Giant/Martin’s To Acquire Musser’s Three Units

Jeff has been reporting, analyzing and opining about the retail grocery business since 1973. He has served as publisher of Food Trade News and Food World since 1978 and as president since 2007. He can be reached at jeff@foodtradenews.com.

Another big month for the folks in Carlisle, PA as just before presstime we learned that Giant/Martin’s has agreed to acquire (on October 24) Musser’s Markets, the three-store Central Pennsylvania family-owned independent that began operations in 1925 in Buck, PA (Lancaster County).

The purchase marks the fourth strategic “infill” acquisition that Giant/Martin’s has made in less than a year. Other than its deal to buy five Shop ‘n Save stores in Maryland, Pennsylvania, Virginia and West Virginia from UNFI/Supervalu earlier this year, the big chain has focused on buying family-owned independents facing increasing competition and potential succession issues primarily in Lancaster County. Late last year, Giant/Carlisle acquired the four store Darrenkamp’s group (keeping one store and closing three others) and in July it consummated a deal to purchase high-volume single-store operator Ferguson & Hassler in Quarryville, PA, also in Lancaster County.

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Giant/Martin’s will keep all three Musser’s units operational (there was some speculation that the Buck store might close because of its proximity to the Fergie’s store in Quarryville). I’m sure selling a successful business now in its fourth generation was a difficult choice for the Musser family. They’re good people who epitomize what makes independent food retailing so special. But the Central PA market is changing radically; a marketing area that used to be controlled by family-owned merchants is evolving into a chain-dominated region as seen by stalwarts Giant and Weis and newcomers such as Wegmans, Whole Foods and Aldi.

A bit further east in Philadelphia, Giant/Martin’s is also making news with the announcement that it will open its first Center City conventional supermarket next year. The 65,000 square foot two-story unit will be part of the city’s River Walk project (23rd and Arch Streets) and is part of an 8.5 acre mixed-used development that abuts the Schuylkill River.

While dominant in the Philly suburbs for 30 years, Giant only operates one traditional supermarket within the city, on Grant Avenue (which opened in 2011) and has the feel of a more suburban store being located in Northeast Philadelphia.

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However, earlier this year, the Ahold Delhaize USA brand began to penetrate Center City with the opening of the first of four urban small format stores – a 9,500 square foot Heirloom Market on Bainbridge Street. Earlier this month, the second Heirloom unit opened on Chestnut Street and is doing well in its first few weeks of operation. Later this year, other Heirloom stores will open on North Second Street and on South Street. The River Walk unit should not only strengthen Giant’s presence in the city, where the retail food landscape is changing rapidly, it will provide some sizzle, too.

It’s been a full-tilt boogie for Giant/Martin’s since it became a decentralized unit and president Nick Bertam took over. During the past 20 months, there’s been a little bit of everything in the pipeline – new stores, acquisitions, new formats, warerooms and more digital focus to go along with improved execution at store level.

It’s a winning combination that has made Giant/Martin’s not only a star in the world of Ahold Delhaize, but also among the entire Mid-Atlantic region’s grocery operators.

Save-A-Lot Struggles Continue As Discounter Reviews Strategic Options

Beleaguered discount grocery chain Save-A-Lot may be on the verge of major changes.

The St. Ann, MO-based value-added merchant, which was acquired in late 2016 by Canadian private equity firm Onex Corp. from Supervalu for $1.4 billion in cash, has done a pretty good job of irritating many of its licensees which control about 70 percent the retailer’s approximately 1,280 locations nationally (and about 65 percent of S-A-L’s annual sales).

According to an internal memo sent by CEO Kenneth McGrath (the former chief executive of Lidl US for a brief period), the company is in the process of reviewing its strategic options to “accelerate our transformation.”

The memo goes on to say that for the past few months, Save-A-Lot has been working to evaluate potential strategic partnerships that could accelerate its transformation and enhance its opportunities for growth.

