Bids In For Ahold, Delhaize Units; Publix Eyeing Richmond?
The first round of inquiries from food retailers potentially interested in acquiring one or more of the 84 stores that Ahold USA (Martin’s, Giant/Landover, Stop & Shop) and Delhaize America (Food Lion, Hannaford) have on the selling block expired last month. On April 11, the real activity began with retailers submitting specific bids on a per-unit or bundled-store basis.
As I stated last month, I expect the bidding for many of the stores to be robust, even if more than half the units (43 stores) trade as Food Lions, a difficult model to navigate with no pharmacy, limited perishables and “tweener’ sized boxes averaging about 33,000 square feet.
But as we’ve seen in recent years, most supermarket retailers have significantly reduced the number of new stores they’re constructing, opting instead for remodels or the chance to purchase existing stores that become available due to the misfortune of others (Bottom Dollar Foods, A&P, Haggen) or the government mandate of divestiture, which is the case with the upcoming Ahold-Delhaize “merger” as well as with recent Albertsons-Safeway and Dollar Tree-Family Dollar deals.
Beyond the size and locations of many of the Food Lion units, Ahold and Delhaize are under another type of restriction – at least in this round of meetings – as they must find viable buyers that plan to continue to operate those stores as grocery outlets. Those FTC rules can be amended later for stores that receive no bids or bids that come in below the price that either chain is asking for those listed for sale supermarkets.
It certainly behooves both European retailers to attempt to expedite the process as they race toward their expected mid-June merger completion deadline.
If I were a betting man, I’d expect Albertsons (Safeway-Eastern and Acme), Weis Markets, and a handful of independent and ethnic operators to be in the mix for primarily Food Lion stores being offered in Maryland, Delaware and Northern Virginia.
I don’t expect operators such as Lidl, Trader Joe’s and Save-A-Lot to be active, but Aldi is a possibility for several stores, even if the average Food Lion is about twice as large as Aldi’s U.S. model.
The six unionized Giant/Landover stores for sale in the Fredericksburg, VA area are more of a challenge with heavy overstoring already present in a marketplace that other retailers have learned “tastes great,” but ultimately proves less filling (think McMansions and trailer parks all in one condensed marketing area). I’m not sure that I can make a logical case for any new or existing operator to acquire six organized supermarkets in a funky market that lies 50 miles from both Washington and Richmond.
That leaves Richmond as the big puzzle. By placing 19 Martin’s stores on the sale list (three other Martin’s stores will close this summer due to lease and underperformance issues), Ahold USA has essentially thrown in the towel on its $140 million 2010 acquisition of Ukrop’s. And by keeping the approximately 45 Food Lions in Richmond, the inference becomes clear that: 1) Food Lion is less of a drain to the soon-to-be combined organization than Martin’s is; and, 2) it will be easier to sell the larger, more diverse Martin’s physical plants than it would be to peddle Food Lion’s smallish units.
Many trade observers (including some Martin’s store associates) believe the obvious buyer for most if not all of the 19 units is Publix, which two months ago announced it will expand into one of the most challenging markets in the country with a new store in Glen Allen, VA in 2018. Although Publix generally expands organically, there have been exceptions, including its entry into Tennessee in 2002 when it acquired seven units from Albertsons. Publix now operates nearly 40 stores in the Volunteer State.
By acquiring all or most of the Martin’s stores in the Old Dominion’s capital, Publix could be in a “turnkey” competitive mode almost immediately, which might be important considering the carpet bombing that Wegmans will likely create when its first two stores in the Richmond market open over the next four months. And that’s not even mentioning other new store activity including a Whole Foods on Broad Street in development and the debut of Lidl, which will most likely have 4-6 new discount stores ready to launch in early 2018.
Oh, and did I mention that the market’s fastest growing operator, Kroger, is replacing its Mechanicsville store with a 113,000 square foot Marketplace combo unit, is expanding its store on Midlothian Pike to 105,000 square feet and is building another conventional 100,000 square foot Kroger unit in Colonial Heights?
It’s hard enough being the “new kid on the block” (especially with only one future store in a kamikaze market like Richmond), and it certainly would take time for Publix to undo the self-inflicted damage that Martin’s has incurred over the past six years (including training several thousand associates to perform the “Publix way” – a very impressive initiative, by any measure). However, Publix should act quickly on the Martin’s opportunity, if interested.
And just to further indicate how interested they may be in regional expansion, the Lakeland, FL-based merchant has reportedly hired real estate broker KLNB for both tenant and landlord representation in the Baltimore-Washington market.
Stay tuned, I truly believe we’ll be seeing stores being moved on the original sales list very soon.
