With Four Stores Open, Publix Is Off To Quick Start In Richmond; More Units To Debut Later This Year
We’re still in the early innings of what will become the fiercest of all grocery battles on the East Coast, but it’s already clear in the first six weeks of making its Richmond debut that Publix intends to become a primetime player in its northernmost marketing area.
I was a bit skeptical about how the Lakeland, FL-based juggernaut would fare in a new market that is significantly overstored (even with the departure of Martin’s) and offers so many different retailing operating styles that it’s been a challenge for all retailers to gain market share over the past year (Wegmans, which entered the market in 2016 is the exception).
On paper, you might not think that a service-oriented grocer with not especially low prices operating out of a modest footprint (49,000-60,000 square feet) could find a sweet spot in a market where discounters Wal-Mart/Neighborhood Market, Aldi and now Lidl have carved out a solid niche; a conventional operator such as Kroger (Marketplace) has been adding locations and expanding others in recent years; and upscale merchants such as Wegmans and Whole Foods are also posting strong per-store average volumes. Throw in Food Lion (struggling, but with more than 40 stores in the market) and the penetration of the alternate channel retailers – Target, CVS, Walgreens, Costco, Sam’s Club, BJ’s, Wawa and 7-Eleven – you’ve got a cluster. And as the new kid on the block, that ain’t necessarily a good thing.
However, Publix has seemed to overcome that in the early going by providing Richmond consumers with a shopping experience that would remind many of the halcyon days of Ukrop’s. Thus far Publix’s strategy of keeping the 10 Martin’s stores it purchased from Ahold Delhaize closed for about a year (or longer), has proved to be a wise move. While Publix may have only paid an estimated $3 million a store, it has spent at least that much on remodeling the three former Martin’s units open thus far (the first area store in Glen Allen, VA was built from the ground up). All four units offer sharp store design and they are well staffed. Associate training is also excellent. As one of our readers noted: “They have seemed to create a totally new shopping image – the staff is courteous and informed. Perhaps one of the reasons Publix waited so long to reopen was to remove the taint of the entire Martin’s experience in Richmond.”
Now that former Martin’s stores (and former Ukrop’s units, too) have opened on Staples Mills Road, S. Laburnum Avenue and most recently on John Rolfe Parkway, it’s obvious that Publix has prepared well for what will remain a big challenge for the employee-owned chain. It is still the last merchant to arrive in an overheated market; it’s division headquarters in Charlotte is nearly 300 miles away and its closest distribution center in Dacula, GA is 500 miles from Richmond.
As noted earlier, there is more competition that has recently arrived with four new Lidl discount units now open (and about six more to come in the next 12 months), a new Wal-Mart SuperCenter on Nine Mile Road as well as a new Whole Foods slated for W. Broad Street.
There have been some market corrections, too. Kroger canceled plans to build a new store in Colonial Heights and a larger replacement store in Mechanicsville (another new store planned for Charlottesville has also been scrapped). Additionally, Wal-Mart will not go forward with a proposed Neighborhood Market on Laburnum Avenue near Mechanicsville Turnpike and Food Lion, which has closed a handful of stores over the past few years, has relocated its store from the Ashland Junction shopping center to the larger former Martin’s unit in the Ashland Hanover shopping center about half a mile away.
Before the end of the fall, Publix is slated to open four more remodeled stores – Brook Road in western Henrico County is likely next to open; Pump Road in Short Pump; Hull Street. Road in Chesterfield County; and a former Martin’s store in Colonial Heights. There’s also a chance that three of the last-to-be-closed Martin’s stores that Publix had agree to acquire – Three Chopt Road; West Broad Street; and Carytown – could open before the end of the year.
Additionally, we’ve learned that Publix has acquired the former Martin’s store on Forest Hill Avenue in the city of Richmond for $12.5 million. That store was also originally a Ukrop’s supermarket and the Ukrop family sold the property to Publix. It was among the last of the Martin’s stores to close when it shut its doors early last month.
