Robert Weis Stepping Down As Chairman; Leaves A Legacy Of Strong, Steady Leadership
One of the classiest (and most unsung) leaders of the grocery business announced on April 8 that he will not stand for re-election as chairman of the company his family started 103 years ago. Robert Weis, who for the past 20 years has led the Sunbury, PA regional chain through challenges and sea changes, is retiring from day-to-day activities at Weis Markets.
Mr. Weis is 95 years old and has been an integral part of the retailer’s growth for the past 69 years. He will be succeeded by his son, Jonathan, who currently serves as both chief executive and vice chairman. With Robert Weis’ retirement, the company’s board will be officially reduced from six members to five when it convenes at its annual shareholders meeting at Weis headquarters on April 23.
“My father’s contributions to the growth and development of Weis Markets are far too many to detail,” said Jonathan Weis, adding that “throughout the years, I have relied on him for valuable advice, and he has always been available to discuss any detail or issue.”
At the upcoming meeting, the board plans on naming Robert Weis “chairman emeritus” in recognition of his many years of service to the company co-founded by his father, Harry, in 1912.
I first met Bob Weis in the late 1990s, shortly before he was named chairman, succeeding his first cousin, Sig, a dynamic firebrand who dominated every aspect of Weis’ business. The company had a great track record for many years under Sig’s leadership, going public in 1965 and gaining a formidable reputation as perennially being the largest publicly-traded grocery chain in America.
However, by the late 1980s and early 1990s, Sig’s autocratic, insulated management style began to adversely impact the company. The stores looked stale, little new talent was being developed and competitors, particularly Giant/Carlisle, began eroding Weis’ market share dominance in key markets such as Harrisburg, Lancaster and York.
Bob Weis’ approach was so much different from Sig’s. The bombastic and quasi-tyrannical style of his cousin was replaced by analysis, praise of the associates and a new open door policy. Bob Weis also made a move that would also help raise Weis’ stature when he tapped Norm Rich, who joined Weis Markets in 1964 as director of quality assurance, to become president of the regional chain.
The chemistry between Bob and Norm clicked from the start and for the next 13 years they helped Weis modernize many of the company’s functions while also prioritizing the happiness and welfare of its more than 18,000 associates.
And Bob Weis’ calm hand and leadership skills were never more tested that in late 1999, when two directors who sided with Janet Weis (Sig Weis’ widow) accused Bob, Jonathan and Norm Rich of an “absence of a more pro-active strategy” to improve shareholder value.
Strongly disagreeing with that view (but never outwardly expressing emotion), Bob Weis remained resolute and vowed not to sell the company. He had the leverage and used it brilliantly, ultimately buying the dissenting group’s 35 percent stake three years later.
By 2008, Jonathan Weis’ influence was becoming stronger and, as Norm Rich was nearing retirement, Weis Markets began to search for his successor. The search was lengthy and arduous and resulted in former Price Chopper executive Dave Hepfinger coming aboard as president and ultimately CEO a year later.
For the first two years of his tenure, Hepfinger produced strong results, improving efficiencies in key areas such as operations, merchandising and IT. However, by 2011, Hepfinger’s persona seemed to change – he became more aloof and less team-oriented. It became clear that he could no longer function effectively in the Weis culture, something that’s always been of critical importance to Bob and Jonathan. This time, Jonathan took the lead with the full support of his father, and Hepfinger was bought out of his contract.
Hepfinger’s departure could have been a critical loss for Weis, but Bob and Jonathan never let the problem get that far. Much like his father did in 1995, after Sig Weis died, Jonathan stepped up and became chief executive; he entrusted Kurt Schertle (now COO) to serve as his right hand man and re-energized the leadership team. A new sales-driven merchandising program was unveiled and Weis is again humming on all cylinders.
It’s a wonderful story and one that Bob Weis played a seminal role in shaping. Besides his industry legacy, what you might not know about Bob is that he’s a highly educated man (he graduated from Yale), a world-class art collector and a very generous philanthropist.
More importantly, he’s a masterful leader and a great husband and father. I’m going to miss his presence in the industry.
Lidl Gathering Backroom Momentum With Aggressive Store Pursuit, New U.S. Headquarters
The track record of European retailers that have sought greater riches by entering the U.S. market either organically or through acquisition has been pretty dismal over the past 25 years. Successful merchants from the other side of the pond such as Tesco, the Tengelmann Group, Marks & Spencer, J. Sainsbury, Carrefour and Leedmark have tanked in the U.S. And even other mainstays like Ahold and Delhaize Group have been criticized for having “too much Europe (process)” in their game plans and not enough local initiative and entrepreneurial spirit in their go to market strategies.
