Market Study Reveals That ‘Selling More Stuff’ Works For Only Those Retailers That Are Actionable
The SNAP benefits reduction has cycled through; gas prices, while creeping up again, are still down from the levels of 18 months ago; and consumers generally feel better about the overall economy. The result: increased spending at retail food and drug outlets (both bricks and mortar and online). Based on the past five years, it was a moderately good year for many merchants in the region, which were also aided by a small inflationary tailwind.
Let’s face it, food retailing will never be the same as we knew it from even 10 years earlier. The growth of the e-merchants alone (Amazon, Peapod, Fresh Direct, and Relay Foods) has and will continue to impact conventional shopping patterns. And when you add the one key factor that has remained constant ever since the great recession began in 2008 – overstoring and retail diversity – it’s a lot more difficult to be a successful food and drug merchant than ever before.
But clearly it’s not all doom and gloom. If you look at the evolution of the Baltimore-Washington market alone, there’s a reason that Wegmans, Harris Teeter and Whole Foods have made great strides against leaders Giant and Safeway – they connect with their customers more effectively than the perennial market leaders do, especially the millennials and Gen-Yers whose shopping habits are far different from baby boomers like me.
And for the value-oriented shopper there are plenty of Aldis, Save-A-Lots, PriceRites and dollar stores in the market to scratch that itch. Even the 94 “international supermarkets” that now exist in the market have demonstrated that they can serve their customer more effectively than many traditional food retailers.
So, why is it that over the past year Giant/Landover has slipped back further; Safeway’s eastern division presence was almost invisible; and, despite efforts to improve sales and store conditions, (which it has), Shoppers can’t gain more traction?
The answer to those questions and a full-analysis of the key operators in the market is disseminated below.
Giant/Landover – Another disastrous year. It’s not as though the once great chain isn’t trying – relatively new president Gordon Reid has improved morale, and Ahold’s “Thunder” program has created noticeable price reductions – but the plan just isn’t working. Giant’s problems are easy to recognize, but tough to fix. “We’ve lost our soul,” said one veteran Giant associate. That comment could be applied to much of the entire AUSA culture. Too much strategy, not enough focus on creating a positive culture. As management guru Peter Drucker once said, “Culture eats strategy for breakfast.” We also hear the words “associate engagement and empowerment,” but we don’t see much evidence of that in the stores. Staffing levels need to be increased, training is below par and, after 30 months of new corporate U.S. leadership, the “journey” has led Giant down a dead end street. With Safeway’s new initiative that’s targeted directly against Giant, perhaps if the Delhaize acquisition does occur, Ahold will seek to sell one of its former crown jewels.
Safeway – For purposes of the market study, Safeway’s eastern division had a poor year, too. But what would you expect from a company that treated its eastern-most unit as though it has been in quarantine for decades? When you add in the lame duck status it operated under for nearly a year, the outcome was expected, especially in a fiercely competitive market. But, the gloves are off now with new ownership and a new local team in place. Add in a real decentralized model, and an authentic employee engagement plan, and Safeway has begun to make strides. Here’s one key difference between the two perennial leaders in the B-W market: one company is owned by a large private equity firm (Cerberus) where cash flow (selling more stuff) is prioritized and the pressures of being publicly-traded don’t exist; the other retailer “bleeds” process, seems more focused on stock price and, despite denials, generally operates on a “one size fits all” philosophy. I’ll be curious to see the sales and share of market data a year from now.
Shoppers Food & Pharmacy – Certainly a better year than the last six years, but Shoppers still has a long way to go and, based on the market gridlock, it may never get there. President Bob Gleeson has worked hard and achieved success in enhancing store conditions, bolstering morale and improving same store sales. Still, there are no new stores in the pipeline and the discount portal under which Shoppers operates in is getting even more crowded with Aldis, PriceRites, dollar stores and ethnic markets adding stores. Shoppers always seems to be the target of sales speculation, and you have to wonder where in the puzzle Supervalu’s corporately-owned supermarkets division fits.
Wal-Mart – Another flat year for the Behemoth with little new store activity in the B-W market (it converted its Germantown, MD unit to a SuperCenter). The good news for Wal-Mart remains that its average sales per unit still places it into the elite category among all food and drug merchants in the market and its basic mantra of “price, price, price” seemingly will always resonate with its core shoppers. But as relatively new CEO Doug McMillon has said countless times, certain fundamentals need to improve – particularly in-stock conditions (still horrid), and employee engagement/morale (still resembling an episode of “F Troop”). More than his predecessors Mike Duke and Lee Scott, McMillon is making some progress on those challenges. Still, it’s a mighty big ship to turn around and after an extensive tour of Wal-Mart units in the B-W market over the past eight weeks, I would say that improvements aren’t yet noticeable. The fastest growing retail channel in the B-W area over the past 12 months has been the discount portal. That said, how soon will it be before Wal-Mart opens its first Neighborhood Market in the region?