The lines of battle can be clearly seen. All the long-time retailers, upstart merchants and new operators are now in the ring and fighting ferociously to stake their claims in a metro market whose population is 1.26 million and food and where drug sales reached $3.7 billion last year.
I smell blood.
Focus Becoming Clearer For Amazon’s Whole Foods’ Strategy
While Publix is one of several retailers helping reshape the Richmond market area, Amazon is now officially accelerating its reformation of its last great frontier – retail food.
Despite the enmity of President Donald Trump and some verbal pushback from union leaders and others more directly associated with the grocery industry, Amazon received FTC clearance to acquire Whole Foods in about 10 weeks.
And on day one, August 28, Amazon was already making changes – price changes that is. Even though we counted fewer than 50 price cuts, those reductions were significant and eye-catching. But we don’t expect Amazon to turn Whole Foods into a discounter. While immediate price reductions (most greater than 30 percent) take solid aim at changing WFM’s “Whole Paycheck” image, we believe Amazon’s long-term plans won’t be as noticeable inside the stores as they will be in just having a brick and mortar foundation from which to work.
Besides pricing there isn’t that much more in-store fixing that’s needed at Whole Foods. Merchandising is still very good, in-stock conditions remain solid and while WFM’s in-store culture has slipped a bit in recent years, it still grades out very well when compared to most others in terms of customer engagement and shopping experience. Perhaps Danny Wegman could improve Whole Foods’ store ops, however don’t expect much expertise from one of the most successful companies of the past 50 years, but one with little experience when it comes to operating physical stores.
However, with the stores as its base, almost instantly Amazon becomes both a company that can use those 465 units as mobile delivery hubs (after its contract with Instacart expires) and click and collect pickup points (with the use of Amazon Lockers). Additionally, expect Amazon to relaunch Whole Foods’ poorly executed loyalty program – it has already begun to engage its best customers by linking its 80 million “Prime” members to store savings and unique benefit offerings.
Moreover, many of Amazon’s e-commerce portals – Amazon.com, Amazon Fresh, Prime Pantry and Prime Now – have begun offering hundreds of Whole Foods’ own label items including such brands as 365, Whole Foods Market, Whole Paws and Whole Catch.
My prediction is that the evolution will happen quickly with many of Amazon’s programs integrated into a very pliable operating model that Whole Foods has shaped over the past 37 years. In fact, the real payoff will lie in how quickly and effectively Amazon is able to integrate Whole Foods into the rest of its innovative and successful organization.
With that understanding, it’s easier to rationalize why the world’s fastest growing company paid so much for its newest acquisition.
‘Round The Trade
Lidl is continuing its aggressive pace of store openings, having cut the ribbon son four new discount units last month – Newport News, VA; Thomasville, NC; Spartanburg, SC (its second unit in that city); and Middletown, DE, its first store in the First State. Thirteen more Lidl units will open this month including four stores in Virginia (Manassas, Danville, Suffolk and Richmond-Hermitage Avenue); three in North Carolina (Morehead City, Shelby and Gastonia); five in South Carolina (Greenwood, Orangeburg, Indian Land, Rock Hill and North Augusta); and one in Georgia (Augusta). After having visited several more Lidl units several weeks after they’ve opened, my volume assessments are scattered – some stores remain very busy (weekly volumes approaching $300K) while others appear to be struggling. However, I remain impressed with Lidl’s store design, its merchandising/marketing effort and its packaging. And while the company’s “fresh” offerings and presentation are larger than and superior to Aldi’s, improvement is still needed in its meat/seafood department. Lidl also acknowledged that it will be opening stores in Ohio with about half a dozen locations reportedly secured. And as previously reported, the German discounter will also be entering the large Texas market with about 10 new sites…struggling meal kit provider Blue Apron got a boost last month when activist hedge fund player Jana Partners acquired a 2 percent stake in the Manhattan-based start-up which went public about two months and almost immediately saw its value plummet by 50 percent. Even