“We have been, and continue to be, actively engaged in discussions with multiple strategic parties regarding transaction alternatives. If realized, these alternatives would meaningfully accelerate the company’s go-forward strategy,” McGrath explained, adding, “in the event that we do not choose one of these options, we will continue to assess our portfolio of assets, both wholesale and retail, to identify where we can be the most competitive. We have begun to identify certain assets (in both our wholesale and retail business) which we believe could potentially be more strategic to third parties. Should we choose this path, the result would be a smaller but more profitable core from which to grow the brand.”

The Irish-born executive who joined Save-A-Lot in 2017 cited one recent example of this strategy in the company’s decision to exit its distribution center in Pompano Beach, FL and consolidate operations into Save-A-Lot’s Plant City, FL depot about 215 miles away.

“We are confident that either option will ensure we are well positioned to continue to execute against our transformation plan,” he proclaimed.

I wouldn’t be that confident.

While Save-A-Lot has been struggling since long before Onex took over (oh, to relive the glory days of founder Bill Moran and former CEO Bill Shaner), the situation, as some licensees see it, has devolved to the point where the company’s ownership operates from a virtually hands-off position, and its current leadership has little sensitivity about the needs of the independent owners.

“As licensees, we became successful because we knew our markets and our customers. The old Save-A-Lot culture was excellent because their goal was to help us become sharper and more efficient merchants. This new team has no sensitivity about what we need. It’s a ‘play by the numbers’ management style – heavy on centralization with little direct connection to the owners,” said one licensee who owns multiple S-A-L locations on the East Coast.

And there’s more than just the poor communications between leadership and its store owners. While Lidl isn’t exactly threatening anybody with its body of work, the retailer’s U.S. debut in 2017 has further diluted an already crowded field of value merchants, particularly in the Mid-Atlantic and Southeast. And let’s face it, Aldi is kicking everyone’s butt and dollar stores (particularly Dollar General and Dollar Tree) are also adversely impacting Save-A-Lot.

Exploring strategic options? Sounds like the raising of the white flag is imminent. Transformational plan? Sounds like a cry for new ownership with a new management team – if selling the company (or pieces of it) is even a viable option.

However, you don’t need a trade analyst to assess Save-A-Lot’s problems. Just ask the licensees.