Harris Teeter – Unlike its supermarket peers Giant/Landover, Safeway and Shoppers, Harris Teeter’s new store program is robust and healthy. Three new B-W stores opened during the past 12 months and there’s at least another half-dozen projects in the pipeline. Even more than Wegmans on a market-wide basis (primarily in the Washington area), the “Teeter” has captured the business that Giant used to have and continues to build its customer base (and market share) annually. Earlier this month, long-time president Fred Morganthall was given a new assignment by parent company Kroger. Morganthall will serve as senior VP-retail divisions, where he will oversee six Kroger divisions, including Harris Teeter. Don’t expect any loss of momentum with Rod Antolock, Morganthall’s sidekick for many years, assuming the top post at the Matthews, NC-based merchant. Harris Teeter’s success formula has been easy to follow – develop a real estate expansion plan, operate clean stores, staff them adequately, properly train the associates, prioritize perishables and make the customers feel important – but obviously difficult to replicate based on peer comparisons.
Wegmans – From a sales and new store perspective, it was kind of a flat year for the uber-retailer from Rochester. But don’t be fooled, just because no new B-W stores were opened, there’s plenty of activity happening in the Wegmans’ laboratory. First, despite some reader feedback that Wegmans in-store conditions are slipping, I see no evidence of that and its huge per store volume averages attest to that. As far as new stores are concerned, the B-W ribbon cutting derby restarted earlier this month with the debut of its 126,000 square foot Alexandria, VA store and the announcement that it would build a smaller format unit (75,000-ish square feet) in Tysons Corner. The success of its first smaller footprint unit in Chestnut Hill, MA (which opened in 2014) has given the family-owned merchant the confidence to expand that model, and a new Brooklyn, NY stores was recently added to the roster (its first in the city of New York). Additionally, Wegmans is reportedly close to signing a lease at the old Walter Reed Hospital site in DC. The retailer is also slated to open a new conventionally sized unit (130,000 square feet) in Owings Mills, MD next year. Based on that new store growth track and now with the ability to succeed with a model that is 40 percent smaller than its previous size, Wegmans may be the new 800 pound gorilla in the room that will open a new store near you.
Update: Ahold-Delhaize Deal Reportedly Coming Closer To Being Consummated
While both sides are keeping negotiating progress closely under wraps, my sources (company insiders, financial and industry analysts) indicate that both Ahold and Delhaize are working feverishly to complete a deal in which Ahold would acquire its Belgian counterpart and competitor.
While many view this deal as a shot in the arm for both somewhat underperforming merchants (certainly the stock price gains since it was announced that both companies were in talks have indicated positive energy), others wonder how the synergies created would benefit store operations in the long-term.
“Leveraging their equities will certainly produce greater efficiencies just by eliminating duplication alone. And the buying power of a combined entity would increase,” said one Euronext analyst I spoke to. “However, I’m struggling to visualize how this deal will improve sales, enhance culture and make headway against the intense competition each company now faces, both in Europe and the U.S.”
Another trade observer in the U.S. noted that if Frans Muller (current Delhaize CEO) does become chief executive of the potentially $60 billion supermarket organization (and Dick Boer gets elevated to chairman of Ahold’s supervisory board), that would serve as an encouraging sign.
“How many in the grocery trade believe that Ahold’s current management is making progress –other than share price – both in the tangible measures – ID sales, earnings, market share gains – and intangible ones, too – culture, execution, creativity?” said the trade observer, a former Ahold executive. “The same could be said of Delhaize during the 15 year ineffective run of Pierre-Olivier Beckers as CEO. Muller, who joined the company 18 months ago, already has brought a different perspective and an increased energy to the scene. Based on what Ahold will have to pay for this acquisition, it might be a good idea to add fresh leadership to the new organization.”
With Pierre-Olivier Beckers departing the scene in late 2013, the tradition of family-run leadership ended (his father, Guy, also served as Delhaize CEO in the 1980s and 90s) and the Beckers family and other insiders reportedly began looking to maximize their investment. Also likely accelerating that mindset was the declining productivity of the supermarket organization that the family founded in 1867 in part due to heightened competition in Europe (and particularly in its home country, Belgium, where Ahold now competes with Delhaize).
The timing is right; sources indicate that negotiations are moving swiftly, so don’t be surprised if a deal is announced before the end of July.
If that happens, and after regulatory clearances both in the U.S. and Europe, the heavy lifting will begin for a new enterprise that’s got a lot of upside, but wasn’t been able to get its mojo working for several years when the companies operated independently.