Perkins To Head Albertsons Western Ops; Morris Will Supervise Chain’s Eastern Units
Jim Perkins, the Albertsons veteran executive who spearheaded Acme’s comeback and most recently served as the company’s executive VP of operations for its East region, will now oversee the big chain’s operational effort for seven western divisions.
Promoted to supervise Albertsons-East is former Denver division president Susan Morris who will now have responsibility for the Acme, Safeway Eastern (Baltimore-Washington), Houston, Jewel-Osco, Southern (Dallas-Fort Worth), Shaw’s and Star Markets divisions. Morris began her Albertsons career in high school in her native Denver and has served the supermarket chain in many capacities in her more than 30 years in the grocery business.
Perkins’ new responsibilities include supervising the following Albertsons divisions: Denver, Southwest (Phoenix), Southern California, Northern California, Intermountain (Salt Lake City), Portland and Seattle. Perkins first joined Albertsons in 1982 and was named president of Acme Markets in 2013. He was promoted to executive VP last year.
These changes were made after it was announced that Kelly Griffith, EVP-operations for the chain’s West division, has departed. Griffith came to Albertsons as part of the Boise, ID-based chain’s 2015 acquisition of Safeway, where he served in a similar capacity. Griffith was with Safeway for 35 years.
Also departing Albertsons is Jim Rice, who became president of the company’s Shaw’s/Star Market division in 2014.
Returning to the West Bridgewater, MA-based is chain is Paul Gossett, this time as president.
Gossett had been Shaw’s VP-marketing and merchandising from March 2013 until last October when he assumed a similar role at Albertsons’ Southern division based in Fort Worth, TX. He began his career at Albertsons in 1977. Gossett’s promotion was the catalyst for other changes at Shaw’s/Star.
Joe Kelley, who became VP-marketing and merchandising for Shaw’s/Star last October, will now become VP and general manager of Star Markets, a position designed to place more focus on the company’s 22-unit more urban model which celebrated its 100th anniversary last year. He will report to Morris. The New England-born industry veteran has had previous executive stints at Price Chopper, Marsh Supermarkets and Stop & Shop.
Replacing Morris as president of the Denver division is Todd Broderick. Most recently, Broderick served as senior VP-operations at Albertsons at the merchant’s Portland division. He joined Safeway in 1981. Wayne Denningham, Albertsons’ chief operating officer, will continue to maintain direct oversight of the company’s United division based in Lubbock, TX.
As I’ve said recently, there’s never a dull moment at Albertsons.
‘Round The Trade
Although it didn’t mention Kroger by name, a filing by The Fresh Market (TFM) related to its recent sale to private equity firm Apollo Global Management, indicated that a strategic buyer (thought to be Kroger) sought to team up with another PE firm to acquire the struggling upscale fresh merchant. The filing described background of the deal and revealed that, over a five month period beginning in October 2015, at least three retailers and several other PE firms investigated whether to pursue a deal. The last strategic player (again, thought to be Kroger) withdrew from the bidding only two days before the $1.36 billion winning bid was announced. Because of the tightening of financial markets, it turned out that Apollo’s winning bid of $28.50 per share was approximately $75 million less than the $30 per share offer it made in October…another upscale retailer with some financial issues that are much more dire than TFM’s were might be seeking the Chapter 11 route. According to a story in Bloomberg, Manhattan-based Fairway Market is close to filing for Chapter 11 bankruptcy protection. According to the story, which was published on April 15, officials at the underperforming specialty retailer have reached a deal with creditors to restructure its organization and the filing is likely to occur in May. Reportedly, GSO Capital Partners (part of The Blackstone Group) would provide the primary financing in the restructuring. Fairway’s sales and earnings have dipped precipitously over the past year, a trend that began shortly after the company went public in 2013. In its most recent quarter ended December 27, overall sales were down 7 percent and its operating loss was $9.7 million. Fairway is expected to release its fourth quarter and annual sales and earnings (for the period ended April 3) late next month, precluding any possible bankruptcy announcement. At presstime, Fairway’s stock was trading at $.37 per share…faced with expiring leases and stores that were older, Acme will close three stores – Bridgeton, NJ; Shrewsbury, NJ; and Oxford, PA – on April 28…Wal-Mart is adding Richmond and Virginia Beach to its list of cities in which it will offer free curbside pickup of groceries. The Behemoth’s online-driven “pickup” program began last year and now has been rolled out in 30 cites covering about 200 stores. Michael Bender, Wal-Mart’s e-commerce COO, said that the retailer is preparing to further expand its footprint, noting that early customer response has been very good and satisfaction ratings have been in the mid to high 90’s.