with that Jana jolt, Blue Apron shares were still trading at a disappointing $5.47 per share as of September 8. Jana, which pocketed a cool $300 million in profit from its 9 percent stake in Whole Foods, has also taken an equity position in Sprouts Farmers Market (593,000 shares), which might be the next grocery retailer to be in play. One company that continues to struggle is Camden, NJ-based Campbell’s Soup, which last month posted its 11th consecutive quarter of revenue decline. Campbell’s CEO Denise Morrison, a very talented and dedicated leader, summed up Campbell’s challenges (which could also apply to a lot of large CPG companies whose core lines are housed in the center of the store): “The operating environment for the packaged foods industry remains challenging due to shifting demographics, changing consumer preferences for food, the adoption of new shopping behaviors and the dynamic retailer landscape. In these times, sales growth remains a challenge.” Morrison also acknowledged that sales from its core soup line would likely decline in the coming year after the company was unable to reach an agreement with an unnamed retailer (thought to be Wal-Mart) on a promotional program. The difficulty in making deals with the some of the industry’s largest merchants has certainly become more challenging for most manufacturers in the last year with big players such as Wal-Mart, Ahold Delhaize and most recently Kroger (who are facing greater market pressures, too) demanding lower prices and better promotional deals from their suppliers…while Blue Apron and Campbell’s are facing some bumps in the road, they are light years away from inhabiting the bottomless sinkhole that Sears Holdings calls home. In its recently completed second quarter, the once iconic merchant lost $251 million, saw its revenue plunge 23 percent and (this is unbelievable) posted a negative 11.5 comp store sales decline. Additionally, the Hoffman Estates, IL retailer announced 28 more Kmart closings including two in Pennsylvania (Allentown, Willow Grove); one in New jersey (Parsippany); and three in New York (Rochester, Victor and Vails Gate. Can’t we offer them euthanasia?
Local Notes
I’m not surprised that Jennifer Carr-Smith has resigned as president of Ahold Delhaize’s Peapod unit even though she only joined the online retailer slightly more than two years ago. Peapod acknowledged she’s leaving to pursue another opportunity, but given the poor level of communications between senior management at corporate Ahold Delhaize (which emanates from Amsterdam) and its associates which has exacerbated a culture that has been declining for several years, it’s shocking that more people haven’t left. That may be a moot point soon, because in the next two weeks Ahold USA will be conducting its “outlook” meetings with many managers, directors and a few vice presidents. Those meetings are expected to reveal the fate of hundreds of associates (both at corporate headquarters and at the three divisions). You can expect to see some job cuts, some relocations, some changing of titles (to more closely resemble the structure at Food Lion and Hannaford) and a possible change in long-term benefits for its employees who do make the cut. Culture aside, last month’s strong earnings report apparently has energized Ahold Delhaize CEO Frans Muller, who told the Dutch newspaper De Financiele Telegraaf that based on the company’s U.S. success, “We will open our eyes to opportunities for acquisitions to strengthen our position on the East Coast.” We’ve learned that Ahold USA has named the next group of merchandising executives who will support the company’s three divisions (brands) as it moves towards a January 1, 2018 decentralized operating structure. According to an internal announcement, at Giant/Martin’s, veterans Denise Mullen and Dave Lessard will become VP-non-perishables and VP-perishables respectively. Reporting to Mullen will be Deb Kreider, Kyle Kirkpatrick and Rebecca Lupfer. Steve Allison, Brian Lorenz and Chris Keetch will report to Lessard. Both VPs will report to John Ruane, senior VP-merchandising for the Carlisle, PA-based unit. At Stop & Shop, Kerri Aguilo will serve as senior VP of non-perishables with Maria Elena Ruisi, Natalia Torres-Furtado and Joel Brissenden reporting to her. The internal announcement we received still had the SVP of non-perishables position as open. Aguilo will report to Mark Messier, the division’s EVP-merchandising. At Giant/Landover, Michael Weinstock is the new VP of non-perishables and will have Greg Bibb and Diane Couchman reporting to him. As was the case at Stoppie, the