This move may best signify the insensitivity and lack of awareness of UNFI. It’s obvious that we’ve been criticizing the Providence, RI-based distributor for the past six months, but as I’ve said previously, most of the criticism has been originally generated from UNFI’s independent retailers, its associates and its vendors.
Over the last month, several of UNFI’s independent retailers have informed me that the company has struck a deal with Rite Aid in which the drug chain will sell one of UNFI’s private label brands, Wild Harvest. That brand was developed in 1996 by Star Markets (which was once owned by UNFI’s predecessor company, Supervalu) to provide retailers with a line of “free from” products (natural, organic, gluten free, etc.) that focused on healthier alternatives. According to our source, Rite Aid was looking for a healthier private label option and found it more efficient to seek an outsourced solution. The brand will be featured at all of the approximately 2,500 Rite Aid stores nationally.
Wild Harvest, along with other former Supervalu “own” labels – Everyday Essentials and Culinary Circle – have generally earned praise from UNFI’s independent supermarket customers and remain one of the strengths from UNFI’s acquisition of SVU last October.And while UNFI has every right to develop a new customer and sell more merchandise, some of those independents aren’t pleased with the way this is being handled.
“It’s typical UNFI. Do you think they’d have the courtesy to tell their core customers that they’re selling to an out-of-channel competitor?” asked a Philadelphia area UNFI customer. “We compete with Rite Aid and some other customers even have Rite Aids located in the same shopping center as their supermarkets.”
“Private label is one of those areas that we deem proprietary,” said another UNFI-supplied independent retailer. “I believe that there’s a special relationship between an independent retailer and his wholesaler when it comes to private label. It’s our point of difference and in all the years I’ve owned stores (more than 30) that trust has never been violated. It’s just more of the same with UNFI. Communications stink, execution is bad and after nearly 10 months of ownership we continue to have more questions than solutions.”
Another UNFI customer who called the distributor’s effort to sell Rite Aid “hypocritical,” also wondered why private label item costs are rising so quickly.
“I recognize that we’re in a period of moderate food price inflation, but we’re consistently seeing double digit wholesale increases in private label product, much higher than national brands. We’ve asked UNFI for an explanation, but as usual no clear answer is forthcoming. It’s like dealing with the Wizard of Oz.”
With UNFI’s fiscal year and fourth quarter ending later this month, don’t expect any groundbreaking events to occur (including an announcement about the sale of Shoppers’ stores). Much of that bad news will likely be channeled into Q1 or Q2 of fiscal 2020.
Back in the real world, UNFI’s stock has plunged 75 percent over the past 12 months (it closed at $9.65 on July 10). By its own ineptitude, it has already diminished the potential return on its Shoppers sell-off. Its poor communication, lackluster execution and billing methods have already caused anger and distrust with some of its independent retailers (at least in the Northeast) and its relationship with its own employees (especially Supervalu legacy associates) has created a culture of frustration and apathy.
That’s sound like a winning hand – if you’re playing Liar’s Poker.
‘Round the Trade
One of the most interesting business stories I’ve read details the spiraling costs and intensifying pressure that’s on Walmart as the Behemoth struggles with mounting losses and expenses at its e-commerce unit. Written by Jason Del Rey and published on July 3 by Recode magazine, the piece details the problems at Walmart’s e-commerce division, which the publication estimates at more than $1 billion annually on sales of about $22 billion. Meanwhile, as many of us know, the world’s largest retailer is producing tremendous results at its core brick and mortar stores, where last year’s profit was estimated at $7 billion. The story goes beyond numbers though. It details the frustration that some at Walmart have with the e-commerce unit and its founder Marc Lore, who came aboard after Walmart paid $3.3 billion in 2016 to acquire Lore’s online shopping venture jet.com – which had never been profitable since it was formed in 2010. And while it has closed the gap between it and Amazon, the Seattle-based juggernaut has also increased its e-commerce market share from 32 to 38 percent according to the story (Walmart’s share is currently estimated at 4.7 percent). It’s a story worth reading.