Local Notes
After nearly a two year search, Ahold USA has found the man to supervise its merchandising platform. Andrew Iacobucci is officially on board in Carlisle, PA as the chain’s EVP-merchandising. Iacobucci most recently served as president of Loblaw’s discount division (annual volume $17 billion). He has spent much of his career at that Canadian retailer. At Ahold USA, five senior VPs will report to him: John Ruane (fresh); Jeff Dichele (grocery); Tonya Herring (perishables and basics); Raymond McCall (pharmacy); and Nick Bertram (merchandise strategy and support). The chief merchant position has been virtually empty since mid-2014 after Mark McGowan was reassigned to run the company’s largest division – Stop & Shop in New England. Most recently, Ahold USA COO James McCann was overseeing the merchandising function at the $26 billion retail organization. More Ahold news: two more Boston area bfresh stores will open later this year as the retailer’s “fresh formats’ division begins to expand. The new stores will be located in Brighton, MA and Somerville, MA. Last month, the fresh division of the big retailer said that will add another Philadelphia store at 22nd and South Street. Simultaneous to the Boston area expansion was the news that bfresh will close its Fairfield, CT location which only debuted about six months ago. “…it became apparent that this particular location was not suitable for the bfresh concept,” the company said in a statement. With the Fairfield closure and three new leases signed, the fresh formats unit will now be comprised of four stores including the 3,700 square foot Everything Fresh “lab” store on Walnut Street in Philly which opened in December 2014. At AUSA’s Stop & Shop division, an agreement has been reached with five UFCW Locals in New England which represent 35,000 Stoppie associates. The three-month bargaining process was sometimes contentious and very intense, involving 57 negotiating meetings…two very different and very unique stores opened in the last month. Safeway cut the ribbon on a replacement store in Hyattsville, MD and the company deserves high praise for its store design and merchandising skills. The folks at Safeway, both pre and post-Albertsons, have proven they can build an urban store on par with anybody in the industry. And MOM’s Organic Market opened its 15th store (and first in Baltimore City), a 17,000 square foot organic store at the site of the old Rotunda (home to a Giant store for many years). The store is beautifully designed and is part of a larger mixed-use project that is being developed in the former blue collar Hampden section of Baltimore. CEO Scott Nash, who founded the company in Rockville, MD when he was 22, told me that MOM’s recently signed a lease and will open its first store in Center City Philadelphia (on 11th Street) later this year…after finding success in Chapel Hill, NC and suburban Charleston, SC, Southern Season, the upscale specialty gourmet grocery store/restaurant/cooking school, hit the wall in Richmond and announced that it will close its 55,000 square foot store on Staples Mill Road later this month. The store debuted in July 2014. Southern Season’s entry into the Richmond market was a gamble from the outset given its location (in a beautiful new not-yet completed 80-acre property) that was generally not known for its affluence or its population density. I’ve visited the store about a dozen times in the past 18 months and not once did I ever see it busy. While visually a delight to walk through, it seemed like the sum of its parts never created a sense of “wholeness.” It just shows that a concept that is so successful at Southern Season’s 60,000 square foot flagship store in Chapel Hill couldn’t resonate at all with consumers in a market like Richmond…Beth Newlands-Campbell,
former president of Food Lion from 2012-2014, has been named president
of Sobeys’ Atlantic/Ontario business unit. Newlands-Campbell joins the
Canadian grocer after a 30 year career with Hannaford and Food Lion
(Delhaize America). She will report to Marc Poulin, CEO of Canada’s second
largest grocery chain…a couple of Wakefern items to report: Village Super Market, the co-op’s second largest member (behind Saker ShopRites) reported increased overall and same-store sales of 2.2 percent on total revenue of $420.2 million in its recently completed second quarter ended January 23. The Springfield, NJ high-volume 29-store ShopRite operator posted quarterly net income of $6.3 million, a decrease of 4.5 percent from $6.6 million in the same period last year, although when adjusted for a higher tax rate and penalties due to a tax dispute in the prior period, income actually declined by 11 percent. The company said that additional volume at its newly expanded store in Stirling, NJ, as well as other upgraded locations in Morristown and Union, NJ, contributed to the sales growth. Sales were offset by six competitor openings in the period, including several former A&P units, and by deflation in meat, seafood and dairy. Also, a tip of the hat to Wakefern’s Cheryl Williams who has been promoted at the Keasbey, NJ based co-op. Williams will also serve as VP of Wakefern’s computer information services division (CISD) and the company’s chief information officer (CIO), coordinating cyber security efforts and technology on both the