Lidl Makes First Announcement About U.S. Entry: Will HQ In Arlington, VA, Build Depot In Fredericksburg
One of the retailers giving both Ahold (Albert Heijn) and Delhaize headaches in Europe is Lidl, which finally came out from the underground on June 12 and confirmed, as previously reported, that it will center its U.S. headquarters in the Potomac Yards development in Arlington, VA. It also announced that Brendan Proctor, who formerly ran Lidl’s Irish operation, will become the new president and CEO of Lidl U.S., and the German-owned discounter (owned by the Schwarz Group) will open a regional office and distribution center in the Fredericksburg, VA area (Spotsylvania County).
During a press conference held at Lidl’s headquarters in Neckarslum, Germany, Proctor said his company’s entry into the U.S. represents an initial $202 million investment – $77 million for its headquarters (a 217,000 square foot office building on South Clark Street in Arlington) and $125 million for the planned distribution center (at a yet undetermined site in Spotsylvania County). Virginia Governor Terry McAuliffe, who also participated in the press briefing, said that Lidl will employ approximately 500 people in Arlington and 200 in Spotsylvania.
Lidl, which operates about 10,000 stores in 26 countries, amassed nearly $100 million in sales last year. Proctor said the decision to locate in Virginia was made because of “the market opportunities, depth of the talented job force and strategic location that Virginia provides. Our philosophy is simple. We are focused on offering customers top-quality products at the most competitive pricing in convenient locations. We plan to build on the foundation that has made Lidl so successful in Europe.”
Governor McAuliffe has approved $5 million in grants from the Governor’s Opportunity Fund to assist Arlington and Spotsylvania with the project. He also approved $2 million in funds from the Virginia Economic Development Incentive Grant, a self-funded program of performance-based incentives that the state awards to exceptional economic development projects.
While no mention was made of store opening dates, it is expected that Lidl will open the first of about 100 stores in early 2018. And our friend Randy Hallman of the Richmond Times-Dispatch reported that plans for at least two Richmond-area Lidl stores have been filed by McLean-based MGP Retail Consulting, Lidl’s U.S. real estate arm. One plan calls for a 36,160 square foot grocery store at 5110 South Laburnum Avenue in eastern Henrico County, and the other calls for a 36,170 square foot store at 1301 Mall Drive near Chesterfield Towne Center in Chesterfield County, county planning documents show.
According to Hallman’s story, the proposed Lidl store in Henrico would be on a 4.6-acre property that currently is home to part of the Bill Talley Automotive operation. Owner William H. Talley Jr. has said the property is under contract to be sold and he would move his operations to a nearby 18,000 square foot body shop building with plans to expand.
The Chesterfield site is currently a vacant lot.
Real estate brokers and developers have told us that over the past nine months, MGP has visited dozens of sites, looking to sign leases for stores in a wide-ranging area from Pennsylvania through North Carolina. We’re told that they are looking at sites in the 25,000-35,000 square foot range (larger than European rival Aldi’s typical 18,000 square foot U.S. model). Lidl has also begun to look for headquarters and store personnel utilizing the Internet site “LinkedIn” as a primary job search tool.
C&S Makes First Major Changes As It Seeks Greater Efficiencies From AWI/White Rose Deal
When C&S Wholesale Grocers acquired bankrupt wholesalers AWI and White Rose last November for $288 million, you knew it wouldn’t take too long before the largest and one of the most successful distributors in the entire grocery industry would begin seeking efficiencies from the deal. That time has arrived.
Last month, the Keene, NH-based voluntary wholesaler announced that it will close three former White Rose facilities based in Carteret, NJ and Avenel, NJ.
C&S detailed those changes in a letter to its independent customers who were serviced from those grocery, frozen and dairy facilities.
“As you know, we have been evaluating the finances associated with the grocery, dairy, and frozen warehouse facilities operated in New Jersey by C&S subsidiaries Port Carteret Drive Logistics LLC, Middlesex Avenue Logistics LLC, Middlesex Avenue Haulage LLC, Blair Road Logistics LLC, and Blair Road Haulage LLC. Our analysis showed that the customers serviced from these facilities might be serviced more efficiently from other locations in the C&S network. We met with the unions representing the employees in the New Jersey facilities to share this analysis and to seek any insights or proposals they had. That process has now concluded, and we have decided that the grocery, dairy and frozen warehouse facilities in Carteret, NJ will be permanently closed. The closure date is anticipated to be between July 12 and July 25.”
Following the closure of the New Jersey facilities, C&S will begin shipping to former White Rose customers from existing C&S facilities in Bethlehem, PA (grocery), Chester, NY (dairy) and Westfield, MA (frozen). All three are non-union warehouses.