Perhaps as an indicator of what’s to come at Walmart’s digital business, the Behemoth has integrated its jet.com business into its walmart.com portfolio which Lore said will make its entire digital entity more efficient. As a result of the move, Simon Belsham, president of jet.com, will be leaving the company…at rival Amazon, “Godzilla” is readying for “Prime Day,” its annual 48-hour mega-promotion available to Prime members. More than a million deals will be offered during Amazon’s biggest sales event of the year which in 2018 generated sales estimated at $4.2 billion when it ran as a 36-hour promotion. And Target, which has been ramping up its digital efforts over the past year, will hold a similar event during the same period. “Deal Days” will offer “hundreds of thousands of items on promotion during the event which includes one key differential from Amazon – “Deal Days” is open to all consumers with no membership requirement. Amazon has also hooked up with Rite Aid as a pickup option for Amazon merchandise. The program called “Counter” will begin with 100 Rite Aid stores (and expand to 1,500 units by the end of the year) and will allow Amazon customers to pick up their merchandise at a locker in a Rite Aid store. When a package arrives, customers are notified via email. Once inside the store, the customer shows a Rite Aid employee a barcode which is scanned and retrieved. Amazon said that existing shipping options including one-day service would apply and there’s no extra cost to utilize the service. Amazon is courting other retailers to join the program. The announcement certainly helped Rite Aid’s stock value which rose from $6.86 per share to its current price of $9.39 (as of July 10)…good news for FMI, NGA and many retailers. In one of its last decisions before closing out the 2019 session, the U.S. Supreme Court has reversed a lower court ruling and will allow the confidentiality of store level sales data for those merchants who participate in federal SNAP (food assistance) programs to remain protected. After a South Dakota newspaper sued to make the data public, a federal District Court in that state sided with the paper. FMI, NGA and several other organizations appealed with the high court overruling that lower court’s decision on a 6-3 vote.
Local Notes
Sprouts Farmers Market opened its third Maryland store earlier this month in Bel Air, MD and like its other two Old Line state stores in Ellicott City and Towson, the opening was a big one. In a Mid-Atlantic marketplace that’s overstored and diversified, Sprouts has been one of the few retailers seeking to open more stores and producing strong sales. Another Sprouts store in Herndon, VA is slated to open on August 28 and the Phoenix, AZ-based chain is aggressively seeking additional sites in the region. Sprouts will also open stores next year in Upper Dublin Township, PA and Wilmington, DE. And it was great to see Dan Croce at the Bel Air ribbon cutting. The Acme and A&P veteran executive joined Sprouts about a year ago as senior VP-eastern division and has been doing a bang-up job since he arrived. Corporately, Jack Sinclair has been named the new CEO of the company. The former chief executive of 99 Cents Only Stores (which will become a myth shortly after Chinese imposed tariffs take effect) cut his teeth at Walmart as its former executive VP in charge of U.S. grocery. He replaces interim co-CEOs Brad Lukow (who resigned) and Jim Nielsen (currently on a medical leave of absence) who were appointed late last year when former chief executive Amin Maredia left to pursue other interests. “I am humbled and extremely privileged to be appointed chief executive officer of Sprouts Farmers Market,” Sinclair stated. “Sprouts is a company with a higher purpose – to empower every person to eat healthier and live a better life – and the commitment of its 30,000 team members to drive lasting change in the communities they serve truly resonates with me. I look forward to working with Sprouts’ board of directors, leadership team and all Sprouts team members to continue furthering that purpose.”
Giant/Martin’s officially opened the former Ferguson & Hassler store in Quarryville, PA late last month as the Ahold Delhaize USA brand continued its “infill” acquisition strategy (Darrenkamp’s, Shop ’n Save). Of all the independent “takeovers” that have occurred in the last few years, the Fergie’s store was the nicest looking unit of them all and, at 65,000 square feet, fits in well with the current Giant footprint.
More Central PA news: received a note from Don Tinsman, who informed me that after 65 years he has closed his Harrisburg-based brokerage organization, the Donald R. Tinsman Co. The company was begun by Don’s father in 1954. Don joined in 1961 and earned the reputation of legendary peddler, particularly in the general merchandise field. His son, Jeff, remains in the brokerage business with his own firm, The Tinsman Group. “I have had many years of success and look back at these years and am sorry that I had to retire after all these years, but I am 82, so I guess it’s time. I would like to thank all my principals, customers, etc. for the many years I have been in business.”…and speaking of Central PA food brokers, one of the greatest of all time, Alvin Schwartz, just celebrated his 90th birthday. Alvin was a truly a pioneer; as a broker from a small market he was able to attract major clients with his consummate sales skills and long-term industry vision through which he helped create partnerships and affiliations to expand his firm’s geographic coverage and satisfy the needs of his principals. And on the customer level, his market knowledge and relationships were unparalleled. Happy birthday to a true mensch whose love for the business was only exceeded by his faith and family.
Some Richmond information of note: Ukrop’s Homestyle Foods (UHF) will open its first food hall late next year on property that was formerly owned by the Bon Air Baptist Church on Patterson Avenue in Richmond. The planned food hall, which still needs zoning commission approval will sell only food products made by UHF including fried chicken, paninis, potato wedges and pizza. Bobby Ukrop, CEO of the company said that besides serving as a dining hall and marketplace, he hopes the new food hall will provide an opportunity to extend the company’s product line. Ukrop also strongly stated that the iconic family-owned business has no plans to re-enter the supermarket space…and speaking of iconic family-owned companies, C.F. Sauer, the Richmond-based spice, extract and mayonnaise (Duke’s) manufacturer that has been around since 1887, has agreed to sell its business to Charlotte, NC-based private equity company Falfurrias Capital. Conrad F. Sauer IV, the fourth generation of Sauer family leadership, will step down as CEO (but remain on the board) and be replaced on an interim bases by Bill Lovette, former chief executive at poultry processor Pilgrim’s Pride. The company’s 860 employees, including 165 in Richmond, will remain with the new firm. Not included in the deal is the vast real estate holdings of the Sauer family, including its headquarters property on West Broad Street. The new company will be known as Sauer Brands Inc.
