Aldi To Acquire Bottom Dollar Foods From Delhaize America For $15 Million

The four year experiment to penetrate the Delaware Valley and Lehigh Valley markets is over for Bottom Dollar Foods (BDF). It’s not as though parent company Delhaize America didn’t give it a solid effort, but the company’s attempt to penetrate the Eastern Pennsylvania and south Jersey area with its own version of discount stores never really gained the momentum it needed. To many trade observers that seemed obvious almost from the beginning on October 8, 2010 (the day it opened its first store in King of Prussia, PA) until the company was sold to Aldi earlier this month. The story of Bottom Dollar exploring a sale of its operation was first reported in the August issue of Food Trade News.

All told, Aldi acquired the real estate and certain other assets of the 66-store chain (46 stores in the Delaware Valley/Lehigh Valley and an additional 20 units in the Pittsburgh-Youngstown market) from the Salisbury, NC-based merchant for a mere $15 million (not including inventory and fixtures). Approximately 3,000 BDF employees will be affected. The stores are expected to stay open for the remainder of 2014 and the transaction should close in the first quarter of 2015.

During its brief tenure in the Delaware Valley/Lehigh Valley, BDF enjoyed most of its success in urban areas (City of Philadelphia, Lansdowne, PA, Trenton, NJ). However, it struggled to make its merchandising model, which featured national brands, private label and an emphasis on produce, to connect with consumers. Sites leased or acquired were often in secondary locations, but as the latest player to enter the game, records indicate that Bottom Dollar often paid above market rents and even took ownership of 10 of its stores.

With the announcement of the closing, parent firm Delhaize Group will take an asset impairment charge of $180 million.

Prior to its entry into the Delaware and LehighValleys, the Bottom Dollar name was created in 2004 when Brussels-based parent company Delhaize Group announced it would differentiate the banners within its Food Lion stores. In addition to its core Food Lion banner, Delhaize ultimately opened or converted more than 60 stores to a new upscale format called Bloom (which operated in North Carolina, South Carolina, Virginia and Maryland) and also created a deeper discount format – Bottom Dollar Foods. The first BDF store opened in 2005 in High Point, NC and prior to opening its first Pennsylvania store in 2010, Delhaize America operated nearly 30 BDF stores in North Carolina, Virginia and Maryland. In a major U.S. reorganization in 2012, Delhaize announced it would close 127 Food Lions, retire the Bloom concept, close six BDF units and convert the remaining 22 Bottom Dollar locations to Food Lions except those open in Pennsylvania and New Jersey.

In January 2013, Bottom Dollar Foods expanded its operations to Western Pennsylvania and Northeast Ohio.

As for Aldi, the opportunity to expand further in to Pennsylvania, New Jersey and Ohio was too good to pass up (especially at the discounted price). In the past three years, the privately-held German based retailer (with U.S. headquarters in Batavia, IL and Mid-Atlantic distribution centers based in Center Valley, PA and Frederick, MD), announced plans to double its U.S. store fleet, which now stands at approximately 1,350 units. U.S. sales are estimated to be about $6.5 billion, making it the largest of the “extreme value” retailers in the country. It currently operates 26 stores in the DelawareValley with estimated sales of approximately $175 million.

Along with the announced sale of Bottom Dollar, there was other news to report at Delhaize. Resigning unexpectedly as president of its largest unit – Food Lion was Beth Newlands Campbell. Campbell, a 27-year veteran of the company, who was replaced by Bottom Dollar Foods president Meg Ham effective November 1. The retailer said she left for “personal and professional reasons.”

“We are extremely pleased to tap into internal talent to ensure a seamless transition of Food Lion operations to Meg Ham,” said Kevin Holt, CEO of Delhaize America, who oversees the Salisbury, NC chain which operates more than 1,100 stores in 10 Mid-Atlantic and Southeastern states and employs more than 63,000 associates. “I have full confidence in Meg to continue to lead Food Lion’s transformation and to deliver on the company’s ‘Easy, Fresh and Affordable…You Can Count on Food Lion Every Day’ strategy to enhance the customer shopping experience. Meg has an extensive retail operations and merchandising background with a strong focus on the customer experience and associate engagement.”

Ham will lead all Food Lion banner operations, including strategic direction, financial performance, product assortment, pricing, customer service and marketing. She will continue to report to Holt.

“I’m honored to take on this new role at Food Lion, a company that I have been passionate about for many years,” said Ham. “I look forward to maintaining our positive momentum at Food Lion by continuing to deploy our new strategy, serving our customers well and caring for our communities through ‘Food Lion Feeds.’ ” Prior to being named president of Bottom Dollar in 2010, she held a wide range of leadership roles at both Food Lion and Hannaford. She joined Delhaize America in 1988.

Parent firm Delhaize Group also announced increased third quarter sales at its U.S. stores. The period, which ended September 30, was the first one under new Delhaize America chief executive Holt.

Acknowledging that it was aided by this past summer’s job action at rival Market Basket in New England which resulted in approximately $100 million in new revenue during the quarter for its Hannaford unit, parent firm Delhaize Group, posted strong sales increases in its U.S. stores. Overall sales in the U.S. increased 5.9 percent to $4.66 billion in the period ended September 30. Comp store revenue increased a very healthy 5.3 percent and operating profit jumped 10.2 percent.

Following the earnings announcement, in a conference call with financial analysts which included Delhaize Group CEO Frans Muller as well as Holt, the global merchant noted that Hannaford’s sales gains were centered on 30 units that were nearest to Market Basket’s stores in Eastern Massachusetts, New Hampshire and Maine.

On the other side of the pond, Europe continues to be a major problem for the Delhaize Group. Operating profit in Belgium (by far its largest European market) fell 50 percent and as many as 2,500 jobs may be cut.