The letter added: “By utilizing these shipping locations, we will be able to make thousands of new items available to you and your customers.”
Additionally, C&S’ entire customer service team (about 45 people), which was also based at the White Rose complex in Carteret, will be relocating to C&S offices in Edison, NJ. The warehouse closing will affect approximately 525 employees represented by Teamster Locals 97, 641, 863 and 810.
This is not the first time that C&S has shifted distribution from unionized northern New Jersey warehouses it controlled to non-union facilities in Pennsylvania. In 2011, after A&P entered Chapter 11 bankruptcy and was seeking concessions from both labor unions and suppliers, the privately-held wholesaler closed its primary facility, also in Avenel NJ, and five other smaller distribution centers that served A&P and Pathmark and moved much of that business to other non-organized depots it operated in Pennsylvania. Ironically, that Avenel DC now serves as Amazon Fresh’s main warehouse serving Metro New York.
At this point, AWI’s primary warehouse in Robesonia, PA is not affected by these moves. However, C&S did make some personnel changes early this month at its Central PA offices.
We’re told that approximately 60 employees were told they would be laid off in the near future, another move designed to create greater efficiency and improve overall productivity. Several sources told us the changes were spread over the entire Robesonia staff – buyers, several category managers, clerical associates and even warehouse maintenance workers. Among those who will be leaving is Bill Donovan, the veteran grocery executive who joined AWI in 2005 and most recently served C&S as VP-sales and account management.
My guess is that the headquarters count reduction in Robesonia probably precludes other changes there as well. Why would C&S, the master of efficiency, elect to keep its non-modern unionized DC in Robesonia (and a smaller HBC/GM depot in York) open in the long-term when it already has eight other non-union warehouses in the Keystone State?
And when analyzing the business from last June (when AWI declared bankruptcy), there has been some customer attrition leading to revenue reduction from the Robesonia warehouse. The bankruptcy certainly played a key role in that reduction, both financially and emotionally. Reportedly there was about $80 million in shareholder equity lost for the independent retailers who were members of the co-op. Some retailers closed their businesses, and others moved to other wholesalers, even before C&S acquired the AWI/White Rose business at auction.
Since then, C&S’ customer retention rate has been good, but competing wholesalers Bozzuto’s, Supervalu and AWI have picked up new accounts and even existing customers have increased their cross-buying from other specialty distributors (produce, HBC/GM, etc.), something that was more restricted and frowned upon when the company operated as a co-op and was owned by the independent members.
However, you can be certain of one thing: C&S will run all of its newly acquired businesses (including Piggly Wiggly-Carolina and Grocers Supply in Texas) in a way that produces the greatest efficiency.
CEO Rick Cohen (he of the 30 pound brain) is arguably the smartest guy in the grocery business and now that the first major changes have been announced, expect further tweakings in the near future. These are tough decisions, but they’re the kind of decisions that have helped make C&S the largest wholesale grocer in the country.
‘Round The Trade
Buoyed by appearances of entertainers Reese Witherspoon, Mariah Carey, Rod Stewart and Ricky Martin (should he still be considered an entertainer?), Wal-Mart held its three-day annual meeting before 14,000 enthusiastic shareholders and acolytes at the Bud Walton Arena on the campus of the University of Arkansas in Fayetteville. After the superficial thrills had ended, CEO Doug McMillon addressed several critical issues impacting the Behemoth’s business. This is McMillon’s first shareholding confab with a full year under his belt (he was promoted to chief executive in February 2014). With a greatly overhauled management team to work with led by U.S. CEO Greg Foran and COO Judith McKenna, McMillon focused on the “urgency and determination” of the company’s investments in people and technology. “The investments we’re making today will set the stage for strong and sustainable growth,” he stated. He thanked the company’s associates for their efforts and implored them to be “obsessed with serving customers.” As stated before, there’s little question that McMillon recognizes the enormous challenges his company faces and has addressed the key infrastructure issues during the past year. Now the question becomes, are those problems fixable (without radically deviating from the core Wal-Mart model) and if so, how long will it take before measurable progress can be