announcement we received still had the VP-perishables position as still being open. Weinstock will report to Tonya Herring, SVP-merchandising. Not released at this time were any announcements concerning divisional operations leadership (those who would report to the senior VPs of operations who were named in May). A little further down the road (perhaps after Labor Day) we expect to hear who will be filling the specific category manager positions at the three divisions…we’re hearing that there’s been some movement in Supervalu’s effort to sell its Farm Fresh corporate unit and that an announcement on who might buy the beleaguered 40-store Hampton Roads chain in the next couple of months. Don’t expect all the stores to be sold. I also believe there will be several buyers involved with Kroger/Harris Teeter being a likely player in that equation… …at Supervalu’s annual shareholders’ meeting, held July 19 in Minneapolis, stockholders authorized a 1-for-7 reverse stock split, a move designed to enhance the appeal of its shares to the financial community. Supervalu, like many other companies in the retail/wholesale sector, has experienced flat to declining stock prices over the past six months, which was further exacerbated by the prospective Amazon-Whole Foods deal. The reverse stock split, effective at the close of business on August 1, will reduce the number of authorized shares to 57.1 million while the number of issued and outstanding shares will be reduced from 268.5 million to 38.4 million. At presstime, SVU’s stock was trading at $3.33 per share…Ken Martindale has left his post as CEO of Rite Aid Stores (and COO of Rite Aid Corp.) to become chief executive of GNC Holdings. Bryan Everett, current Rite Aid EVP-store operations, has been promoted to the newly created position of chief operating officer of Rite Aid Stores. Martindale’s departure is hardly surprising given the retailer’s recently struck deal with Walgreens in which the Camp Hill, PA based drug merchant will sell nearly 2,200 stores and three distribution centers (48 percent of Rite Aid’s entire store fleet) to the Deerfield, IL operator…longtime Wal-Mart executive and former CEO of its Sam’s Club unit, Rosalind Brewer, is joining another mega merchant, Starbucks, as its new COO…even though it’s getting little credit from the financial community, Kroger turned around its short-term ID sales malaise in its second quarter (ended August 12) by posting a 0.7 percent identical store increase. Earnings for the quarter were $353 million and comments from CEO Rodney McMullen reflected the improving news: “Through innovation, Kroger is redefining the food and grocery customer experience based on our core strengths. Our second quarter results demonstrate the progress we’ve made. We returned to positive identical supermarket sales growth in the second quarter. We had strong in both loyal and total households. Traffic is up, unit movement is up, market share is up, and our customers’ price perception is excellent and continues to improve. We have, and always will, put the customer first in all we do.”…Target rebounded from a nearly 18-month downward trend by earning $1.23 per share (up from $1.19 per share last year) in its second quarter. Even more encouraging for the Minneapolis-based mass merchant was a 1.3 percent gain in comp store revenue and a robust 32 percent jump in digital sales. Store traffic also increased by slightly more than 2 percent. Earlier this month, “Tarjay” also rolled out its collection of $5 wines under its California Roots collection. The new vinos come in five varieties and are available in more than 1,100 locations. California Roots is the Minneapolis’ mass merchant first offering in the fast growing world of private label alcohol. Sounds yummy…at Target’s chief rival Wal-Mart, its second quarter news was even better. Earnings improved to $1.08 per share, U.S. comp store sales (ex-fuel) grew 1.7 percent, digital revenue increased 60 percent and store traffic rose by 1.3 percent…Joseph Bivona has been named new executive director of Saint Joseph’s University’s Academy of Food Marketing replacing Bob Higgins, who announced his retirement earlier this year after an eight-year run as executive director. Bivona will lead recruitment, placement and expansion strategies for the academy, which supports the Erivan K. Haub School of Business’ (HSB) department of food marketing at Saint Joseph’s. Until he retired in June, Bivona had worked for Time, Inc. for the past 29 years where he most recently served as VP-customer development for Time/Warner Retail Sales and Marketing, a division of Time, Inc. We wish