Than Any Segment, Independents Feeling Impact Of Competitive Landscape 

Business is as tough as it’s ever been. The overstored, diverse makeup of virtually every market in the U.S. has been well documented as have other day-to-day challenges – a still unsettled economy, an 11 percent reduction in SNAP benefits, rising health care costs, $4 per gallon fuel prices and low price inflation.

All those factors have made food retailing no place for the meek. And among all retailer segments, none has felt the pain more than the independent retailer. For me to report this is painful because I learned the business from some of the best independent retailers in the country while starting my career in New England (which once was a haven for great independent retailing) in the early 1970s.

And I don’t want to throw all independents in the same bathtub, because surely great independent retailing can and will continue to survive and prosper. The 50 member/owners of Wakefern (ShopRite), Redner’s, B. Green (Food Depot/Cost Plus), McCaffrey’s Market, Darrenkamp’s, Karns, Graul’s, Eddie’s of Roland Park, Boyer’s and Lauer’s remain strong and viable entities that have survived several generations of leadership and tremendous industry change. And part of their successes have stemmed from an ability to adapt to changing consumer habits and also use their inherent street skills to continue to make themselves meaningful. People like Herbie Beckenheimer and Bernie Meizlish of Food King, Ron Murphy at Murphy’s Markets and Dave Snider at Snider’s in Silver Spring are not only great entrepreneurs, they’re also terrific merchants who have intangible connections with their customers that most retail organizations will never be able to replicate.

But the facts don’t lie and the number of independent retailers is shrinking both in the Mid-Atlantic and nationally. Sure, perpetuation issues remain a major factor in the long-term survival of the independent retailer. However today this issue is more acute given the fierce level of competition and the unwillingness of future generations to enter the fray. And capital investment is still a hurdle that will always challenge the independent operator more than a chain store merchant. But the amount of capital investment needed to stay relevant has escalated significantly over the past decade and so have the stakes to keep an independent store relevant on the technology side. There are no more weak sisters to battle – everyone is in the heavyweight division today.

So, it’s not just the Camellia Foods or Farmer’s Foods that we mourn. Last year it was Santoni’s, and the year before Magruder’s called it a day. Fresh & Green’s, the ill-fated attempt to open healthy natural and organic supermarkets by Canadian private equity firm Catalyst Capital also went bust less than three years after it debuted. Even the independent retailers who are members of wholesale grocery co-op AWI are somewhat endangered as a collective organization with the pending sales of its White Rose unit and its reduced rebate payment this year. And just before presstime, we learned that Henry Baines will be closing his remaining four stores in Baltimore City.

As I’ve said too often recently: “There are no more lay-ups – every shot is contested today.”

And while there will always be opportunities for great independent retailing, the herd has clearly been thinned in recent years. That in itself is sad when you consider that it was truly the independent merchant that provided the foundation of this great business.