evaluated? Judging store conditions (in-stocks, employee morale, store cleanliness, etc.) is the most visceral way to evaluate progress, but on the harder to measure technology front, Wal-Mart is losing ground to its “prime” competitor, Amazon, whose “innovation of the month” is lapping walmart.com’s effort to catch up. In other Bentonville-related news, Greg Penner has been elected Wal-Mart’s new chairman, replacing his father Rob Walton (one of Sam’s sons). Penner, 48, is only the third chairman in the history of the world’s largest retailer. I think it’s good to be related to a member of the Walton family…speaking of Amazon’s rapid innovation strategy, the Seattle-based online company is reportedly ready to jump into the private label grocery business featuring such items as cereal, milk, cookies, household products and baby food. Published reports have indicated that Amazon has filed for trademark rights in a host of additional categories, too, among them pasta, soup, water, pet foods and coffee, which it would market under its own Elements brand…Whole Foods has revealed more about its alternative banner, which is designed to be more value-focused in an effort to expand its audience into fresh and healthy foods. The new stores will be called “365 by Whole Foods Market” and will open its first store next year. Jeff Turnas, a 20 year Whole Foods Market veteran, will serve as president of the new unit. Turnas, who has held various leadership positions on both the product and operations fronts, will be based at the company’s headquarters in Austin, TX. He recently led the “good for you” merchant’s efforts in the United Kingdom where WFM currently operates nine stores and has several other planned. “We are excited to introduce 365 by Whole Foods Market to bring healthy foods to even more communities with a fresh, quality-meets-value shopping experience that’s fun and convenient,” Turnas said. “A modern, streamlined design with innovative technology and a carefully curated product mix will offer an efficient and rewarding way to grocery shop.”…with some reluctance, I went to the FMIConnect show in Chicago earlier this month. After last year’s underwhelming revival, I felt FMI CEO Leslie Sarasin and her team deserved another look. I was wrong. While the seminars and speeches were fine, the fulcrum of the FMI’s spring show has always been the action in the exhibit hall. And much like last year, there was no energy, no juice. The McCormick Place arena seemed half empty with significantly more equipment and software companies than traditional CPG vendors. After reading the stellar list of retailers who signed up for FMI, I can attest that many of them never made it to the exhibit floor. Which is a shame since FMI promised a better show. But don’t blame this solely on Sarasin and her team. It really does take a village and if the retail food industry’s top executives are too busy to walk the show for a few hours to engage with their vendors, why bother to aggressively market the event? Maybe FMI should once again consider ending its May/June show. Perhaps, with “Midwinter” (a great conference) and the more targeted meetings that occur throughout the year, that’s enough to serve the education and legislative needs of the retailers and suppliers. On the other hand, just across the hall, the United Fresh produce show was jumping. Everything from the lighting to the creativity of the booths had more pizzazz. United Fresh CEO Tom Stenzel and his team should be proud of their effort.
Local Notes
Safeway’s eastern division, which has already made inroads against Giant/Landover and several other competitors with its new decentralized and local go-to-market approach, is investing more into store ops. The Lanham, MD-based division announced earlier this month that it will add approximately 2,000 jobs this summer across its four-state, Mid-Atlantic operating territory. Safeway said it expects many of the entry-level positions to be filled by teenagers, who may be in the process of securing jobs (for some, this could be their first work experience) for the summer. While the number of available jobs will vary by store, many Safeway locations will be hiring for a wide range of positions, including include courtesy, food and service clerks; cashiers; cake decorators; bakers; produce clerks; department managers; meat cutters and wrappers; and assistant store managers. Hiring for retail-level positions will be handled exclusively by the respective store directors. “We are very excited to have so many positions available across the region,” said Lisa Umali, eastern division HR director. “For many years, we simply hired to replace positions vacated through the normal course of business. However, this full-scale push to hire well beyond attrition is something we have not done for a very long time. Our customers will be the ultimate beneficiaries as we will have more employees available to serve shoppers.
