Six weeks ago, Ahold Delhaize chief executive Frans Muller said that new acquisition opportunities would be something the Dutch retailer is open to. On January 4, the company made its biggest supermarket deal since the 2016 merger between Ahold and Delhaize when it agreed to acquire King Kullen’s 37 Long Island stores.
Speaking at Ahold Delhaize’s Capital Markets Day in Manhattan on November 13, Muller noted, “We worked very hard for two years on integration. Now is the time to take us to the next phase of growth and market share gain. Our commitment is to self-fund the investments needed to drive growth, as our new cost savings program will allow us to maintain a stable group margin through 2019. This will allow us to invest in our stores, omnichannel offering and technology, while we explore and seize new leadership opportunities in existing and adjacent markets.”
The King Kullen purchase is certainly an “in-market” deal for the Northeast’s largest retailer and the newly acquired units will be operated by the company’s Stop & Shop brand. Included in the deal are King Kullen’s 32 supermarkets, five Wild by Nature natural/organic stores and the use of its corporate offices located in Bethpage, NY. The acquisition is currently expected to close during the first quarter of 2019, subject to customary closing conditions. Financial terms of the deal were not disclosed.
Stop & Shop is the current share of market leader on Long Island (Nassau and Suffolk counties) with 51 stores and an estimated all channel share of 21 percent, according to Food World’s data. Additionally, it intends to spend approximately $150 million on upgrading its existing stores on the Island.
King Kullen’s current market share is estimated to be 5.6 percent of the large $10 billion retail food and drug market. It is the fifth largest retailer in the two-county market.
“King Kullen is a well-respected grocery chain in the Long Island market that has an 88-year tradition of excellent customer service,” said Mark McGowan, president of Stop & Shop. “We look forward to bringing our quality, selection and value to more communities in Nassau and Suffolk counties.”
“In 1930, Michael J. Cullen opened the first King Kullen and ushered in the era of the great American supermarket,” said Brian Cullen, co-president of King Kullen, who leads the company with his cousin J. Donald Kennedy. “As a family-owned and operated business, we are very proud of our heritage and extremely grateful to all of our associates and customers for their support over the years. We are confident the Stop & Shop brand will carry on our legacy of service in the region.”
Reportedly, King Kullen issued a financial prospectus in the past 12 months in which it sought to explore its future options. Trade analysts have observed that the company has struggled over the past five years with increased competition, not only from the supermarket segment (particularly ShopRite), but also from the impact of other trade channels. The lack of new stores and a seemingly limited cap-ex budget to remodel others has also impacted the Cullen family’s operation.
In 2013, King Kullen ranked second among all retailers on Long Island when it operated 42 stores, good for an estimated 8.4 percent of the market.
Just two months ago, another family-owned Long Island-based regional chain – Best Markets – sold 27 of its stores to German discounter Lidl.
Stop & Shop’s first major expansion on Long Island came in 1995 when the company purchased 17 MelMarket Foodtowns from Mel Weitz and the acquisition immediately gave the merchant a strong foothold in the area. That same year, King Kullen opened its first Wild by Nature natural and organics store in East Setauket, NY (a former King Kullen unit). A year later, Amsterdam-based Royal Ahold acquired Stop & Shop and within the next few months converted its remaining Edwards division bannered stores on Long Island to the Stop & Shop banner.
Moreover, this hasn’t been the first occasion that Stop & Shop and King Kullen have structured a deal. In 2011, Stop & Shop acquired three King Kullen locations on Staten Island, as King Kullen retreated from the boroughs of New York City and focused solely on its Long Island business.