‘Round The Trade

The sad soap opera that has become part of the fabric of Demoulas Market Basket in New England continues. Just before we went to press, a group of approximately 75 associates at the high volume Tewksbury, MA-based regional chain announced their “independence” from the retailer’s new co-CEOs and called for the reinstatement of former CEO Arthur T. Demoulas by the company’s board of directors. The so-called “Save Market Basket” movement also asked for a face-to-face meeting with Felicia Thornton and James Gooch noting in a facebook posting that “they have had two-and-a-half weeks to try to gain a toehold of legitimacy and have failed.” The posting also stated “F&G (Felicia and Goode) were summoned to the meeting where they were told in no uncertain terms, that from this moment on (July 9) Market Basket is to be run by the people who know it best. The people who have learned from the best. The people who have the culture and philosophies of their founders and their leaders ingrained into all parts of who they are…today we declare our independence from them and we encourage all stores to do the same. Market Basket is our company and we have had enough of playing along and waiting for others to destroy it. The time has come for us to take it back and today our leaders have set our course in the direction. We are Market Basket!” To review the most recent sad state of affairs, on June 23, Market Basket’s board of directors fired chief executive Arthur T. Demoulas, the retailer’s extremely popular and successful leader. That seminal event came after an intra-family legal battle for control that dates back more than a decade and essentially involved Arthur T. Demoulas and his first cousin Arthur S. Demoulas, who gained control of the board in 2010. Also departing on “Bloody Monday” were two of Market Basket’s oldest and most trusted executives, Joe Rockwell and Bill Marsden. Within days of the dismissal of Arthur T, Rockwell and Marsden, other key Market Basket executives – including CFO Dan Mulligan, deli director Ronald Carnigan, director of advertising Jay Rainville and executive VP Jim Miamis, one of the cornerstones of the entire Demoulas success story for more than 60 years – resigned from the 71-store operation, and a group of approximately 300 associates gathered outside Market Basket’s flagship store in Chelsea, MA to protest the ouster of Arthur T. and the others. In a statement to the Lawrence (MA) Eagle, Marsden, director of store operations, said, “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 – Thornton and Gooch – to become co-chief executives.. 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. This is as ugly as it gets…Safeway cut the ribbon late last month on its new Petworth store in Washington, DC (Georgia Avenue NW), and what a nice store it is. The new 60,000 square foot urban unit is beautifully designed (Safeway continues to display one of the best urban supermarket models in the grocery business) and will certainly be one of the centerpieces of the aging Petworth neighborhood that is just beginning to be redeveloped into the thriving area it was 60 years ago…a tip of the hat to president Bob Gleeson and his team at Shoppers Food & Pharmacy on the successful re-opening of its Glenmont, MD unit. For the first time since it opened its Annapolis store in 2008, the Bowie, MD-based unit of Supervalu has some positive momentum in its favor. Clearly the new management team at SVU in Eden Prairie, MD has provided the guidance and expertise needed to run a once powerful corporate organization and also has now allowed its local executives like Gleeson the flexibility to sell more stuff. The Glenmont store reflects that in its merchandising, pricing and the attitude of the Shoppers associates, who for years were hamstrung and demoralized by the ineptness of past regimes led by Jeff Noddle and Craig Herkert. More Supervalu news: at the recent Oppenheimer Consumer Conference in Boston, SVU CFO Bruce Besanko said his company will continue to focus on price, particularly at its Save-A-Lot division. “We’ve invested in price to be more competitive with Aldi and to distance ourselves from Wal-Mart with two tranches of price investments over the course of fiscal 2014 that we felt were successful and that generated the kinds of returns we wanted and we we’re going to make additional price investments this year if necessary.”…and speaking about price, now that Harris Teeter has “officially” launched it price reduction program at its nearly 40 Baltimore-Washington stores, it will be interesting to measure its impact against market leaders Giant/Landover and Safeway for the remainder of the summer, typically the softest sales period for most retailers. While we’re expecting HT to post gains in overall sales, traffic and basket size, I think a better assessment of the price impact program will be measured after Labor Day when shopping patterns get back to normal and the influence of HT’s media campaign can be better measured…three industry veterans I’ve known for many years have announced their retirements. Fred Young, general manager of Esskay, Inc., is calling it a career at the Towson, MD meatpacker after 28 years of service to the company. And Todd Furr, who was CEO of T. Furr & Co. before selling the firm to what is now Advantage Waypoint, has decided to enjoy the fruits of his 34 years of labor in the food brokerage industry. He will be retiring on August 1, a day after Sandy Dalla Villa steps down from his executive post at Acosta in Virginia. I’ve known Sandy from almost the beginning of my Mid-Atlantic journey in 1978 and there are few people who could better chronicle the events that have occurred in the Richmond-Norfolk market over the past 40 years. Best of luck to these three gentlemen – all top notch pros and truly nice guys – in their future endeavors…Condolences to the Maggio and Hofmeister families on the deaths of their matriarchs. Rosalie Maggio, mother of Maria Maggio, who serves as VP and general manager of Food World’s sister publication, Food Trade News, passed away unexpectedly earlier this month, some 12 weeks after her husband, Mario (Maggio Cheese) also left us. And Inge Hofmeister, wife of the late Charlie Hofmeister (an icon in the B-W market from his many years at Pantry Pride and A&P), has also passed away. Our deepest sympathies to both families who lost warm, strong and wonderful women…in the entertainment field, some notable deaths that have occurred over the past month, including 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 regular
ly 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.” 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 …I’m also sad to report the death of Paul Mazursky, a greatly underrated filmmaker whose movies often focused on modern morality and changing lifestyles in a caustic absurdist manner. His first big hit was “Bob & Carol & Ted & Alice” (1969) which racked up five Oscar nominations and was followed by other critically acclaimed films such as “An Unmarried Woman” (1972) and “Harry and Tonto” (1974). Mazursky, 84, once noted in a magazine interview, “I know there are some wonderful filmmakers with really tragic views of life. But for me, absurdity is just around the corner. I see it all the time.”…also passing on was Jim Brosnan, former major league pitcher (Reds, Cubs, Cardinals and White Sox) whose prose proved to be more skilled than his pitching prowess. Actually, Brosnan, 84, enjoyed a pretty good nine-year career (his lifetime record was 65-47 with 67 saves), but his 1960 “The Long Season” was the first book I read that really dissected the inside view of how players acted off the field. It was a great read at a time when I was a consumed by everything baseball and “The Long Season” certainly provided the foundation of what is considered the greatest “inside baseball” book of all-time – Jim Bouton’s “Ball Four” written in 1970…also passing away were two members of the Rock and Roll Hall of Fame – Gerry Goffin and Bobby Womack. Along with his former wife, Carole King, Goffin wrote some of America’s greatest songs in the 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 also a member of the Songwriters Hall of Fame. It is also with sadness that I report the death of the great R&B singer, guitarist and songwriter Bobby Womack, who passed away on June 27. A 2009 inductee into the Rock and Roll Hall of Fame, Womack began his career singing gospel music with his family in his native Cleveland at the age of 10. When he was only 20 he wrote and performed (with his group at the time, The Valentinos) the classic song “It’s All Over Now” (made famous by the Rolling Stones) and covered by literally dozens of other singers. Other hits from the Womack archive include “Across 110th Street;” “Trust Me” (covered by Janis Joplin); “I’m A Midnight Mover” (recorded by Wilson Pickett); and “Lookin’ for a Love” (made popular by the J. Geils Band). Womack endured many hardships and personal addictions during his life. However, in the end, he had overcome many of those challenges and he died unexpectedly at his home in Tarzana, CA at the age of 70.