‘Round The Trade

Acme Markets will close four underperforming stores – all former A&P/Pathmark stores in the Metro NY area – in the next six weeks. Closing by early next month will be New Jersey units in Elmwood Park, Weehawken (where a new Whole Foods just opened is doing a booming business) and Woodcliff Lake. In early November, the former A&P in Scarsdale, NY will also shut its doors. It’s no secret that Acme’s acquisition of 76 A&P stores in late 2015 resulted in more challenges for the banner in Northern, NJ than in any of the other marketing areas where Acme expanded its base. Part of the challenge was that Acme’s name recognition and customer familiarity in the core Metro NY market was much weaker than in southern parts of the Garden State or on the Jersey Shore, where the Acme name is still dominant. Moreover, in choosing to quickly reopen the A&P stores “as is,” the Malvern, PA operator was left with many physically stressed stores and a labor force that in many cases wasn’t going to be chosen best in class…Dean & DeLuca, once one of the great names in gourmet retailing, is seemingly sputtering its way to extinction in the U.S. According to the New York Times, the upscale merchant will close three of its seven remaining stores and has left behind a string of unpaid creditors while also withdrawing from signed lease agreements and marketing promotional deals. Dean & DeLuca is now owned by Thai real estate firm Pace Development, which acquired the 42 year old merchant in 2014 for $140 million. It recently closed stores in Napa Valley, CA, Washington, DC (Georgetown) and Manhattan, and according to its website, the retailer once dubbed the “Museum of Fine Foods” is down to two supermarkets (one in New York and one in Hawaii)…Price Rite, the discount unit of powerful Wakefern Corp., has completed another round of store upgrades which began in late 2018. Beginning this month, 17 stores in Pennsylvania, New York, Massachusetts and Connecticut will be updated to feature new store designs and expanded fresh and private label offerings. About 40 percent of Price Rite’s 64 units will have been improved when this round of rollouts is completed. The company, under the skilled hand of president Jim Dorey, said it will complete the rest of its store upgrades (including units in Maryland, Virginia, Rhode Island, New Jersey, New Hampshire and New York) during 2020. More Wakefern news: the Keasbey, NJ cooperative wholesaler will open a 24,300 square foot micro fulfillment center in Clifton, NJ specifically to serve online customers at one of the wholesaler’s larger members – Inserra Supermarkets. Utilizing robotics, the customized fulfillment warehouse will handle both delivery and pickup orders for about a dozen of Inserra’s 23 stores in New Jersey and New York. If all goes well, expect more of these mini-warehouses to open in the future to serve other ShopRite operators…more hybrid digital/bricks and mortar stuff: as it attempts to further integrate its physical stores with its digital operations, Walmart has made a series of executive changes designed to create a more efficient shopping experience. Greg Smith who headed the Behemoth’s bricks and mortar supply chain, will now lead both platforms and report to Greg Foran, CEO of Walmart’s U.S. stores and Marc Lore, CEO of e-commerce. Assisting with that integration will be Nate Faust, who came aboard after the Bentonville, AR-based retailer acquired jet.com in 2016 as head of e-commerce fulfilment. Faust will be given a new role once those units are fully merged. Additionally, Ashley Buchanan will become the new chief merchandising officer for U.S. e-commerce, reporting to Lore. All told, about 20 Walmart executives are impacted but not all departments will be integrated according to company CEO Doug McMillon, because “we are choosing to maintain some structural separation to enable focus and speed, including our U.S. merchandising organization …more store closings from other channels to report: Walgreens said it will close 200 stores nationally over the next few months (about 3 percent of its fleet) and could take as much as a $2.4 billion write-down in fiscal 2019 which ends on August 31… at woebegone Sears/Kmart (now called Transform Co.), another five Kmarts and 21 Sears units will close late next month. At the rate of its store closures over the past three years, the formerly bankrupt retailer will shortly be operating a negative number of stores. And the man with the greatest reverse Midas touch in retailing history, chairman “Slow” Eddie Lampert, can then continue to justify his new nickname – “Mr. Non-Transform.”

Local Notes

Good news for our friends at Karns Quality Foods. The Mechanicsburg, PA-based family-owned independent will open its ninth supermarket at the site of the former Darrenkamp’s unit (originally a Super Fresh) in Etters, PA (Newberry Township). The 39,000 square foot supermarket will undergo a major remodeling and is set to open in early 2020. While the Etters location has proven challenging for its first two owners (there’s a Walmart SuperCenter virtually next door), CEO Scott Karns and his team have done a great job of successfully acquiring other former grocery stores by offering customers a clear point of differentiation, primarily with its upscale meat and seafood departments. We wish them all the best with this new site…from the obit desk, we have a few things to report this month. Toni Morrison, one of the great authors of the past 50 years, has passed away at the age of 88. Morrison was the first African-American woman to win a Nobel Prize in literature. Books such as “Beloved,” “Song Of Solomon” and “God Help The Child” depicted the stark realities of living life as an African American. Her gift was her writing style, in which she was able to blend the lives of complex characters into dark realities such as slavery and misogyny…I was saddened by the passing of John Traub, the former Fleming Cos. executive who died last month at the age of 89. I remember John as being especially nice and helpful when we acquired Food Trade News in 1979. He, along with memorable figures like Bill Watson and Harry Kearney, would always go the extra mile for their independent customers, helping make Fleming the largest wholesale grocer in the Philadelphia market during the 1970s and 80s. The Traub family grocery connection continues with his son, Ken, who operates the successful Frenchtown Market in scenic Frenchtown, NJ.