Of course, the one exception to that historical accounting would be privately-owned Aldi and Trader Joe’s, both controlled by the Albrecht family, which has amassed one of the largest family fortunes in the world.
Not having to deal with external shareholders is a huge advantage, which has allowed companies like Aldi, Wegmans, H-E-B and Publix to more effectively deploy medium and long-range planning while also creating less pressure to “meet the number” every quarter.
In the case of Aldi and Trader Joe’s, let’s give the parent company credit. In 1979, when Theo Albrecht acquired Trader Joe’s it only operated 23 stores, all in California. Today, with nearly 425 stores, Trader Joe’s has carved out a truly American identity that has produced the best sales per square foot average in the retail food industry.
And sister retailer Aldi, which expanded to the U.S. in 1976, has proven that it can be flexible in store design and product mix and tenacious with its pricing (generally considered to be the lowest price retailer in the U.S.) while also using its financial might to grow faster than any other merchant in the U.S. (Aldi currently has 1,300 U.S. stores with a goal of 2,000 unit by 2018).
In Europe, the most comparable model to Aldi is Lidl, which is slightly larger than Aldi -10,000 stores vs. 7,600 units. Both German-based firms operate stores in the 10,000 square foot range.
Since it announced nearly two years ago that it would be entering the U.S. market, Lidl has captured a lot of interest without a lot of substance. However, over the past nine months that is changing. Using its MGP Retail arm as its ramrod, Lidl has quietly begun assembling an infrastructure that’s been real estate focused. Real estate executives have confirmed to us that Lidl has scoured hundreds of potential sites in an area ranging from southern New Jersey to North Carolina. Sources have also told us that Lidl has consummated deals at more than 20 locations and hopes to have at least 100 stores open or ready to open by the time it officially begins operations in the U.S. in 2018. Additionally, MGP has reportedly targeted two locations – Aberdeen, MD and Hawfields, NC – as potential locations for distribution centers.
Over the past six weeks, the veil of secrecy seems to be lifting a bit. Earlier this month, MGP/Lidl acquired majority interest in a 217,000 square foot headquarters building in Arlington, VA complete with a quality assurance lab and a test kitchen. It has also been utilizing LinkedIn to search for talent, including meat, dairy and produce positions.
Real estate executives have told us that Lidl’s U.S. model will be significantly larger than its European one (25,000-30,000 square feet). That would also make it significantly larger than Aldi’s typical footprint of approximately 18,000 square feet.
So, the ultimate question remains: can Lidl succeed in a market where so many other European companies have failed?
On paper, they’ve taken the right approach to start, giving themselves plenty of time to develop a complete network, beginning with the most important component – real estate. Other questions remain to be answered such as: will Lidl truly act as an American company, or just another piece in a corporate growth initiative? And how will it fare as the “last man” to enter the highly competitive and overstored extreme value market.
As it does in Europe, Aldi will battle ferociously to protect its market share. However, this time Aldi has the advantage with an established strong image and an accelerated growth track of its own to stand on. And future competitors such as Save-A-Lot, PriceRite and hundreds of dollar stores have already shown they’ll protect their price images to the hilt.
This will be a fascinating story to watch, because Lidl clearly has the financial ammo to compete and is taking a measured, long-term approach in developing its foundation in the U.S.
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‘Round The Trade
Matt Saunders has departed C&S. Saunders took the helm at AWI/White Rose last summer after veteran CEO Chris Michael “retired” and he steadily navigated the ailing co-op through many difficult periods last year before the wholesaler was sold to C&S last November for $288 million. He is a quality person and an extremely nice man, and I give Matt Saunders a lot of credit for handling an untenable situation with professionalism and grace…Aldi will reopen 30 of the 66 Bottom Dollar Foods locations it acquired from Delhaize America late last year. An attempt to sell or sublease the remaining 36 units will be made. Twenty of those Aldi units are located in the DelawareValley and the others are located in the Pittsburgh area. A tour of some of the sites indicates that conversion work had already begun on at least half a dozen stores…according to several large national CPG companies, Wal-Mart has been very vocal in seeking lower everyday prices from its suppliers. That message was also recently echoed by new U.S. CEO Greg Foran, who noted “…I’m not into gimmicks. I’m into simplicity ensuring that we negotiate the very best price, and then we pass it on to our customers.” And even when bad stuff isn’t the fault of the Behemoth, it somehow seems to share in some of the negative perception. To wit: a restroom at a Wal-Mart in Muncie, IN had to be closed indefinitely when an associate discovered a working meth lab inside. Huh? We’re not talking about someone ducking into the men’s room to smoke a joint, but rather a chemical lab large enough to potentially produce methamphetamine…Harris Teeter has