Joe the best in his new gig, an important position at the country’s largest academic training ground for those who are seeking a career in this great business…sadly, the obit desk has been very busy over the past month. John Sieglein, a fixture for many years on the Baltimore grocery scene with Food Fair, Farm Fresh and Geresbeck’s, passed away earlier this month. John knew the grocery business like the back of his hand, was a tireless worker and all around good guy, He and his wife Penny (who survives him) comprised a real dynamic duo for many years. We also lost veteran supermarket executive Jim Demme at age 77. A native of Buffalo, Demme held a variety of executive level positions for such retailers as Penn Traffic, Homeland Supermarkets, A&P and Shaw’s. In recent years Demme served as chairman of King’s Food Market (working for former owner Angela Gordon) and at the time of his death was chairman of Manhattan-based Fairway Ma
rkets…Jerry Lewis has also died. The legendary comedian, whose career spanned nearly 80 years, passed away late last month at the age of 91 in Las Vegas. While Lewis’ physical, often slapstick, brand of humor wasn’t everybody’s cup of tea, he made his mark first from his partnership with Dean Martin and later in more than 50 films including his biggest success “The Nutty Professor” (1963). Despite a rollercoaster career, Lewis helped raise more than $2.5 billion during his 44-year association with the Muscular Dystrophy Association. And Lewis could also act. His role as kidnapped late night talk show host Jerry Langford in Martin Scorsese’s unsung great movie “The King of Comedy” (1982) was spectacular…Shelley Berman, a contemporary of Jerry Lewis, has also passed away. The Grammy award winning entertainer, 92, emerged from a group of intellectual and political oriented comedians in the late 1950s (that also included Mort Sahl and Bob Newhart). Berman, who described himself as a “sit-down comic” because he usually worked while sitting on a stool, was active until 2014. His career received a boost in 2000 when he was cast as Larry David’s father, Nat, on the hilarious HBO sitcom “Curb Your Enthusiasm.” One of Berman’s finest performances was in “The Car Pool Lane,” a 2004 episode of the show…if you like French films, especially new wave cinema, you will be saddened to hear of the passing of Jeanne Moreau, the beautiful French actress who starred in such classic films as “Jules and Jim” (1962, directed by Francois Truffaut) and “Lift To The Scaffold” (1961, directed by Louis Malle). Moreau, 89, also turned down a part that would have surely enhanced her popularity in America: that of Mrs. Robinson in the Academy Award winning film “The Graduate” (1967)… Godzilla is also dead. No, not the fictional monster (who will apparently live forever), nor Amazon’s nickname, but Haruo Nakajima, who wore the Godzilla body suit in the first nine Godzilla films, from the original 1954 flick to 1972’s “Godzilla vs. Gigan.” BTW, the original Godzilla costume weighed about 200 pounds and was created from mostly concrete since commodities like rubber were in short supply after World War II. He was given little direction on how to portray the monster and formulated his character by conducting his own research at the Tokyo Zoo. Nakajima was 88…I was personally touched by the death of Walter Becker, who along with his partner Donald Fagen, created one of the great rock and roll bands of the past 50 years – Steely Dan. Becker and Fagen first met at Bard College in New York (“My Old School.”) Before they became famous, they once toured with Jay and the Americans and created the soundtrack for the 1971 Richard Pryor movie “You Gotta Walk It Like You Talk It.” They even wrote a song for Barbra Streisand. Then in 1972, the duo assembled Steely Dan, greatly aided by a group of Los Angeles session players. However, it was Becker and Fagen who supplied the juice with their abstract songwriting and jazz-influenced playing and arranging. Becker, whose dry wit and sometimes sardonic view of American culture, helped define Steely Dan’s music, last appeared with the band on May 27. In a statement released after Becker’s death, Fagen noted “He was cynical about human nature, including his own, and hysterically funny. Like a lot of kids from fractured families, he had the knack of creative mimicry, reading people’s hidden psychology and transforming what he saw into bubbly, incisive art.” Becker was only 67. And, as for the origin of the band’s name, you’ll have to look that up for yourself. Once you find the answer, you’ll know a little bit more about Walter Becker’s sense of humor.