In addition, we expect that some percentage of those hired will become long-time Safeway employees. Historically, many of our retail executives began their careers in entry-level positions as high school and/or college students, and chose to make retail grocery a career after learning about the business and enjoying the work.”…it was huge opening day at the new Wegmans unit in Alexandria, VA on June 14. That area of south Alexandria (off Telegraph Road) should be an excellent one for the uber-retailer – isolated enough from the intense overstoring of much of Fairfax County – but in a population-dense and demographic-friendly area that will draw plenty of new customers. After more than a year of no new Mid-Atlantic activity, Wegmans is beginning a run of new store openings unprecedented in its history. Later this year new conventional Wegmans (125,000-140,000 square feet) will open in Westwood, MA and Concordville, PA to be followed by four B-W debuts in 2016 – both Richmond area stores (Short Pump, then Midlothian); Owings Mills, MD; and Charlottesville, VA. It will also be building a conventionally-sized store in Chantilly, VA (Westfield Boulevard), in the next few years. The family-owned merchant also recently signed a new lease and will open one of its smaller prototypes (about 75,000 square feet) in Tysons Corner, VA. The freshly inked deal will not only place the new Wegmans into one of the most demographically desirable locals in the Northeast, it will be part of the Capital One’s headquarters expansion development located at I-495 and Route 123. The 26 acre Capital One campus is scheduled to include 3.1 million square feet of office space (including the existing bank headquarters and conference center), 1.2 million square feet of new residential development with a minimum 800 units, 406,762 square feet of hotel space, 128,781 square feet of retail and a 30,000-square-foot community center. That Wegmans store is slated for a 2019 opening. Wegmans also recently signed on to build its first store in the City of New York. That unit will be 74,000 square feet in size and will open in late 2017 in the ongoing expansion/redevelopment of the old Brooklyn Navy Yard. And several sources have told us that Wegmans is close to signing a deal to construct a smaller-footprint unit near Fenway Park in Boston. Other new conventional Wegmans that will open in the next three years include sites in Montvale, NJ and Hanover Township, NJ…it’s been a busy month for Ahold. In addition to the Dutch retailer’s continuing negotiations with Delhaize, the company announced its first quarter financial results. Not surprising to financial analysts and industry observers, ID sales in the U.S. remained marginally positive (0.1 percent, ex-fuel) and overall sales increased by a meager 0.4 percent, well below the results of its publicly-traded peer group. The Zaandam-based operator said after currency adjustments were made (the U.S. dollar is very strong against the euro), investments in price (“Project Thunder”) led to decreases in operating income and operating margin. The Northeast’s largest retailer also said that sales at its online Peapod unit fell into single digits, noting that its new dedicated warehouse in Jersey City, NJ has struggled to reach capacity. A week later, Peapod president and co-founder (with his brother) Andrew Parkinson was shifted to an advisory role and former COO for J Crew’s online business, Jennifer Carr-Smith, was installed as president (I think I need a new scorecard to keep up with the Ahold USA personnel changes). In Chicago, during the aforementioned FMIConnect show, Ahold USA threw an “After Party” for its key vendors to formally introduce its new simplified merchandising strategy. According to Mark McGowan, who recently changed hats from EVP-merchandising to EVP-operations and president of its largest division – Stop & Shop New England, Ahold USA’s new “Winning Together” strategy has taken a vertical rather than a horizontal approach with its vendors. The new approach will transform the merchandising team at the Carlisle, PA-based company into a more portfolio-centric organization, so that it can be more competitive and better drive sales. “In the past our merchandising teams were siloed, with each of our 18 portfolios overseeing its own functionality, merchandising and sales planning, which made it challenging for suppliers to partner with us. We had one-stop shops for customers but not necessarily for our business partners and we realize we were not the easiest company to do business with. Now we’re looking at the business differently – more vertically than horizontally – with each portfolio leader looking up and down the P&L statement instead of just at the top half. It was a great theory on paper, but we realized if we didn’t get serious about our support teams, we wouldn’t get the results we wanted. Now it’s like our portfolio leaders and their teams are seated around a large table, with each team having full functionality. Each one looks at the business up and down – at all the components – that should allow us to move faster, be better and bring our stores to life more effectively.” Also at the “after party” a presentation was made by executive VP-marketing, format, own brand, e-commerce and supply chain Jan van Dam (can we give him a longer titles) who along with senior VP-marketing Amy Hahn discussed the retailer’s launch of its new free magazine Savory- Fast, Fresh and Easy (which debuted on June 14). The new initiative also includes a digital component and is modeled after Albert Heijn’s publication, Allehande (translation: a little bit of everything). Hahn, who joined AUSA from Hershey in 2014 (that change was on my old scorecard), noted: “Savory was designed to help make every day a little fresher, a little easier and a little more delicious for our busy customers. It is a go-to guide with recipes and meal solutions that will help customers save time, save money, and eat well.” She termed the release of the new publication and related digital initiative as potentially “game changing.” Having attended