shuttered its Bethany Beach, DE store. HT, which opened the store in 2010 as one of three SussexCounty units, has never really gotten its mojo working in the “FirstState,” and with Bethany Beach being one of many Delmarva small towns where seasonal populations create great swing in volume, the unit of Kroger packed up its tent and left. Harris Teeter also announced that it is exiting the Nashville, TN market in the next three months, closing one of its remaining stores and “trading” (for the unknown player to be named later) the other three to parent firm Kroger. Technically, it’s a sale and purchase deal and marks the first time since Kroger’s January 2014 acquisition of Teeter that this type of intra-company banner switch has occurred. Kroger ranks second to Wal-Mart in the Nashville market with about 45 stores…now that the marathon to acquire Family Dollar has finally ended, winning bidder Dollar Tree will have to divest 340 stores, according to the Chesapeake, VA-based discounter. That seems like a big win for Dollar Tree, which will have about 13,000 units when the FTC grants final permission of the deal later this year…ever since Kraft split into two separate operating companies (Kraft and Mondelez) in late 2012, industry speculation was strong that one of those two entities would be target by private equity interests. It may have taken a bit longer than expected, but Brazilian investment firm 3G Capital, headed by entrepreneur Jorge Paulo Lemann, is reportedly close to acquiring the stalwart packer whose brands include Maxwell House, Oscar Mayer, Planters, Cracker Barrel and Jell-O. The final price could exceed $40 billion. If such a deal happens, look for 3G to combine that business with Heinz, a company it bought (along with Warren Buffet) in 2013 for $23 billion. 3G also owns Burger King…President Barack Obama has rejected legislation that would have canceled a new National Labor Relations Board (NLRB) rule to accelerate and streamline the union organizing elections process. As such, the new rule, which allows certain documents to be filed electronically and limits employers’ legal challenges, goes into effect on April 14…perhaps the busiest man in the retail food industry lately has been our buddy Bill Shaner, who is currently CEO of Haggen’s new Pacific Southwest division, which was created when parent firm Comvest (a private equity firm) acquired 146 stores from Albertsons and Safeway in Southern California and Arizona as part of the FTC-ordered divestiture process. The conversions are still in their early stages, and for a company that until recently operated 18 service-oriented stores in the Washington-Oregon area, Shaner is at the helm of essentially building an entirely new company. Bill’s a true talent with a great work ethic and off-the-chart people skills, so I’m curious to see how he’ll handle this daunting challenge in a large new market that’s already overstored.
Local News
Good news for our friends at Burris Logistics, the large provider of customized retail distribution services specializing in temperature controlled supply chain solutions. Burris has recently renewed its supply agreement with The Fresh Market, the Greensboro, NC specialty grocery retailer with revenues of more than $1.7 billion and stores in 27 states across the U.S. Since establishing a partnership with Burris, headquartered in Milford, DE, The Fresh Market has added more than 100 stores. In turn the company stated it has maintained a reliable and highly efficient supply chain in the midst of this rapid growth by adding a second distribution center, expanding its dedicated fleet and enhancing all aspects of technology to make the supply chain seamless and simpler for both retailer and distributor. Donnie Burris, CEO said, “Our custom distribution solution – unlike the traditional wholesaler model – provides a transparent procurement service. The Fresh Market has full control of the buying process and an understanding of the exact cost of goods. This allows the Fresh Market team to focus on selecting healthy choices and unique offerings that inspire and engage the consumer.”…Amazon has recently expanded its “Prime Now” service (delivery in two hours for free and or one-hour delivery for $7.99) to Baltimore and Miami. Baltimore is also a market where, sometime later this year, the big online juggernaut will roll-out Amazon Fresh service…Jan Hommen, who temporarily stepped down as chairman of Ahold’s supervisory board last June to accept an interim post as CEO of accounting firm KPMG, has resumed his role at Ahold and will chair Ahold’s upcoming annual meeting on April 15. Rob van den Bergh, who filled in for Hommen, remains on the supervisory board, serving on the remuneration, and selection and appointment committees…Rite Aid continued its recent run of improved earnings and sales. In its fourth quarter ended February 28, earnings at the Camp Hill, PA-based drug chain rose to $1.84 billion, or $1.79 per share, versus $55.4 million, or $0.06 per share, in the year-ago period. The latest quarter results included $1.67 per share in income tax benefit. Its revenue for the quarter climbed to $6.8 billion from $6.6 billion with same store sales increasing 4.5 percent in the quarter, including a 5.7 percent gain in pharmacy sales and a 2.0 rise in front-end sales. “In the fourth quarter, our strong growth in same-store sales and prescription count as well as strong cost control helped drive continued profitability,” said Rite Aid chairman and CEO John Standley. “These positive results contributed to a successful year in