corporate and retail fronts. She most recently served Wakefern as its VP-digital commerce and innovation (DCI). “Cheryl Williams has been at the forefront of technology during her two decades at Wakefern, and plans to work in her new role to ensure that technological innovation remains a competitive advantage for the cooperative,” the company said. “From our phones to our computers, and from our warehouses to our retail stores, technology is key and it’s important that the division stays leading edge,” Williams said. She began her Wakefern career as a manager of retail systems in 1996 and later worked as a director. She was named VP-marketing in 2001, working with a variety of divisions to launch key consumer marketing and data programs before being named VP of DCI in 2012. As head of DCI, Williams led the team that launched ShopRite’s first mobile app along with the ShopRite from Home online service and digital coupons to address the changing needs of ShopRite consumers… Very said news to report about two of my industry friends who founded and presided over Ashland, VA food brokerage, Premier Sales & Marketing – Joe Del Giudice and Ron Stinchfield both passed away recently. Del Giudice, a prominent food broker in the Richmond market for more nearly 40 years, first hung out his broker shingle in Richmond in 1975 as Joe Dell Brokerage. He built his firm into a local powerhouse before selling it to Advantage Sales & Marketing in the late 90s. However, Joe couldn’t stay retired for too long, and by the mid-2000s he started another brokerage business – Premier Sales & Marketing – with his longtime friend and industry cohort Ron Stinchfield. When Joe actually retired a few years ago, Ron acquired Joe’s equity stake and became president of Premier. A little man with a big heart, Joe Dell, more than anyone else, taught a young kid about the Richmond-Norfolk market when my partner Dick Bestany and I acquired Food World in 1978. Street smart and intuitive, but always a gentleman, Joe was 83 when he passed. Two months ago, Ron also passed away, at the age of 73. Like Joe, I had known Ron for more than 35 years and a nicer, more upbeat person you would be hard-pressed to find. Ron always saw the world from a glass mostly full perspective and you could always count on him to add some humor and insight into your day. Joe and Ron, may you both rest in peace, my friends…also passing on was Frank Saunders, former vice president of meat and seafood for Shoppers Food Warehouse, where he enjoyed a 31-year career. A truly nice man who learned at the feet of the late, great Kenneth Herman (co-founder of Jumbo/Shoppers). Saunders played an integral role in the growth of what once was Baltimore/Washington’s leading discount grocery chain…I was deeply saddened to learn of the death of Merle Haggard, one of my favorite singers of all time, covering all genres. Haggard passed away on April 6, his 79th birthday. Haggard could do it all – sing, compose and play several instruments skillfully. His early life was a rugged one in Bakersfield, CA that took him to San Quentin prison for several years, but he emerged with an ear and an instinct that was instrumental in the evolution of country music in the late 1960s and 70s. Haggard continued to record and had been on tour with another legend, Willie Nelson, when he became too ill to perform. The list of great songs written by Haggard include “Mama Tried;” “Sing Me Back Home;” “Workin’ Man Blues;” and “I’m A Lonesome Fugitive.” Those songs and countless others were not only hits for Haggard, but were covered by many other country and rock and roll singers and bands. He was inducted into the Country Music Hall of Fame in 1994…we also learned of the passing of the brilliant comedian Garry Shandling, whose dark and satiric look at the behind-the-scenes life of a late-night talk show (“The Larry Sanders Show”) was one of the most original TV shows in the history of the medium. In its six season run on HBO, “Larry Sanders” (1992-1998) won universal praise and multiple Emmy Awards for Shandling’s portrayal as a neurotic, egotistical talk show host who would invite real life celebrities as guests. Also adding to the “show-within-a-show” concept were his ill-tempered producer Rip Torn, and his bumbling announcer Jeffrey Tambor, two of the best comic character actors in the business. Shandling was 66…Patty Duke has also passed away. The 69 year old former child star led a very interesting and complicated life that included years of mental illness and substance abuse. She overcame those problems to continue her acting career and write a great personal memoir, “Call Me Anna” in 1988 (her real name was Anna Marie Pearce.) While she won an Academy Award for her portrayal as Helen Keller in “The Miracle Worker (1962),” I’ll best remember her as playing both Patty and Cathy (identical twin cousins???) on the popular mid 60s sit-com “The Patty Duke Show.” Finally, Arthur Anderson has left us. No, not the Arthur Andersen of accounting fame, this Mr. Anderson was a New York actor who for three decades provided the voice of “Lucky the Leprechaun” in General Mills’ Lucky Charms cereal commercials. While he dubbed the small cereal nuggets as being “magically delicious,” Anderson, 93, never found the pot of gold, claiming that General Mills never offered him any free Lucky Charms.