the “after party” at the downtown Marriott, I can attest that many of the vendors I chatted with (more than 100 vendors attended), weren’t overwhelmed and several expressed an “I’m from Missouri” (Show Me) takeaway. You can hardly blame them, given the fact that they’ve seen the old merchandising system break down (as McGowan inferred) while also dealing with diminished sales and increased demands. One more Ahold USA tidbit: a year ago, then EVP-operations Bhavdeep Singh left his post to head up AUSA’s new formats unit. Late last year, the company opened a very small “laboratory” store on Walnut Street in Center City Philadelphia called “Everything Fresh” to test merchandising concepts and product mix, primarily in produce and prepared foods. The concept will go live this August, when the first “real” new format unit will open in the Allston section of Boston. And Paul Kneeland, former VP-produce and floral for Kings/Balducci’s, will be joining the new format team as VP-fresh marketing. Paul, a Boston area native who cut his teeth at Roche Bros., should prove to be a big asset to the new division…at Harris Teeter, I’m happy for both Rod Antolock and Fred Morganthall. Earlier this month, Antolock was named president of the Matthews, NC-based regional chain after many years serving as Morganthall’s “go to” compadre. It’s great to see that Rod’s going to get his shot as top dog. He’s smart, hard-working and very capable. As for Morganthall, who’s been president of Teeter since 1997, he is moving up to parent company Kroger, where he will serve as senior VP-retail divisions, overseeing six operating divisions, including Harris Teeter. It’s a wonderful way to cap a great industry career for Fred, and we wish both gentlemen much success in their new gigs…Target, which is beginning to regain its “land legs,” made it official by announcing its will open a 20,000 square foot TargetExpress unit on
Wilson Boulevard in Rosslyn, VA in October. The new format emphasizes convenience and should serve as more of a “fill-in” shopping trip than its larger more conventional 135,000 square foot core model. The Rosslyn unit will be one of eight the Minneapolis mass merchant is scheduled to open in the Mid-Atlantic this year, including one that was previously announced in College Park, MD. And, just before presstime, Target announced that it is selling its 1,660 in-store pharmacies and 80 in-store health clinics to CVS for $1.9 billion. The move will allow Target to better focus on its core business. The deal will not only put CVS drug units inside Target’s national network, it will also allow the Woonsocket, RI drug chain to increase its presence in under-served markets such as Seattle, Portland and Denver. And, in the next two years, the two big retailers plan to jointly develop pharmacy inclusion in the aforementioned new TargetExpress format…sadly, it’s been a busy month at the obituary desk. Just before presstime, a true grocery industry talent passed away. Russ Reynolds, former area sales director for Supervalu’s eastern region, died in Richmond. I have so many fond memories of Russell, especially in our younger days when he was a food broker in Richmond and I was brand new to the market. Nobody worked harder and (at the same time) had more fun than Russell. And if you came along for the ride, your trip was always more enjoyable, too. When he transitioned to the “other side of the desk,” Russell’s work ethic was just as strong as it ever was (ask Dick Redner), and while the “crazy days” were behind him, he always arrived with a smile on his face, a firm handshake (or slap on the back) and usually a hilarious joke (that wasn’t always repeatable). You’ve left us way to young, my friend, and I’m going to miss you …Late last month we learned of the passing of legendary blues singer B.B. King. King was arguably the most important blues singer of all time, helping bridge the gap between blues and rock and influencing a generation of guitarists, including Jimi Hendrix, Eric Clapton and Buddy Guy. His lifelong accompanist was Lucille, his black guitar that Gibson crafted for him. Born Riley B. King in 1925 on a tenant farm near Itta Bena, MS, he worked as a sharecropper. A preacher uncle taught him how to play the guitar and, in the late 1940s, he landed a job as a disc jockey at Memphis radio station WDIA where he was nicknamed “Beale Street Blues Boy,” which was later shortened to B.B. He never stopped playing the guitar, though, and by the mid 1950s, he was becoming a well known and peripatetic musician, playing 342 one-night stands in 1956. Up until the last three years, he was still performing about 100 shows a year. King’s legendary persona and musical ability brought him many honors, including induction into the Blues Foundation Hall of Fame, the Rock and Roll Hall of Fame and the Songwriters Hall of Fame. He also received the Presidential Medal of Freedom from President George W. Bush…from a different musical realm, great alto sax jazz player Ornette Coleman has died. Coleman was the father of “free jazz” a style of playing that focused on melody improvisation rather than chord changes. While his music sometimes seemed so unorthodox and difficult to follow, Coleman persevered with his raw musical talent and stubbornness to change. Ultimately, he developed a very devoted following and became only the second jazz musician to receive a Pulitzer Prize for his 2006 album “Sound Grammar.” A true musical original, Coleman was 85 when he passed away…from the acting world, Christopher Lee, arguably the second great portrayer of Dracula (after Bela Lugosi), died earlier this month in his native London. During a career that lasted nearly 70 years, Lee, 93, appeared in 278 movie and TV roles, with more than 50 of those credits involving some genre of horror. Perhaps his best movie role was as creepy Lord Summerisle in the excellent (and mostly forgotten) 1973 chiller flick “The Wicker Man.”