which we took significant steps to further position Rite Aid as a retail healthcare company.” By the way, there’s been a lot of street chatter recently that Walgreens is prepared to make a run at Rite Aid, now that the company’s fiscal health has been restored…Baltimore-based spicemaker McCormick has been busy on the acquisition front lately. Last month the company announced that it had acquired large Italian spice firm Drogheria & Alimentari for $97 million. Then, earlier this month, McCormick, the global leader in spices and seasonings, affirmed that it has also purchased Lakewood, NJ-based Brand Aromatics for $63 million in cash. “Brand Aromatics is a great addition to our McCormick’s industrial business,” said Alan Wilson, McCormick’s CEO. “We are currently a leading supplier to packaged food companies and leading restaurants, and this acquisition extends the value-added flavor solutions we provide to stocks, marinades and other savory products, we look forward to working with the employees of Brand Aromatics to build sales and further strengthen our customer intimacy.”…Lew Soloff, a tremendous jazz trumpeter who I had the pleasure of hearing several times over the past 20 years, is dead. The former member of Blood Sweat and Tears and a virtuoso in his own right, is best remembered by me for his lilting piccolo trumpet solo on the Paul McCartney classic “Penny Lane,” which he performed often when he was a member of The Fab Faux, the greatest (and still active) Beatles cover band of all time. He was 71… former Coca-Cola president and COO Don Keough has also passed away. In my 42 years in the business, he was one of the most interesting people I ever met. Keough had a long association with Coke beginning in 1950 He retired in 1993 and served on the company’s board until 2013. Keough was a great motivator, one who was passionate about the brand and is probably best remembered as one of the key executives during Coke’s short, ill-fated foray into New Coke. Of that highly publicized period, Keough said, “Some critics will say Coca-Cola made a marketing mistake. Some cynics will say that we planned the whole thing. The truth is we are not that dumb and not that smart.” Don’s great people skills, his hilarious storytelling and his innate leadership ability made him one of the most influential people in our business over the last 35 years…It is also with great sadness that I report the death of my good friend Stuart Mendelson, former senior VP of sales for Murry’s. Stuart passed last month at the age of 69. More than just a talented sales executive, Stuart Mendelson was truly a one of a kind person – funny, hilariously profane and gifted with the highest level of street smarts that you can imagine. Stuart was always “on.” He’d unnerve you, challenge you, and then make you laugh, all seemingly within the same moment. He was kind of like the Robin Williams of the food business. In the end, his heart of gold always shone through causing you to forget the candor and the insults. To his wife Jackie, and his two children. Scott and Staci, you have lost a great partner and I have lost a good friend. My deepest condolences…and finally, James Wood, former A&P chairman and CEO for 21 years (1980-2001) has passed away. Wood, 85, presided over A&P during one its darkest periods (not entirely created by him) that led to massive store closures and consistently negative earnings and sales. Born in England, he cut his teeth with now defunct food retailer Cavenham (a company founded by Sir James Goldsmith – remember him?), which at the time owned another misguided U.S. chain, Grand Union (RIP, too). Wood was a smart guy and a nice guy, but could never seem to transition from the process-world to one that demanded more hands-on leadership and street smarts. Of course, he wasn’t helped by the limited supermarket skills of Christian Haub (co-CEO for a time and son of the owner of parent company, Tengelmann Group). Woods’ legacy may not be associated with success, but you’ve got to give him credit – he survived for more than two decades at a company which was perceived as one of the worst run in the industry – a perception that still exists today…in a not so surprising move just before presstime, AB ACquisition LLC (Part of Cerberus Capital Management) and parent company of Albertsons LLC, New Albertsons Inc. and Safeway Inc., announced that Bob Miller, the company’s current executive chairman, will assume the additional role of chief executive officer, effective immediately. Robert Edwards, who served as CEO when the Safeway acquisition was announced in late January, will continue on with the company as vice chairman providing counsel to the board and the organization on key strategic and integration matters. Edwards, as Safeway CEO in 2013, initiated the move to sell the company to Albertsons/Cerberus and it figured once the deal closed and integration issues were smoothly handled, his day-to-day role was not as essential. Make no mistake, this is Bob Miller’s company. Albertsons also announced the restructuring of its executive leadership team, introducing the “office of the CEO” to support the day-to-day operations of the company’s 14 divisions and 2,200 stores. In addition to Miller, the “office of the CEO” will be comprised of Wayne Denningham, COO for all of the company’s regions; Justin Dye, chief administrative officer; and Shane Samps
on, chief marketing and merchandising officer. Jim Perkins and Kelly Griffith will continue to serve as executive VPs of operations for the company’s regions and will now report to Denningham.