A rare closing for Walmart which has shuttered its small 4,100 square foot “campus” site on West Grace Street, near Virginia Commonwealth University in Richmond. Earlier this year, the Behemoth also pulled the plug one of its Neighborhood Markets on Iron Bridge Road in Chesterfield.
From the obit desk, we have some deaths to report. Lee Iacocca, the “father” of the Ford Mustang and one of the leading lights in the American automobile industry for 50 years, has passed away at 94. Iacocca joined Ford in 1946 and was the leader of the management team that created the first Mustang in 1964. He became Ford’s CEO in 1970. After being fired by chairman Henry Ford in 1978, he became chief executive of bankrupt Chrysler Corp. a year later. With the help of a $1.2 billion federal government loan, along with his own shrewd management decisions, Chrysler’s profit soared to $2.4 billion in 1984, and Iacocca attained rock star status. However, as Japanese imports gained more market share by the late 80s, Chrysler began to suffer. He retired from Chrysler in 1992. Perhaps former Chrysler executive Bennett Bidwell best summed up Iacocca’s persona: “He hit home runs and he struck out a lot. But he always filled the ballpark.”…also leaving us was H. Ross Perot, the Texas born billionaire who made a strong bid as a third-party presidential candidate in 1992. A graduate of the U.S. Naval Academy, Perot, 94, became a successful IBM salesman, and later left the company to start his own firm, Electronic Data Systems in 1962 with $1,000 of his own savings. The company became hugely successful (he was a billionaire by the age of 50) and by the early 1990s Perot, always an iconoclast, became frustrated with American politics and its leadership. He began his third-party run for the presidency in 1991 and a year later participated in all three presidential debates. “I don’t have any experience in running up a $4 trillion debt. I don’t have any experience in gridlock government, where nobody takes responsibility for anything and everybody blames everybody else,” he said in one of those debates. (it seems not much has changed in the last 27 years.) In that 1992 election, Perot received nearly 19 percent of the vote – the best showing of an independent since Teddy Roosevelt’s Bull Moose Party in 1912…veteran actors Arte Johnson and Rip Torn have recently passed as well. Johnson, 90, who spent more than 50 years in show business, was best known for playing multiple characters in the ground-breaking 60s comedy show “Rowan and Martin’s Laugh-In” (1967-1973). Among the characters he played on the show were Tyrone Horneigh, a dirty old man who constantly accosted a woman (Ruth Buzzi) on a park bench; Rosmenko, a Russian with speech problems; Rabbi Shankar, a non-Hindu guru; and Wolfgang Busch, a helmeted German soldier, who would be constantly looking through bushes with a puzzled expression towards the end of the sketch. That in itself was “very interesting.” One of the greatest underrated actors of the past 50 years Elmore “Rip” Torn, has died at the age of 88. A product of the post-World War II school of method acting (which also included Marlon Brando, Paul Newman and James Dean), Torn made a powerful debut in 1956 in the Tennessee Williams-inspired film “Baby Doll.” Torn appeared in nearly 200 film and TV roles, including some of his best-known parts in “The Cincinnati Kid” (1965) and “Cross Creek” (1983). However, my favorite Rip Torn role was Maury Dann in the low-budget independent flick “Payday” (1973) in which he plays a selfish, degenerate, over-the-hill country singer watching his career spiral out-of-control. It is a gritty, dark tour-de-force performance by a great actor…baseball player and author Jim Bouton has moved on to his own field of dreams. Bouton, 80, who was a hard-throwing All-Star pitcher for the New York Yankees in the mid-60s, later reinvented himself as a knuckleball pitcher, and reappeared for the Atlanta Braves in 1978. However, he became better known as the author of the 1970 classic book “Ball Four,” an unfettered expose of how baseball players acted off the field. It was one of the first sports books that I ever read, and while I could see why baseball blackballed Bouton for his “treason,” the tome was both eye-opening and laugh out loud funny. The players hated their sometimes immoral behavior being exposed (Pete Rose greeted Bouton from his dugout by yelling “FU, Shakespeare”). And while Bouton’s exile from baseball was painful, he eventually moved on to write other books and to appear as a network sportscaster. In a time heals all wounds manner, the Yankees invited Bouton back to its annual Old-Timers game in 1998, where he received a standing ovation. Bouton was an interesting guy who wrote a great book that nearly 50 years later is still relevant and still hilarious.