…Marques Haynes, 85, has passed on to basketball heaven. Arguably the greatest dribbler of all-time, the former Harlem Globetrotter played more than 1,200 games for the hoops entertainers and served as one of its all-time ambassadors, visiting more than 100 countries with the team. “Marques was a pioneer, helping pave the way for people of all races to have opportunities to play basketball, and for the sport to explode on a global scale,” said Kurt Schneider, current Globetrotters CEO said. “His unique and groundbreaking style of play set the tone for modern basketball as we know it. Anyone involved with basketball worldwide is indebted to Marques. He was the consummate Globetrotter.” The Globetrotters will dedicate their 90th anniversary tour in 2016 to Haynes and will wear a uniform patch in tribute….Vincent Musetto is dead. Who was Vincent Musetto, you may ask? Musetto, 74, was a retired editor and film critic for the New York Post, who, after a particularly grisly murder in Queens in 1983, penned what is, in my opinion, the greatest headline of all time: “Headless Body Found In Topless Bar.” Enough said. May he rest in peace…and just before presstime, we learned that B. Green & Co. has acquired the former Fresh & Green’s store in Arnold, MD (which started off in life as a Super Fresh). The 40,000 square foot unit will trade as a Green Valley Marketplace (the second store with that banner) and should open later this year. Earlier this month, B. Green celebrated its 100th anniversary (as a family business) and one of the nuggets I learned is that there are actually three members of the current generation with the first and middle names of Benjamin Louis, (who were named after company founder Benjamin Louis Green). There’s “Big Benjy” – U.S. Senator Ben Cardin; “Little Benjy” – current B. Green executive Ben Sigman; and “Tiny Benjy” – B. Green’s chief executive Benjy Green. “Tiny Benjy?” Ouch! …and just before presstime, …just before presstime, 11 local labor unions representing 30,000 A&P associates at its approximately 300 Mid-Atlantic stores (operating under the Super Fresh, Waldbaums, Pathmark, Food Basics, Food Emporium and A&P banners) issued a statement on June 15 that they believe the company is for sale. Additionally, the New York Post published a story on June 17 claiming A&P is actively shopping 137 of its 301-store portfolio. Dozens of Metro New York stores are on the block — including all 10 Manhattan Food Emporium stores the report noted. After initially not commenting on the widespread industry speculation that A&P is attempting a major store sell-off or is once again considering filing bankruptcy, the Tea Company issued a statement after the Post story ran. “The review includes raising new capital from investors, considering new business-partner relationships and exploring the sale of certain assets of the company,” A&P said, adding that it has been reviewing its strategic options since March. Dana Reagan, A&P’s HR director provided a statement to NorthJersey.com, that stated the review “is ongoing and no decisions have been made,” and that there is no timetable for a decision. The union statement was issued by UFCW Locals 1500, 1262, 352, 100R, 338, 371, 1245, 342 and 464A as well as Retail, Wholesale and Departments Store Union (RWDSU) Locals 338 and 1034 and stated that it was “well aware of the rumors circulating about the potential sale of the A&P company in whole or in part.” The union announcement also said “We have confirmed that A&P is actively seeking potential buyers for part or all of the company, adding “there is interest being shown by several companies regarding a purchase of A&P in whole or in part. The unions acknowledged that A&P has not contacted them directly regarding a potential sale, nor have they met with any representatives of potential buyers to discuss any such purchase. However it added this prologue to its statement: “For the past five years all o
f our local unions have been united, working together to protect and maintain the jobs of over 30,000 UFCW members working under the A&P banner. Please be assured that as we move forward with a potential sale of the company your Local Unions will continue to work together to ensure that the best interests of all of our members are being protected. Furthermore, should a sale in fact be pending, we will demand a seat at the table with both the A&P Company and any potential buyers to ensure that our members and their jobs are protected.” A former Tea Company executive, who spent more than 20 years with the company. “The stores are a train wreck and the amount of people they’ve turned over at headquarters since exiting Chapter 11 is hard to fathom. However, I’m sure (parent company) Yucaipa has milked every dime out of this investment which still controls a lot of real estate and provides significant cash flow. But, this lingering near-death scenario can’t go on much longer. It’s horrible for the associates, who’ve already sacrificed a lot over the years. Ultimately, whenever the end comes, it will be a sad day. The pain and suffering can’t go on much longer.” Several other sources speculated that if A&P does go the bankruptcy route, it will be a Chapter 7 filing, full liquidation without any attempt to reorganize. The Montvale, NJ-based retailer, which filed for Chapter 11 bankruptcy in December 2010 and emerged from the process in early 2012. At the time, private equity firm, Yucaipa Cos., took control of the organization and more than 15 labor unions granted significant financial and benefit concessions to help ensure Yucaipa’s ownership would be more successful than that of the Tengelmann Group, A&P owners since 1978. However, the once iconic merchant has put back little into its investment since that exit. Sales have plummeted, employee morale has been poor and the company continues to lose market share to its prime competitors – ShopRite, Stop & Shop and Giant/Carlisle as well as urban merchants such as Key Food, who have all been mentioned as potential buyers of blocs of A&P stores, should the company file.
Labor accepted significant concessions as A&P emerged from Chapter 11 bankruptcy protection in 2012. The statement Monday they said they would seek to negotiate with any potential buyers.